NRI ITR Filing FY 2025-26: Residential Status, DTAA & Schedule FA

If you are an Indian citizen working abroad, an OCI cardholder, or someone who recently moved out of India for work — your tax filing for AY 2026-27 sits on a very specific playbook. Get the residential status wrong and you’ll either pay tax twice or face a Black Money Act notice. Neither is a good outcome.

This guide walks through the four decisions every NRI must make before filing.

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Decision 1: What’s your residential status for FY 2025-26?

Residential status is determined annually, based purely on physical days in India. It overrides your visa, OCI status, citizenship, or how you self-identify.

Resident vs Non-Resident — the basic test

You’re a Resident if you satisfy either:

• Test 1: ≥ 182 days in India in FY 2025-26, OR
• Test 2: ≥ 60 days in FY 2025-26 AND ≥ 365 days cumulatively across the 4 preceding FYs

Special carve-outs (Test 2 relaxes to 182 days):

• Indian citizens leaving India for employment abroad
• Indian citizens / PIOs visiting India

If you don’t satisfy either test, you’re a Non-Resident (NR) for FY 2025-26.

The “Deemed Resident” trap (Sec 6(1A))

This catches many high-earning NRIs:

• Indian citizen
• Total income (other than foreign sources) > ₹15 lakh in FY 2025-26
• Not liable to tax in any other country by reason of domicile / residence

If all three apply, you’re deemed Resident but Not Ordinarily Resident (RNOR). This was inserted to plug the “stateless person” loophole used by globally mobile Indian citizens parking themselves in zero-tax jurisdictions.

Resident & Ordinarily Resident (ROR) vs Not Ordinarily Resident (RNOR)

If you’re a Resident, you’re further classified:

• ROR if you’ve been Resident in at least 2 of the preceding 10 FYs AND in India ≥ 730 days in the preceding 7 FYs
• RNOR otherwise

The difference matters enormously: ROR is taxed on global income; RNOR and NR are taxed only on India-sourced income.

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Decision 2: What gets taxed in India?

Income type	NR	RNOR	ROR
Salary received in India	✅	✅	✅
Salary received abroad for India services	✅	✅	✅
Salary for services rendered abroad	❌	❌	✅
Rent from Indian property	✅	✅	✅
Rent from foreign property	❌	❌	✅
Interest from NRO account	✅	✅	✅
Interest from NRE / FCNR	❌	❌	❌ (exempt)
Capital gains on Indian assets	✅	✅	✅
Capital gains on foreign assets	❌	❌	✅
Foreign business income controlled from India	❌	✅	✅

The NRE / FCNR interest exemption is one of the most valuable tax positions for NRIs and survives until you become Resident — at which point your bank should redesignate the accounts.

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Decision 3: Which ITR form?

• NR / RNOR / ROR with foreign assets or capital gains: ITR-2
• NR / RNOR / ROR with business or professional income: ITR-3
• ITR-1 is never available to a non-resident, even with simple income — the form is restricted to ordinary residents.

For most NRIs, ITR-2 is the right form.

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Decision 4: Are you claiming DTAA relief?

If your India-source income is also taxed in your country of residence (US, UK, UAE, Singapore, Canada, Australia, etc.), you can claim relief under the relevant Double Tax Avoidance Agreement.

Two methods of relief

• Exemption method: Income is taxed only in one country (e.g., NRE interest exempt in India by Act, exempt in UAE by treaty).
• Credit method: Income is taxed in both countries; the residence country gives credit for tax paid in the source country.

Required filings

To claim DTAA benefit on your Indian return:

1. Form 10F — self-declaration with PAN, country of residence, TIN abroad. Filed online before the return.
2. Tax Residency Certificate (TRC) — issued by the foreign tax authority for the relevant tax year. Keep it ready.
3. Form 67 — for foreign tax credit, filed before the return due date. Missing this can invalidate the credit claim.

Common DTAA outcomes for NRIs

Country	Interest TDS	Dividend TDS	Royalty / FTS
USA	15%	25%	15%
UK	15%	15%	15%
UAE	12.5%	10%	10%
Singapore	15%	15%	10%
Canada	15%	25%	15%
Australia	15%	15%	15% (10–15)

These are treaty rates — they override the Income Tax Act’s higher domestic rates. Without proper documentation, your bank will deduct domestic rates (often 30%+ on certain incomes), and you’ll need to claim refund through the return.

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Schedule FA — the section that gets NRIs into trouble

If you become ROR in any year — even after a long stint abroad — you must disclose all your foreign assets in Schedule FA:

• Foreign bank accounts (current, savings, deposits) with peak balance and year-end balance
• Foreign equity, debt, and beneficial ownership in entities
• Foreign immovable property
• Trusts where you’re a settlor / beneficiary / trustee
• Signing authority over foreign accounts (even if you don’t own them)
• Pension and retirement accounts (401k, IRA, pension funds)

Penalty for non-disclosure: ₹10 lakh per year per asset under Section 43 of the Black Money (Undisclosed Foreign Income and Assets) Act, 2015 — plus prosecution. This is one of the toughest penal provisions in Indian tax law, and ignorance is not a defence.

NRIs returning to India after years abroad must plan disclosure in their first ROR year. We help several returnee clients each year build a clean Schedule FA from scratch.

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Repatriation — moving money out of India

NRIs often need to repatriate sale proceeds or rental income. The two key instruments:

• Form 15CA — declaration by remitter (filed electronically)
• Form 15CB — CA certificate confirming tax has been correctly deducted/paid

Limits:

• Up to USD 1 million per FY can be repatriated from NRO accounts after Form 15CA/CB.
• Sale proceeds of property require additional documentation if held for less than 10 years from acquisition.
• Inheritance proceeds have a separate framework.

We issue Form 15CB after reviewing the underlying source — sale deed, rental agreement, capital gain computation, TDS proof. A poorly issued 15CB can invite scrutiny on both sides of the transaction.

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Common NRI filing mistakes

1. Treating NRE interest as taxable — it’s exempt under Sec 10(4)(ii). You don’t even need to disclose it as taxable.
2. Missing TDS refund — banks often deduct 30% on NRO interest while the actual liability under DTAA may be 10–15%. You must file ITR-2 to claim the refund.
3. Filing ITR-1 — invalid for NRIs. The return becomes defective under Sec 139(9).
4. Forgetting Schedule FA in the year of return — most expensive mistake, attracts Black Money Act penalty.
5. Missing Form 67 — if you skip this for foreign tax credit, the credit can be denied even if you paid tax abroad legitimately.

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How we file NRI returns

Our NRI practice runs entirely remotely — secure document portal, video calls across time zones, fixed fees. For each client we:

• Establish residential status with day-by-day passport stamp analysis
• Map every income stream to the right tax bucket (Indian / foreign / treaty-protected)
• File Form 10F and ensure TRC is in place before claiming DTAA
• Reconcile NRO / NRE / FCNR interest against bank certificates and 26AS
• File Form 67 well before the return due date for foreign tax credit
• Build clean Schedule FA documentation for ROR clients
• Issue Form 15CA / 15CB for repatriation as needed

If you’re an NRI in the US, UK, UAE, Singapore, Canada, Australia, or anywhere globally and need your AY 2026-27 return filed correctly — reach out via WhatsApp or our contact page. We file for clients across 30+ countries.

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Frequently Asked Questions

Is NRE account interest taxable in India?

No. NRE and FCNR account interest is fully exempt under Section 10(4)(ii) as long as you maintain non-resident status. Once you become Resident, the bank must redesignate the accounts and interest becomes taxable.

Do I need to file ITR if my only India income is NRE interest?

Strictly no, since it’s exempt. But if your bank deducted any TDS, or you have any other India-source income (rent, capital gains, dividend), you must file ITR-2 to either claim refund or report income.

What’s the difference between Form 10F and TRC?

TRC is issued by the foreign country’s tax authority confirming you’re a tax resident there. Form 10F is your self-declaration on the Indian portal providing PAN, TIN abroad, and basic details. You need both to claim DTAA relief.

Can I claim Sec 80C deductions as an NRI?

NRIs can claim 80C for life insurance, PPF (existing accounts only — new accounts not allowed), ELSS, and tuition fees. They cannot claim 80C on PPF or NSC contributions made after becoming NR. 80D and 80E are also available.

What if I returned to India in November 2025 — am I Resident or NR?

Likely Resident if you stayed 182+ days from November 2025 to March 2026 (which is about 150 days max — so likely NR for FY 2025-26). But check Test 2 with prior-year days. If you’re Resident, you’ll be RNOR for the first 2-3 years before becoming ROR.

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Related reading

• ITR Filing FY 2025-26: The Complete Guide
• Buying Property from an NRI: TDS Under Section 195
• Documents Required for Net Worth Certificate (Student Visa)
• New vs Old Tax Regime FY 2025-26