NRI Income Tax Return & FEMA Compliance

Being an NRI means living between two tax systems and hoping neither catches you off guard. Your Indian rent flows into an NRO account, your overseas salary is taxed at source, your Singapore broker reports dividends locally, and somewhere a portal in Bengaluru is matching TDS challans against your PAN. The Indian tax department does not care that you have not lived in Mumbai for a decade — if you have rental income, capital gains, NRO interest, or you sold a flat in Pune, you owe a return.

This page covers NRI income tax return filing, FEMA-side repatriation, Form 10F, DTAA relief and Schedule FA for FY 2026-27 (AY 2027-28). One team, one working file, from a written residential-status memo to the A2 form at your bank.

At a Glance

• Who needs it: NRIs, OCIs and RNORs with any Indian-source income, those who sold Indian property, hold NRO / NRE / FCNR accounts, or have TDS sitting on the portal waiting to be claimed back.
• Governing law: Income Tax Act 1961, FEMA 1999, the applicable Double Tax Avoidance Agreement (DTAA), and Black Money (Undisclosed Foreign Income and Assets) Act 2015.
• Filing window: 31 July 2027 for non-audit cases, 31 October 2027 where audit applies, 31 December 2027 for belated returns with late fee.
• Form to use: ITR-2 for most NRIs with salary, capital gains, multiple house properties or foreign income; ITR-3 if you run a business or profession in India.
• Deemed-resident threshold: Indian citizens with Indian-source income above Rs 15 lakh and no tax residency anywhere are treated as deemed residents.
• Repatriation cap: USD 1 million per FY from NRO; USD 250,000 per FY under LRS (tracked across all your Indian bank accounts).
• DTAA paperwork: E-filed Form 10F, TRC of your residence country, Form 67 for foreign tax credit — all mandatory where treaty relief is claimed.
• Turnaround: 5-10 working days end-to-end, from documents in hand to filed return and bank-ready FEMA pack.

What's New for FY 2026-27

A few changes materially affect how your AY 2027-28 return looks compared to last year.

• New capital gains regime: From 23 July 2024 onwards, LTCG on listed equity above Rs 1.25 lakh is taxed at 12.5% without indexation. LTCG on property and most other assets also moves to a flat 12.5%, with no indexation benefit for NRIs in nearly all cases.
• Form 10F e-filing remains mandatory: Paper Form 10F is no longer accepted. Every non-resident claiming DTAA relief must e-file Form 10F on the income tax portal. NRIs without an Indian PAN can use the alternative IDs notified by CBDT.
• AIS and TIS live validation: Pre-filled data from the Annual Information Statement now drives the return. Any TDS, dividend, interest or capital gain that does not match portal data must be reconciled before submission, not patched after a notice.
• Deemed-resident rule active: If you are an Indian citizen with Indian-source income above Rs 15 lakh and no tax residency anywhere, you are taxed in India on Indian-source income at slab rates as a deemed resident.
• TCS-LRS threshold: 20% TCS applies on LRS remittances above Rs 10 lakh per FY since October 2024. The TCS is creditable against your final Indian tax liability and is recoverable through the return.
• ITR-2 and ITR-3 expanded: Schedule FA and capital gains schedules are wider this year, with more granular disclosure of foreign accounts, custodial holdings and beneficial interests.

Why NRIs Cannot Skip Indian Tax Filing

Several reasons make filing non-optional, even when you live thousands of kilometres away.

• Indian-source income is taxed in India: Rent, capital gains on Indian assets, NRO interest and any business income arising in India fall under Indian tax, regardless of where you live or where you are paid.
• TDS refund only flows through a return: Banks deduct TDS on NRO interest at 30% plus surcharge and cess. The only way to recover the excess is by filing — it does not refund itself.
• Property sale TDS gap: Buyers deduct TDS at 12.5% on LTCG (or higher on STCG) when buying from an NRI. Without filing, you cannot claim back the gap between TDS withheld and your actual liability.
• Bank repatriation needs the ITR: AD banks will not release USD 1 million from your NRO account without the ITR acknowledgement, 15CA and 15CB sitting on file.
• AIS-driven notices: The portal automatically flags non-filers with reported Indian income. A 142(1) or 148 notice often follows within months, not years.
• Overseas documentation: Many foreign authorities ask for Indian ITR copies as proof of tax compliance for citizenship, PR or loan applications.
• Loss carry-forward: Capital and business losses can be carried forward only if you file within the original due date — miss it, and the loss is gone.

How It Actually Works

The work runs in a fixed sequence, designed to settle status before any number is filled into a return.

Step 1: Residential Status Memo (1-2 days)

We open with a day-count working under Section 6 of the Income Tax Act. Days in India for FY 2026-27 are counted from passport stamps, supplemented by airline records where stamps are unclear. The deemed-resident test is run if you live in a zero-tax country, and the 60-plus-365 test is checked for those who travelled often. Returning NRIs are checked for RNOR availability — up to three years of shielding from Indian tax on global income. The output is a one-page status memo that you keep on file for the year.

Step 2: AIS, 26AS and TIS Reconciliation (1-2 days)

Every line in your Annual Information Statement, Form 26AS and TIS is matched against your bank, broker and AMC statements. Mismatches — wrong PAN tagging, double-counted dividends, missing TDS credits — are corrected through portal feedback before computation begins. Only after AIS is clean do we move to the numbers.

Step 3: DTAA, FTC and Form 10F (1-2 days)

We pull the applicable treaty article — interest, dividend, capital gains, royalty, fees for technical services — and apply the lower of the Act rate or the treaty rate. Your residence-country TRC is collected and Form 10F is e-filed on your behalf. Where foreign tax has already been paid on income also taxable in India, Form 67 is prepared so the foreign tax credit is actually claimed and credited.

Step 4: Schedule FA and Capital Gains (1-2 days)

If you are an ROR, every foreign account, equity holding, custodial account, trust beneficiary interest and signing authority is mapped into Schedule FA. Capital gains are computed under the new 12.5% regime, with Section 54, 54EC and 54F exemptions applied where reinvestment is on the cards. Indexation is no longer available for most cases, so the calculation looks different from last year.

Step 5: ITR-2 or ITR-3 Filing and Verification

The return is prepared in full, peer-reviewed by a senior CA, and filed on the portal. E-verification is done through Aadhaar OTP, DSC or EVC within the 30-day window. Acknowledgement, full computation and the verification proof are shared in a single email along with a one-page summary of what was filed and why.

Step 6: FEMA Reporting, 15CA / 15CB and Repatriation

Outward remittance is handled end-to-end. Form A2, Form 15CA and Form 15CB are prepared and uploaded, and we coordinate directly with your AD bank so the remittance does not sit in a compliance queue. FLA, ODI or LRS returns are filed where applicable. A closure email lands in your inbox with a dated archive of every document.

A Real Example: Selling a Pune Flat from Singapore

Take a fairly common case — an NRI in Singapore selling a flat in Pune after sixteen years.

• The property: Apartment in Pune, bought February 2010 for Rs 65 lakh, sold June 2026 for Rs 1.8 crore.
• Long-term capital gain: Rs 1.15 crore. Under the new regime (post 23 July 2024) there is no indexation. Tax at 12.5% works out to Rs 14.37 lakh, plus surcharge and cess.
• TDS at source: The buyer deducts TDS under Section 195 on the gain (with surcharge if applicable). This often runs higher than your final liability because surcharge thresholds bite on gross numbers, not net.
• DTAA position: Most treaties give India the primary taxing right on income from Indian immovable property. The tax paid in India then flows as a foreign tax credit in your residence country, via Form 67 and the relevant treaty article.
• Section 54 escape: If you reinvest in another residential house in India within the prescribed window, the entire gain can be exempted. This is often the cleanest route for NRIs planning to return within a few years.
• Section 54EC bonds: Up to Rs 50 lakh can be parked in NHAI or REC bonds within 6 months of sale, exempting that portion of the gain from tax.
• Repatriation: After tax is paid, up to USD 1 million per FY can be sent to your overseas account through Form 15CA, Form 15CB and Form A2.

With a clean working file, the entire transaction — from sale deed to USD landing in your overseas account — typically runs 4-6 weeks. Without one, banks bounce remittances back at the compliance review and the timeline doubles.

If the property sale is on your horizon for this year, get the residential status memo and 15CB pre-work done before you sign the sale agreement — not after.

FEMA Reporting and Repatriation, Step by Step

The FEMA side of an NRI file runs parallel to income tax, but the paperwork is separate and the bank cares about every comma.

• NRO-to-NRE transfer: Up to USD 1 million per FY can be moved from your NRO account to your NRE account or overseas account, after Indian tax has been paid. The bank needs Form 15CA, Form 15CB from a CA and Form A2.
• Form 15CA and 15CB pairing: Form 15CB is the CA certificate confirming tax has been deducted correctly. Form 15CA is your own declaration on the portal. The acknowledgement number from 15CA goes into the bank's remittance file before the wire moves.
• LRS limit: USD 250,000 per FY applies to residents only — and is tracked across every bank you hold accounts with. TCS at 20% applies on LRS remittances above Rs 10 lakh per FY since October 2024.
• FLA return: If you are a director or owner in an Indian company that has received FDI or made overseas direct investments, the Foreign Liabilities and Assets return is due 15 July each year.
• ODI compliance: Indian residents making overseas investments must file Form ODI within 30 days of remittance. Returning NRIs who carry foreign investments back must regularise within 180 days of becoming resident.

Where It Goes Wrong

A few patterns repeat across cases that land on our desk after a notice has already arrived.

• Filing ITR-1 by mistake: ITR-1 is for residents only. NRIs cannot use it — the return is treated as invalid and a notice follows within months.
• Treating NRE interest as taxable: NRE and FCNR interest is exempt for NRIs and RNORs under Section 10(4)(ii) and 10(15)(iv)(fa). Adding it to taxable income out of caution just costs you money.
• Missing Form 10F before dividend or royalty TDS: If Form 10F is not on file at the time of payment, the deductor must apply the higher Indian rate. Refunding later is slow and painful.
• Forgetting Schedule FA the year you become ROR: The moment you cross into ROR, every foreign account from 1 April must be disclosed. Black Money Act exposure on undisclosed assets includes a 300% penalty and prosecution risk.
• Mixing NRO and NRE funds: NRE balances are freely repatriable; NRO balances are not. Moving funds the wrong way around triggers a FEMA breach and the bank will freeze further outward transfers.
• Repatriating before 15CB is in hand: Banks block the wire when the 15CB acknowledgement is missing. Re-doing the paperwork costs another two weeks at minimum.
• E-verification missed: If you do not e-verify within 30 days of filing, the return is treated as never filed. Penalty and reopening exposure follow.
• Claiming HRA while living abroad: Not allowed. It triggers an automatic mismatch in AIS and a 143(1) intimation soon after.

The cheapest hour in NRI tax work is the one spent on residential status and AIS reconciliation before any number is filled into a form.

What You Receive at the End

• One-page residential status memo with day-count working
• AIS, 26AS and TIS reconciliation working paper
• Filed ITR with acknowledgement and full computation
• DTAA article analysis and Form 67 working (where applicable)
• E-filed Form 10F and TRC archive
• Form 15CA and Form 15CB acknowledgements
• Form A2 package ready for your AD bank
• Schedule FA disclosure pack, if you are an ROR
• Twelve months of email support for portal notices and clarifications
• Archive ZIP of all working papers, indexed and dated for future reference

How to Get Started

Share your passport entry and exit stamps for the year, your PAN and the country where you currently pay tax. Within 24 hours you receive a checklist tailored to your income mix — rent, capital gains, dividend, NRO interest, overseas salary, foreign brokerage holdings. Once the documents land, the residential status memo is back in your inbox within 48 hours, before any number is touched.

From there the file moves through reconciliation, treaty analysis, computation, filing and FEMA reporting on a fixed timeline. You speak to a senior CA at every checkpoint, not an automated portal. If a notice arrives in later years — under Section 143(1), 148, FEMA or the Black Money Act — the same working file defends the position, with no fresh discovery time to pay for.