NRI ITR Filing Guide 2026: Which Form, DTAA, Rental Income & Capital Gains

Which ITR Form Should an NRI Use?

NRIs cannot use ITR-1 (Sahaj), which is restricted to resident Indians. The correct form depends on your income sources in India:

• ITR-2 — For most NRIs: rental income, capital gains from shares/property/mutual funds, NRO interest, dividends. No business income in India.
• ITR-3 — If you have business or professional income sourced from India in addition to other heads.
• ITR-4 — If you are running a small business in India and opting for the presumptive taxation scheme (Section 44AD/44ADA). Rare for NRIs.

Filing on the wrong form can result in a defective return notice, so the selection matters.

DTAA Benefits: Avoiding Double Taxation

India has Double Taxation Avoidance Agreements (DTAA) with over 90 countries. If you are a tax resident of one of those countries, you can claim the benefit of the applicable DTAA to either:

• Have the income taxed only in one country (exemption method), or
• Get a credit for tax paid in India against your tax liability in your country of residence (credit method)

To claim DTAA in India, you need a Tax Residency Certificate (TRC) from the tax authority of your country of residence and a duly filled Form 10F (available on the Income Tax portal). These must be submitted to the Indian payer (bank, tenant, broker) before payment so they can deduct TDS at the DTAA rate instead of the standard Indian rate.

Practical examples: US-India DTAA caps dividend TDS at 15% (standard rate is 20%+); UAE-India DTAA can eliminate tax on certain categories of income entirely because the UAE does not levy income tax on individuals.

Rental Income from Indian Property

If you own residential or commercial property in India that is rented out:

• The tenant is required by law to deduct TDS at 30% on rent paid to you (as an NRI), irrespective of the rent amount
• You are entitled to a 30% standard deduction on the net annual value (NAV) of the property before computing taxable rental income
• If there is an outstanding home loan, you can deduct the full interest paid on the loan (Section 24(b)) against the rental income
• Municipal taxes paid by you are also deductible

After applying these deductions, your actual tax liability is often well below the 30% TDS deducted — filing an ITR is how you reclaim the excess.

Capital Gains on Shares and Mutual Funds

Capital gains rules are the same for NRIs as for residents in terms of rates, but with one important difference: the payer (broker/custodian) is required to deduct TDS at the applicable rate before crediting gains to your account. This means you may have already paid tax before you even receive the money.

• Short-term capital gains on listed equity / equity mutual funds (held < 12 months): taxed at 20% (Section 111A)
• Long-term capital gains on equity above ₹1.25 lakh per year (held > 12 months): taxed at 12.5% (Section 112A)
• Debt mutual funds (purchased after April 2023): gains added to income and taxed at slab rates

Capital Gains on Property Sale

When an NRI sells immovable property in India, the buyer must deduct TDS at 20% (plus surcharge and cess) on the entire sale value — not just the gain — unless a lower/nil TDS certificate is obtained in advance from the Income Tax department under Section 197. This can result in significant cash being held up in TDS even when the actual gain is much smaller. Applying for this certificate before the sale is strongly advisable for any large property transaction.

Form 15CA and 15CB: Repatriation of Funds

When you want to transfer money from an NRO account to your overseas bank account (for example, after collecting rent or selling property), the Indian bank requires two documents:

• Form 15CA — An online declaration filed by you (or your authorised representative) on the Income Tax portal, certifying that applicable taxes have been paid
• Form 15CB — A certificate issued by a Chartered Accountant confirming that taxes have been paid and the remittance complies with FEMA

Without these documents, the bank will not process the transfer. The CA signing Form 15CB is certifying the tax position, so it must be done by a practicing CA.

How GSRC and Associates Helps NRIs

GSRC and Associates, Navi Mumbai (ICAI Firm Reg. No. 159615W) works with NRI clients across the US, UAE, UK, Australia and Singapore. We handle ITR-2 and ITR-3 filings for NRIs, apply DTAA benefits correctly, obtain lower TDS certificates for property sales, and issue Form 15CB certificates for repatriation. Everything is done remotely over email and WhatsApp — you don't need to be in India.

WhatsApp us for a free initial review of your NRI tax situation in India.