NRI Tax Return, TDS Refunds, FEMA Rules and NRI Taxation

NRI taxation is the set of rules under which India taxes the income of non-resident Indians: only income earned or received in India is taxable, at the normal slab rates and some special rates, and tax is often deducted at source at high rates before the money reaches you. An NRI tax return is how you report that Indian income, claim treaty benefits and get back any excess TDS. IMAK Advisory, an ICAI-registered CA firm in Bengaluru, helps NRIs, OCI cardholders and returning Indians across the world with Indian tax and FEMA compliance.

Most NRI tax problems start with three things: residential status worked out from memory instead of passport dates, TDS deducted on the full sale price of a property instead of on the gain, and money moved abroad without the right certificates. This page explains who counts as an NRI, the NRI tax slab and NRI tax rate on each kind of income, how NRI tax filing works, property sales, treaty relief, repatriation, the FEMA rules that apply to NRIs including Section 13 of FEMA and the FEMA pricing guidelines, and the latest news about NRI tax in India.

• NRI tax return filing for rent, interest, capital gains and salary for work in India
• Refunds of excess TDS on property sales, deposits and dividends
• Lower or nil TDS certificates before selling property
• DTAA relief, tax residency certificates and Form 10F
• Form 15CA and 15CB for repatriation
• FEMA advice on NRE, NRO and FCNR accounts, property and investments

Your tax status is decided afresh every financial year from the number of days you were physically in India. It does not depend on your passport, visa or the type of bank account you hold.

For Indian citizens leaving India for employment, and for Indian citizens or persons of Indian origin visiting India, the 60-day test is replaced by 182 days – or by 120 days if Indian income exceeds ₹15 lakh. An Indian citizen with Indian income above ₹15 lakh who is not taxed in any other country because of residence there can be treated as resident (RNOR). We count the days from passport stamps or travel records for every year we file.

FEMA Status Is Different From Tax Status

FEMA, the foreign exchange law, uses its own test: broadly, whether you have gone abroad for employment, business or an uncertain period. Someone can be a non-resident for tax but resident under FEMA in the year of leaving, or the reverse in the year of return. Bank account types follow FEMA status, so the switch from resident to NRO and NRE accounts should be made when FEMA status changes.

The NRI tax slab is the same as for residents. Under the new regime – the default – the rates for FY 2025-26 and tax year 2026-27 are nil up to ₹4 lakh, then 5%, 10%, 15%, 20% and 25% in ₹4 lakh steps up to ₹24 lakh, and 30% above. The old regime is also available if chosen in a return filed on time.

The missing rebate is the biggest difference. A resident with ₹10 lakh of taxable income usually pays no tax under the new regime; an NRI with the same Indian income does. This is why the NRI tax slab question so often surprises people who compare their bill with a relative living in India.

The NRI tax rate depends on the type of income. Payers in India must deduct tax at source on most payments to NRIs, usually at higher rates than for residents and often on the gross amount.

You must file an NRI tax return in India if your total Indian income, before deductions, is above the basic exemption limit. Even when it is not, filing is usually worth it: it is the only way to get back excess TDS, carry forward capital losses and keep a clean record for loans, visas and later property sales. An NRI whose only Indian income is investment income or long-term gains, with full TDS deducted, may not be required to file, but filing is still needed to claim a refund.

• Form: ITR-2 for most NRIs; ITR-3 if you have business or professional income in India; NRIs cannot use ITR-1 or ITR-4
• Due date: 31 July in most cases; a belated return for AY 2026-27 can be filed until 31 December 2026
• Verification: e-verify within 30 days through net banking of an Indian bank, a bank account EVC, or a digital signature; Aadhaar OTP works only if your Aadhaar is linked to a mobile number you can access
• Refunds: paid only into an Indian bank account – NRE or NRO – that is pre-validated on the portal
• Disclosure: NRIs do not report foreign assets in Schedule FA, but must report Indian bank accounts

NRI Tax Filing India: Step by Step

NRI tax filing follows the same portal as residents, with a few extra checks. Our process for NRI tax filing in India is:

1. Confirm residential status for the year from travel dates.
2. Collect Form 26AS, the Annual Information Statement, bank interest certificates, rent agreements and capital gains statements.
3. Check whether treaty benefits were applied correctly by banks and payers.
4. Compute income, claim deductions under the chosen regime and set off TDS.
5. Choose the bank account for refunds and confirm it is pre-validated.
6. File the return and e-verify from abroad.
7. Track processing and the refund, and reply to any notice.

An NRI tax return India filing done this way usually takes a few days once documents are shared, and can be handled entirely from abroad.

Rent from a flat or house in India is the most common reason for an NRI tax return. The tenant must deduct TDS on rent paid to an NRI, but many individual tenants do not, which leaves tax to be paid with the return. In the return, rent is reduced by a 30% standard deduction for repairs and by interest on any loan taken for the property, and the balance is taxed at slab rates.

• Keep the rent agreement and a record of rent received in the NRO account
• Ask the tenant for TDS certificates, or plan to pay advance tax if no TDS is deducted
• Claim municipal taxes paid during the year
• If the property is jointly owned, each owner reports their share in their own NRI tax return

Because TDS on NRI income is deducted at flat high rates, many NRIs pay more than their actual liability. The NRI tax return is the only way to recover the difference. Refunds are issued after the return is processed, into an Indian account that is pre-validated on the portal and linked to your PAN.

• Check that every TDS entry appears in Form 26AS under your PAN
• Make sure the refund account is an NRE or NRO account in your own name
• File on time – some benefits, such as carrying forward losses, are lost in a late return
• Respond quickly if the department asks for confirmation of the bank account or treaty documents

A refund through the NRI tax return often takes a few weeks after processing. Delays usually come from an account that is not validated, a PAN not linked to Aadhaar where linking applies, or TDS that the deductor has not reported correctly.

If your Indian income for the year is below the basic exemption limit and no TDS was deducted, there is usually no need to file. NRE interest and FCNR interest are exempt and do not count. An NRI whose only Indian income is specified investment income or long-term gains, with TDS fully deducted, is also relieved from filing under the special provisions for non-residents – but filing an NRI tax return is still the only way to claim back any excess TDS or carry forward a loss.

Property sales are where NRIs lose the most money to process rather than to tax. The buyer must deduct TDS on the payment to an NRI, and without a certificate, banks and buyers often deduct on the entire sale price – far more than the tax actually due on the gain.

1. Before the sale, work out the capital gain: sale price, purchase cost, improvement costs and holding period.
2. Apply for a lower or nil TDS certificate from the assessing officer, so that the buyer deducts only on the expected gain.
3. Consider reinvestment exemptions, such as buying another residential house in India or investing in specified bonds within the time limits.
4. Make sure the buyer deducts and deposits TDS and gives you the TDS certificate.
5. File your return to pay the final tax or claim the refund.
6. Repatriate the proceeds with Form 15CA and 15CB through your bank.

Long-term gains on property sold by an NRI are taxed at 12.5% without indexation. The option to compare with a 20% rate after indexation, for property bought before 23 July 2024, is available to resident individuals and HUFs, not to NRIs. From 1 October 2026, resident individual and HUF buyers can deposit the TDS on a purchase from an NRI using their PAN, without first obtaining a separate TAN.

India has tax treaties (DTAAs) with most countries where NRIs live. A treaty can lower the Indian tax rate on interest, dividends and royalties, decide which country may tax pensions or salaries, and resolve cases where both countries treat you as resident.

• To claim a treaty rate in India, give the payer a tax residency certificate from your country of residence and Form 10F
• Where Indian tax has been paid, claim credit for it in your country of residence under its rules
• Where both countries treat you as resident, the treaty's tie-breaker rules – permanent home, centre of vital interests, habitual abode, nationality – decide
• Some countries tax their residents on Indian income even when India has taxed it; the credit there prevents double tax, but timing and documents differ by country

We coordinate with your adviser abroad where needed, so that the Indian return and the foreign return use consistent figures.

NRIs can repatriate current income, such as rent and interest, from an NRO account after paying tax, and can also remit up to USD 1 million per financial year from NRO balances, including sale proceeds of assets, subject to tax. The bank asks for Form 15CA, an online declaration, and in many cases Form 15CB, a certificate from a chartered accountant confirming the tax position. Under the Income-tax Rules, 2026, these forms carry new numbers for later years.

• Keep proof of the source of funds: sale deed, inheritance documents, rent agreements
• Pay tax or have TDS deducted before the remittance
• Use the bank's prescribed forms for the USD 1 million facility
• Funds in NRE accounts are freely repatriable and do not need this process

Alongside tax, NRIs must follow FEMA, the foreign exchange law administered by the RBI. The main rules for individuals are:

• Accounts: NRE accounts hold foreign earnings and are freely repatriable; NRO accounts hold Indian income; FCNR deposits are held in foreign currency
• Resident accounts must be redesignated as NRO when you become non-resident under FEMA
• Property: NRIs and OCI cardholders can buy residential and commercial property in India, but not agricultural land, plantation property or farmhouses, except by inheritance
• Investments: NRIs can invest in Indian shares and funds through the routes FEMA permits, on a repatriable or non-repatriable basis
• Gifts and loans to and from residents are subject to specific limits and conditions

Section 13 of FEMA: Penalties for Contraventions

Section 13 of FEMA sets the penalty for breaking FEMA rules. Where the amount involved can be quantified, the penalty can be up to three times that amount; where it cannot, a fixed maximum applies, with a further daily penalty for a continuing contravention. Separate provisions in Section 13 deal with foreign exchange, foreign securities or property held abroad in contravention of the law, with confiscation of equivalent value in India and possible prosecution. The adjudicating authority can also order confiscation of the money or property involved.

Many FEMA contraventions by individuals are procedural – a late filing, an account not redesignated, a gift beyond limits – and can often be regularised through compounding with the RBI. Acting before a notice arrives is almost always better than after.

FEMA Pricing Guidelines for Investing in Indian Companies

When an NRI invests in an unlisted Indian company on a repatriable basis, or buys shares from or sells shares to a resident, the FEMA pricing guidelines apply. In broad terms, shares issued or transferred to a non-resident cannot be priced below fair value, and shares transferred by a non-resident to a resident cannot be priced above it. Fair value for unlisted companies is worked out by an internationally accepted method on an arm's length basis and certified by a chartered accountant, a SEBI-registered merchant banker or a practising cost accountant; listed shares follow SEBI pricing rules. Investments made on a non-repatriable basis are generally treated like domestic investment.

The latest news about NRI tax in India that affects most non-residents this year:

• 1 April 2026 – The Income-tax Act, 2025 came into force. Income for FY 2025-26 is still governed by the 1961 Act; from tax year 2026-27 the new Act applies, with renumbered sections and forms (for example, Form 27Q becomes Form 144 and Form 13 becomes Form 128)
• 1 February 2026 – Budget 2026 left slab rates unchanged; the ₹12 lakh rebate continues for residents only
• 1 October 2026 – Resident individual and HUF buyers of property from NRIs can deposit TDS using their PAN instead of a separate TAN
• AY 2026-27 – Returns were due by 31 July 2026; belated returns can be filed until 31 December 2026
• Continuing from July 2024 – Long-term gains on property sold by NRIs are taxed at 12.5% without indexation

We review these changes for each NRI client before filing, because a rule that changed mid-year can affect only part of the year's transactions.

When you return to India after years abroad, you usually become resident but not ordinarily resident (RNOR) for a period. During those years, foreign income generally stays outside Indian tax, FCNR deposits can stay tax-free, and you have time to reorganise foreign accounts and investments. Once you become ordinarily resident, worldwide income is taxable and foreign assets must be reported every year.

• Count days for the year of return and the next few years
• Redesignate NRE and NRO accounts to resident accounts under FEMA
• Decide what to do with foreign retirement accounts, shares and property before you become ordinarily resident
• Plan foreign tax credit for income still taxed abroad

We do not publish fees. Our team shares the exact total after reviewing your documents and requirements. The main factors are:

• Number of income sources and properties in India
• Capital gains transactions in the year
• Whether a lower TDS certificate is needed
• Treaty questions and coordination with an adviser abroad
• Form 15CA and 15CB certification
• FEMA questions, compounding or notices

Taxes are paid by you directly to the government and are separate from our professional fees.

An NRI in Dubai Selling a Flat in Bengaluru

An engineer working in Dubai sold a flat bought nine years earlier. The buyer's bank planned to deduct TDS on the full sale value. The work involved computing the gain, applying for a lower TDS certificate before the sale date, checking reinvestment options, filing the return and repatriating the balance with Form 15CA and 15CB.

A Retired Couple in Canada With Indian Deposits

A retired couple living in Canada kept fixed deposits in an NRO account, on which the bank deducted TDS at the full rate. Their total Indian income was modest. The work involved giving the bank the tax residency certificate and Form 10F so that the treaty rate applied, filing NRI tax returns to claim the excess TDS back, and moving future deposits to NRE or FCNR where the funds qualified.

A Software Professional Returning From the US

A software professional returned to India after eleven years, holding US retirement accounts and shares of his former employer. Counting days showed RNOR status for the first years. The plan covered which foreign income would stay outside Indian tax, account redesignation under FEMA, and the year from which Schedule FA reporting would start.

• Assuming NRI status without counting days
• Not filing a return and losing excess TDS
• Letting the buyer deduct TDS on the full sale value without a certificate
• Claiming indexation on property sold after July 2024 as an NRI
• Keeping resident savings accounts after becoming an NRI
• Holding NRE deposits after returning and treating the interest as tax-free
• Missing treaty benefits because the bank did not have a tax residency certificate
• Moving money abroad without Form 15CA and 15CB where needed
• Buying agricultural land or a farmhouse in India as an NRI

OCI Cardholders and Foreign Citizens

Tax status for OCI cardholders and foreign citizens of Indian origin follows the same day-count rules. For FEMA, OCI cardholders are generally treated like NRIs for property and investments, with a few differences.

Inherited Property and Accounts

Inheriting property is not taxed in India, but its later sale is. The cost and holding period of the previous owner carry over. Repatriating inheritance proceeds needs documents showing the source.

Seafarers and Frequent Travellers

Seafarers count days on board ships in a specific way for residency. Frequent travellers should keep their own record of entry and exit dates.

NRIs With Indian Businesses or Partnerships

NRIs who are partners in Indian firms or directors in Indian companies may have business income, director fees or remuneration taxable in India, and may need ITR-3.

• We are not a bank or authorised dealer and cannot open accounts or process remittances
• We are not the RBI and cannot grant FEMA approvals; compounding applications are decided by the RBI
• We do not give advice on your country of residence's tax law; we coordinate with your adviser there
• We do not give legal opinions on property titles or succession; we work with advocates where needed
• We do not promise a refund amount or a processing time

If your only Indian income is a small amount of NRE interest, which is exempt, and you have no TDS to claim back, you may not need to file at all. If your only income is NRO interest within the exemption limit and the bank has already applied the treaty rate correctly, a simple return you file yourself may be enough. Come to us when you sell property, have rent or capital gains, need to claim back TDS, are returning to India, or have a FEMA question.

1. Ask your bank: what TDS has been deducted, at what rate, and has the tax residency certificate been recorded?
2. Ask your tenant: is TDS on rent being deducted and deposited, and will you issue the certificate?
3. Ask the buyer of your property: will you deduct TDS on the certificate amount, and when will you issue Form 16A or its new equivalent?
4. Ask yourself: how many days was I in India this year and in the last four years?
5. Ask your adviser abroad: how will Indian tax be credited in my country of residence?

NRI work involves passports, foreign tax documents, bank statements and family property records. As chartered accountants we follow ICAI's confidentiality rules. Documents are shared through secure channels, seen only by the team working on your return, and never passed to property agents, banks or product sellers without your written consent.

• Travel dates for the year and the previous four years
• PAN, Aadhaar (if any) and an Indian mobile number for OTPs, or net banking access
• Form 26AS and AIS
• Bank interest certificates for NRO, NRE and FCNR accounts
• Rent agreements and TDS certificates from tenants
• Purchase and sale deeds for property, and broker statements
• Tax residency certificate and Form 10F
• Pre-validated Indian bank account for the NRI tax return refund

Our only office is in Whitefield, Bengaluru. NRI work is done online: documents are shared securely, meetings are scheduled across time zones by video, and returns are filed and e-verified from abroad. For matters that need a visit in India – such as a property registration – we coordinate with you or your representative. We do not have offices outside Bengaluru.

Do NRIs need to file an NRI tax return in India?

Yes, if Indian income before deductions exceeds the basic exemption limit. Filing is also needed to claim back excess TDS or carry forward losses.

Which ITR form should an NRI file?

Most NRIs file ITR-2. NRIs with business or professional income in India file ITR-3. ITR-1 and ITR-4 are not available to NRIs.

What is the NRI tax slab in India?

NRIs pay the same slab rates as residents, but do not get the rebate that makes income up to ₹12 lakh tax-free, or the higher exemption for senior citizens.

What is the NRI tax rate on NRO interest?

NRO interest is taxed at slab rates in the return. Banks deduct TDS at 30% plus surcharge and cess, or at the treaty rate if you submit a tax residency certificate and Form 10F.

Is NRE interest taxable?

No. Interest on NRE accounts and FCNR deposits is exempt while you are an NRI, but becomes taxable once you are resident, subject to transition rules.

How is NRI tax filing in India done from abroad?

The return is filed online on the e-filing portal and e-verified through Indian net banking, a bank account EVC or a digital signature. You do not need to be in India.

What is the due date for an NRI tax return?

Usually 31 July after the financial year. For AY 2026-27, a belated return can still be filed until 31 December 2026.

How much TDS is deducted when an NRI sells property?

TDS is deducted on the capital gain at the applicable rate, but buyers often deduct on the full sale value unless you obtain a lower deduction certificate before the sale.

Can NRIs claim indexation on property sales?

No, not on sales after 23 July 2024. Long-term gains are taxed at 12.5% without indexation; the indexation option is for resident individuals and HUFs.

How much money can an NRI repatriate from an NRO account?

Up to USD 1 million per financial year from NRO balances, after tax, with Form 15CA and, where required, Form 15CB.

What is Section 13 of FEMA?

It sets the penalties for contravening FEMA: up to three times the amount involved where it can be quantified, a fixed maximum otherwise, and possible confiscation of the property involved.

What are the FEMA pricing guidelines?

They require shares issued or transferred to non-residents to be priced at not less than fair value, and shares transferred by non-residents to residents at not more than fair value, with valuation by a qualified professional for unlisted companies.

Can an NRI buy agricultural land in India?

No. NRIs and OCI cardholders cannot buy agricultural land, plantation property or farmhouses, except by inheritance.

What is the latest news about NRI tax in India?

From 1 October 2026, resident buyers of property from NRIs can deposit TDS using their PAN, and from 1 April 2026 the Income-tax Act, 2025 applies with renumbered forms.

What happens to my tax status when I return to India?

You usually become RNOR for a period, during which most foreign income stays outside Indian tax. After that, worldwide income is taxable.

How much do your NRI tax services cost?

We do not publish fees. The total depends on your income sources, property transactions and FEMA questions, and our team shares the exact total after reviewing your documents and requirements.

Form 15CA and 15CB · FEMA and FDI Compliance · International Taxation · Income Tax Return · Tax Planning · Tax Notices and Appeals · Business Valuation

Share your travel dates, Form 26AS and details of your Indian income or the property you plan to sell. Our team will confirm your status, the return you need and any certificates to apply for.

Contact Details

Office Address

IMAK Advisory, ITPL Main Rd, Pattandur Agrahara, Whitefield, Bengaluru, Karnataka 560066, India

Phone

+91 79798 50684 (call or WhatsApp)

Email

imakadvisoryteam@gmail.com

Sources: Income Tax Department (incometax.gov.in; press release of 1 April 2026); Business Today on PAN-based TDS for property bought from NRIs from 1 October 2026 (28 August 2026) and on NRI property capital gains (9 May 2026); Foreign Exchange Management Act, 1999, Section 13; Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 on pricing; Reserve Bank of India directions on NRO repatriation; Budget 2026 coverage. Checked 2 November 2026.