NRI Income Tax Filing Checklist for FY25: Key Guidelines and Common Pitfalls

As the income tax filing deadline for Financial Year 2024–25 approaches, Non-Resident Indians (NRIs) are advised to begin their preparations early to ensure compliance and avoid last-minute errors.

Filing taxes as an NRI requires adherence to specific rules and submission of a range of documents that verify both residency status and income details.

To begin with, NRIs need to gather essential documents, including their PAN card and valid visa or proof of overseas residency. They must also collect bank statements for all NRE, NRO, and savings accounts for the period between April 2024 and March 2025. Interest certificates, capital gains reports, and dividend statements must be included to account for income from investments. If any deductions are being claimed, appropriate investment proofs under Sections 80C, 80D, or 80G, among others, should be submitted. In addition, a Tax Residency Certificate (TRC) and Form 10F are mandatory to claim benefits under the Double Taxation Avoidance Agreement (DTAA). For NRIs who are salaried, Form 16 should also be obtained.

Certain key points must be kept in mind while filing. Although interest earned from NRE and FCNR accounts is exempt from tax, it must still be reported in the income tax return. NRIs are required to use ITR-2, as ITR-1 is not applicable to them. It is important to ensure that Aadhaar is linked with PAN and a bank account is validated on the Income Tax portal. Dividend income is taxed at a flat rate of 20% under Section 115A unless DTAA benefits reduce the liability. Furthermore, NRIs are not eligible for the Section 87A rebate, which is otherwise available to resident taxpayers.

NRIs must also avoid some common mistakes. These include failing to report Indian income on which Tax Deducted at Source (TDS) has already been applied, overlooking discrepancies in their Annual Information Statement (AIS) or Taxpayer Information Summary (TIS), and not disclosing Indian assets or liabilities when their total income exceeds ₹1 crore. Another frequent error is using incorrect or outdated email addresses or mobile numbers on the income tax portal, which can lead to issues in receiving important communication from the tax department.

Determining residential status accurately is critical. A person qualifies as an NRI if they stayed in India for less than 182 days during the financial year and less than 60 days in that year, provided their total stay in India during the preceding four financial years is less than 365 days. This classification is crucial for determining which incomes are taxable and what benefits are available.

Finally, the deemed residency rule must be understood. If an Indian citizen earns more than ₹15 lakh from Indian sources and is not liable to pay tax in any other country, they will be treated as a Resident but Not Ordinarily Resident (RNOR). This has implications for the scope of income that becomes taxable in India.

In conclusion, NRIs should approach tax filing with diligence, ensure all information is accurately reported, and seek professional advice if needed. Proper planning and awareness of applicable rules can help avoid penalties and ensure compliance with Indian tax laws.