Published 7 May 2026
Meet Aniruddh Mansukhani, 35, an IT consultant who relocated to Dubai 2.5 years ago. He has been in India for just 18 days during FY 2025-26 (visiting parents). Under Section 6 of the Income-tax Act, he qualifies as Non-Resident (NR).
His worldwide salary income from his Dubai employer is not taxable in India – as an NR, India only taxes income that arises or accrues in India (Sec 5(2)). But he still has India-source income:
- Rent from a Mumbai apartment (₹6 lakh/year)
- NRO bank interest (₹2.48 lakh/year)
This article walks Aniruddh through filing ITR-2 as an NRI – covering the residential-status determination, Section 195 TDS, Schedule FA exemption, and the deductions NRIs can and cannot claim.
1. Residential status – the gateway test
Sec 6 of the Income-tax Act, 1961 lays out a four-test framework:
Resident in India for the year IF either:
- Sec 6(1)(a): Stayed in India ≥ 182 days during the FY, OR
- Sec 6(1)©: Stayed ≥ 60 days during the FY AND ≥ 365 days across the four preceding FYs.
Otherwise: Non-Resident (NR).
For Indian citizens / PIO who are abroad on employment visiting India: the 60-day threshold in 6(1)© is relaxed to 182 days (makes it easier to be NR). For Indian-citizen “high net worth” individuals with India income > ₹15 lakh, a tighter 120-day rule applies.
6(1A) deemed-resident provision for high-income Indian citizens not liable to tax anywhere – introduced by FA 2020.
Aniruddh is an Indian citizen, abroad on employment, in India only 18 days. He fails both 182-day and 60-day tests. Status: NR.
For ITR-1, D101 disqualifies any non-resident. ITR-2 is the right form.
2. What an NRI is taxed on in India
Sec 5(2) limits taxability to:
- Income received or deemed to be received in India (e.g. salary credited to an Indian bank account)
- Income accruing or arising in India (e.g. rent from Indian property, interest from Indian banks, capital gains on Indian shares/property)
NOT taxed:
- Salary earned and received abroad (Aniruddh’s UAE pay)
- Investments / accounts held abroad (subject to FEMA rules, but no India tax)
3. NRO vs NRE accounts – the tax distinction
| Account | Source of funds | India tax | TDS rate |
|---|---|---|---|
| NRO (Ordinary) | Indian-source income (rent, dividend, pension) | Taxable | 30% u/s 195 |
| NRE (External) | Foreign-source funds remitted to India | Exempt under Sec 10(4)(ii) | None |
| FCNR (Foreign Currency) | Foreign currency deposits | Exempt | None |
Aniruddh receives his rent and bank interest in his NRO account. That interest is taxable. NRE / FCNR balances would be tax-exempt.
NRE interest exemption u/s 10(4)(ii) confirmed for AY 2026-27.
4. Section 195 TDS – the NRI’s pain point
When anyone in India pays an NRI, Section 195 mandates TDS at the rate applicable to the NRI’s income type (regardless of slab applicability).
| Income type to NRI | Section 195 TDS rate |
|---|---|
| Interest on NRO deposits | 30% + surcharge + cess |
| Rent paid to NRI landlord | 30% + surcharge + cess |
| Dividend on Indian shares | 20% (or treaty rate if lower) |
| Capital gain on listed equity (LTCG 112A) | 12.5% |
| Capital gain on other LTCG | 20% with indexation |
Sec 195 applicable rates for FY 2025-26.
Aniruddh’s setup:
- Tenant deducts 30% TDS on ₹6 lakh annual rent = ₹1,80,000 (filed via Form 27Q quarterly – NRI-specific TDS return).
- HDFC Bank deducts 30% TDS on his NRO interest above ₹10K threshold = approximately ₹72,000 on ₹2.4L FD interest.
Total TDS deducted: ₹2,52,000. This is much higher than his actual tax liability (likely ~₹13,000-18,000 depending on regime). Refund of ~₹2.34 lakh is the typical NRI outcome.
Why NRIs almost always get refunds. Sec 195 TDS is rate-based (30% flat for rent / NRO interest), not slab-based. Even if the NRI’s total India income falls in the 0-₹4L slab (zero tax), 30% has been withheld at source. Filing the ITR claims the refund. Don’t skip the return – the TDS is yours.
5. NRI-specific filing constraints
| Item | NRI rule |
|---|---|
| Section 87A rebate | NOT available. Section 87A applies to resident individuals only. NR taxpayers compute slab tax with no rebate. |
| 80TTA / 80TTB | NOT available. Section 80TTA explicitly excludes NRIs. |
| 80U / 80DD | NOT available. Disability deductions for resident only. |
| Sec 54 / 54EC / 54F | Available. NRIs can claim CG exemptions on India-property gains. |
| 80C / 80D / 80E / 80G | Available, IF the qualifying expense was incurred in India. |
| Schedule FA (foreign assets) | NOT mandatory for NR. Schedule FA is required only of Resident & Ordinarily Resident (ROR) filers. NRIs report only Indian assets in Schedule AL (if total income > ₹50 lakh). |
| Aadhaar | Mandatory only if the NRI was a resident at any time in the year. Pure NRIs not previously linked may file without Aadhaar (but PAN is mandatory). |
All NRI-specific eligibility constraints above.
6. What Aniruddh needs
| Document | Why |
|---|---|
| Sec 195 Form 27Q TDS certificates | From tenant + bank, confirming TDS deducted. |
| NRO statement | Bank interest credited during the year. |
| Rent agreement + tenant proofs | If ITD asks for verification. |
| PAN | Mandatory. Form 15CB / 15CA may also apply for outward remittances. |
| Passport / visa stamps | Days-in-India calculation backup. |
| 80C investment proofs | LIC, PPF, etc. |
| Indian bank account (NRO) | For refund credit. NRIs cannot have a regular SB account. |
7. Step-by-step walkthrough
Step 1 – Sign in
Step 2 – Skip last-year import (or upload if NRI prior year)
Step 3 – Personal information
Two NRI-specific points:
- Residential Status: Select NR (Non-Resident). BharatTax’s Sec 6 wizard asks the four sub-questions; selecting “<60 days in current PY” + Indian citizen / PIO determines NR.
- Address: Foreign address allowed. Country = United Arab Emirates. Pincode field is forgiving for foreign addresses.
NRO bank for refund. Use an NRO account IFSC + account number. ITD cannot credit refund to an offshore account; it must be Indian. NRO is the right kind for non-residents.
Step 4 – Questionnaire
- Type of assessee: Individual.
- Residential status: Non-Resident (NR).
- Sources of income: ☑ House Property (rent), ☑ Other Sources (NRO interest). NOT salary (UAE salary not taxable in India).
- Director / Unlisted / etc.: No.
Step 5 – House Property (rental income)
ITR-2 supports up to multiple HPs. Click on the House Property card.
- Property: Mumbai 2BHK
- Type: Let-out (LOP)
- Annual rent received: ₹6,00,000
- Municipal taxes paid: ₹18,000
- Standard deduction u/s 24(a): 30% of NAV (auto-applied)
- Interest on home loan u/s 24(b): ₹0 (no loan)
- Tenant TAN: for the Sec 195 TDS row
- Tenant TDS u/s 195: ₹1,80,000 (will surface from 26AS)
Net taxable HP income: ₹6,00,000 − ₹18,000 (municipal) = NAV ₹5,82,000. Less 30% Sec 24(a) standard deduction = ₹4,07,400. No interest deduction. HP income ₹4,07,400 [VERIFY against BharatTax HP engine].
Step 6 – Other Sources (NRO interest)
- Savings account interest (NRO): ₹8,000
- FD interest (NRO): ₹2,40,000
- TDS already deducted by bank u/s 195: ₹72,000 (entered in Schedule TDS-2, section 195 – distinct from regular 194A)
80TTA / 80TTB NOT available for NRI. Resident filers get ₹10,000 (80TTA) or ₹50,000 (80TTB senior) as deduction on deposit interest. NRIs don’t. The NRO interest is fully taxable.
Step 7 – Chapter VI-A (limited NRI eligibility)
- 80C: Aniruddh has ₹80,000 LIC + ₹50,000 PPF (top-up made while still resident; PPF cannot accept fresh contributions from NR but existing deposits continue earning interest). Total ₹1,30,000.
NRI 80C eligibility nuances.
- PPF: Can continue existing account but cannot make fresh deposits as NR. Account matures normally.
- NPS: Can continue / open as NRI under NPS-NRI scheme.
- ELSS / LIC: Can subscribe / pay premiums as NRI.
- Tuition fees: Eligible only if paid for an Indian educational institution.
- Home loan principal: Eligible.
Step 8 – Schedule TI / TTI
| Line | New regime | Old regime |
|---|---|---|
| HP income (after Sec 24) | ₹4,07,400 | ₹4,07,400 |
| OS (NRO interest) | ₹2,48,000 | ₹2,48,000 |
| Gross Total Income | ₹6,55,400 | ₹6,55,400 |
| Less: Chapter VI-A | – | ₹1,30,000 |
| Total Income (Sec 288A) | ₹6,55,400 | ₹5,25,400 |
figures derived; run fixture through BharatTax for exact.
Step 9 – Compute and compare
| New regime | Old regime | |
|---|---|---|
| Tax on slab | ₹12,770 | ₹17,580 |
| Section 87A rebate – NOT AVAILABLE for NR | ₹0 | ₹0 |
| Cess 4% | ₹511 | ₹703 |
| Total tax | ₹13,281 | ₹18,283 |
| TDS on rent (Sec 195) | ₹1,80,000 | ₹1,80,000 |
| TDS on NRO interest (Sec 195) | ₹72,000 | ₹72,000 |
| Total TDS credit | ₹2,52,000 | ₹2,52,000 |
| Net result | Refund ₹2,38,719 | Refund ₹2,33,717 |
arithmetic against BharatTax compute output. Crucial: NR status must trigger 87A rebate disablement.
Why such a big refund? Sec 195 TDS is 30% flat. Aniruddh’s actual tax is ~5% effective (slab basis). Difference = refund. NRIs almost always face this over-withholding pattern.
New still wins by ₹5K. With NRI ineligibility for 80TTA, the regime gap is small. New regime’s wider slabs marginally beat old’s deduction stack here.
Step 10 – Confirm regime, file, e-verify
Download JSON, upload to incometax.gov.in. NRI e-verification:
- Aadhaar OTP: if previously linked when resident.
- Net banking: of NRO-enabled bank.
- DSC: Class 3 DSC tied to PAN.
- ITR-V mailed to CPC Bengaluru within 30 days (slow, but works if no other option).
NRI Aadhaar-OTP often fails because Aadhaar mobile is now an overseas number. Net banking or DSC are more reliable for NRIs.
8. Common mistakes for NRI filers
review all items.
- Filing ITR-1 instead of ITR-2. D101 disqualifies NRI from ITR-1. ITR-2 is mandatory.
- Reporting UAE salary. Salary earned and received abroad is NOT taxable in India for NRI. Don’t include it. (DTAA may also apply – typically eliminates double-taxation altogether for UAE-resident workers.)
- Claiming 80TTA / 80TTB / 80U / 80DD. Not available to NR.
- Forgetting that PPF cannot accept new NR contributions. A fresh NR-period contribution is invalid; the PPF account auto- becomes “matured but no further deposits” status.
- Schedule FA – mandatory or not? Schedule FA is mandatory ONLY for Resident & Ordinarily Resident (ROR). For NR (and RNOR), Schedule FA need NOT be filled. But Schedule AL applies to NR if Indian total income > ₹50 lakh.
- Wrong residential status flag. Selecting Resident when you are NR triggers tax on worldwide income – a costly mistake. Confirm the days count via passport stamps before locking in.
- Bank account type for refund. Must be NRO (or NRE-rupee in some cases). Cannot use a regular SB account or your overseas bank.
- Missing 27Q TDS-2 entries. Tenant’s Sec 195 TDS shows in 26AS under the tenant’s TAN with section “195”. Add it to Schedule TDS-2 – not Schedule TDS-1 (which is salary-only).
9. FAQs
all answers.
Q: I became NRI mid-year (relocated September 2025). Am I NR for FY 2025-26? A: Days-in-India test is for the whole FY not just post-relocation. If you spent April-September in India (> 182 days) you’re Resident for FY 2025-26 – worldwide income taxable. Status changes only when the day count drops below the threshold for the full year.
Q: I have NRE FDs earning ₹3 lakh interest. Tax? A: NRE deposits are exempt under Sec 10(4)(ii) for NRIs. ₹3 lakh NRE interest = ₹0 tax. Don’t include in OS schedule. Bank does NOT deduct TDS on NRE interest.
Q: I sold my Indian property as NRI. How is LTCG handled? A: Same Section 112 / transitional rule applies (12.5% no-index OR 20% indexed – lower). Buyer must deduct 20% TDS u/s 195 on LTCG (or higher 30% on STCG). You can apply for a lower withholding certificate under Sec 197 if expected liability is lower than the standard 195 rate.
Q: Can I claim the standard deduction on rental income? A: Yes – the 30% standard deduction under Section 24(a) on NAV is available regardless of residential status. Same as for residents.
Q: I earn dividend on Indian shares. Tax? A: Dividend is taxable in India for NRIs. TDS u/s 195 at 20% (or DTAA rate). Add to OS schedule. Most DTAAs cap dividend WHT at 10-15% – you can claim treaty rate by filing Form 10F + Tax Residency Certificate (TRC) of your country with the dividend payer.
Q: I have a Demat account in India earning capital gains. Same as resident filing? A: Yes for the gain computation (111A 20%, 112A 12.5%). But the broker deducts Sec 195 TDS on every sale, not just at year-end. You claim the TDS credits in Schedule TDS-2.
Q: I bought NCDs (Non-Convertible Debentures) of an Indian company. Tax on interest? A: Interest on NCDs is taxable; TDS u/s 195 at 20% (or treaty rate) on interest above ₹5,000 to NRI. Add to OS schedule.
Q: I’m an NRI partner in an Indian LLP. Where do I report? A: ITR-2 doesn’t support partnership-firm partner-in-firm income. You’d need ITR-3. Forces escalation. (See ITR-3 partnership companion article 11 [if exists].)
Q: My passport says I was in India 65 days, but I have proof of 3-day overseas trips that the immigration record didn’t capture. What count is right? A: Use the days the passport shows as the official record. Discrepancies require evidence (boarding pass, hotel bills) and typically need correction with Bureau of Immigration. Don’t self-certify a different number on the return without documentation.
Verification checklist
- [ ] All
...markers above resolved. - [ ] Confirm Sec 6 four-test framework + 60/120/182-day rules for AY 2026-27.
- [ ] Confirm Sec 6(1A) deemed-resident provision for HNI Indian citizens.
- [ ] Confirm NRI exclusion from Section 87A rebate explicitly.
- [ ] Confirm 80TTA / 80TTB / 80U / 80DD NRI exclusion.
- [ ] Confirm Schedule FA exemption for NR + RNOR (only ROR mandatory).
- [ ] Confirm Sec 195 TDS rates: 30% rent, 30% NRO interest, 20% dividend, 12.5%/20% LTCG.
- [ ] Run fixture through BharatTax + replace approximations.
- [ ] Confirm BharatTax NR-handling: Q_RESIDENTIAL_STATUS=NR auto- disables Sec 87A and disables NRI-restricted deductions.
- [ ] Persona name uniqueness in
_PERSONAS.md.