You're an NRI. You log into the income-tax portal, see ITR-1 (Sahaj)sitting there looking friendly, and click it — it's the easy one, it's what everyone files. Two weeks later a notice lands: your return is defective. And the TDS you were quietly owed back? Still sitting with the government.
Here's the thing nobody tells NRIs clearly: picking the right form isn't the hard part — it's a 30-second decision. The part worth real money is what comes after, because for most NRIs the question was never “how much tax do I owe?” It's “how much of my TDS am I about to leave on the table?” Let's fix both.
Find your NRI ITR form
First — are you a Non-Resident (NRI) for FY 2025-26?
That's the year 1 April 2025 to 31 March 2026. Your status is decided by the days you spent in India, not your passport.
Why ITR-1 quietly rejects you
ITR-1 was built for one kind of person: a residentwith a simple salary, one or two houses and some bank interest. It doesn't even have the boxes an NRI needs — no field for your residential status, no proper place for capital gains on Indian shares or property, nothing for the special rates that apply to you. So when a non-resident files it, the system doesn't gently correct it. It flags the return as defective under Section 139(9), hands you a short window to refile, and freezes any refund until you do.
The fix is simple and the rule is absolute: an NRI files ITR-2, or ITR-3if there's Indian business or F&O income in the mix. ITR-1 and ITR-4 are never yours.
ITR-2 or ITR-3 — the only two forms in your life
Forget the seven-form list. As an NRI individual, exactly two forms can ever apply, and one question separates them: do you run a business or trade F&O in India?
| Form | File it if… | Deadline |
|---|---|---|
| ITR-2 | Salary, rent, NRO interest, dividends or capital gains — but no Indian business income. This is most NRIs. | 31 July 2026 |
| ITR-3 | You have Indian business, professional, or F&O / intraday income (plus any of the above). | 31 Aug 2026 (non-audit) |
The real reason you're filing: your refund
This is where most NRIs lose money without realising it. TDS on NRI income isn't matched to your tax slab — it's deducted at flat statutory rates that assume the worst: 30% on rent, 30% on NRO interest, 20% on dividends. And on a property sale, the trap is brutal — the buyer must deduct TDS on the entire sale price, not your profit.
On the full sale price
How property TDS is cut for an NRI seller — not on the gain. On a ₹1 crore flat that's often ₹13–14 lakh withheld, against a real tax bill a fraction of the size.
Take Meera, an NRI in London who sells her Pune flat for ₹1 crore. The buyer is required to deduct TDS under Section 195 on the whole ₹1 crore — roughly ₹13–14 lakh once surcharge and cess are added. But she bought the flat for ₹70 lakh, so her actual long-term gain is ₹30 lakh, and the tax on it (12.5% plus cess) is under ₹4 lakh. She has overpaid by close to ₹10 lakh— and the only way that money comes home is by filing ITR-2 and claiming the refund. Assume “TDS is deducted, so I needn't file,” and she simply gifts ₹10 lakh to the exchequer.
Don't eyeball it. Run your Indian income and TDS through the NRI tax calculator — it strips out the 87A rebate (which you don't get), applies the correct special rates, and shows your refund or balance as a single number.
What India taxes — and what it can't touch
As an NRI you're taxed only on Indian-source income. Everything you earn abroad — a foreign salary, overseas rent, a remote job for a non-Indian employer — stays completely outside India's net. Here's the full map:
| Income | In India | How it's treated |
|---|---|---|
| Salary for work done in India | Taxable | Slab rates, after ₹75,000 standard deduction |
| Rent from Indian property | Taxable | After a flat 30% standard deduction (Sec 24) |
| NRO account interest | Taxable | Fully taxable, 30% TDS |
| NRE / FCNR interest | Tax-free | Exempt — Sec 10(4) / 10(15) |
| Dividends from Indian companies | Taxable | 20% (Sec 115A); DTAA often caps at 15% |
| Capital gains — shares, MFs, property | Taxable | Special rates: 12.5% / 20% |
| Your foreign salary & overseas income | Not taxed in India | Outside India's net entirely |
Two lines do the heavy lifting. NRE and FCNR interest is exempt — keep your money there and it earns tax-free — while NRO interest is fully taxable with 30% TDS. And remember the rebate gap: a resident with ₹12 lakh of income pays zero tax thanks to Section 87A. An NRI with the same ₹12 lakh pays real tax, because that rebate is residents-only.
Pay less, legally: the DTAA move
If you live in a country with a tax treaty with India — the US, UK, UAE and dozens more — the Double Taxation Avoidance Agreement can cut the TDS on your Indian dividends and interest before it's even deducted. The India–US treaty, for instance, caps dividend tax at 15% instead of 20%. To claim it, give the payer a Tax Residency Certificate (TRC) from your home country plus Form 10F (now filed electronically on the portal). Expecting far too much TDS on a property sale? Apply for a lower-deduction certificate under Section 197 (Form 13) before the sale, and avoid the ₹10-lakh-refund wait altogether.
For most NRIs the question was never “how much tax do I owe?” It's “how much of my TDS am I about to leave behind?”
How to file ITR-2 as an NRI, step by step
- Confirm you're actually an NRI. A returning NRI is often RNOR, and a resident files differently. Check your status if there's any doubt.
- Download Form 26AS and the AIS.They list every rupee of TDS deducted against your PAN — rent, interest, dividends, the property sale. This is the money you're reclaiming.
- Pick ITR-2(or ITR-3 for business/F&O) on the e-filing portal for AY 2026-27, and set your status to non-resident.
- Enter your Indian income at the right heads— salary, house property, capital gains, other sources — and leave out your foreign income and NRE/FCNR interest, which aren't taxable.
- Claim DTAA relief if it applies (TRC + Form 10F), then let the portal reconcile your tax against the TDS already paid.
- Pre-validate your NRO account, file, and e-verify. Your refund flows to that account once the return is processed.
What it means for you
Honest take: if any TDS was deducted on your Indian income this year, filing is almost certainly worth the afternoon — the refund is usually far bigger than the effort. Get three things right and you're done cleanly: the right form (ITR-2, never ITR-1), the right status (confirm you're NRI, not RNOR), and a pre-validated NRO account for the money to land in.
Start with the number that decides it all — your refund or balance as an NRI — and if you're even slightly unsure whether you're a non-resident this year, settle your status first. The tax follows from it.
For AY 2026-27 (FY 2025-26) under the Income Tax Act, for a confirmed Non-Resident. TDS and tax rates, surcharge and cess vary with income and the specific transaction; the property example is illustrative and ignores surcharge nuances and indexation. DTAA relief depends on your country and valid TRC/Form 10F. Confirm your case on incometax.gov.in or with a qualified CA before filing. General information, not tax advice.