Exemption limits, forms: Income Tax rule changes for NRIs this year

They must report Indian assets if income crosses Rs 1 cr as threshold for capital gains has increased, say experts

Non-resident Indians (NRIs) need to pay attention to changes in filing Income Tax returns (ITR) this year, including a higher threshold for capital gains tax and asset disclosures.

Who is as NRI

 

According to the Income-Tax Department, an individual’s residential status is the first factor in determining tax liability. If a person has spent less than 182 days in India in a financial year, she is typically considered a non-resident and taxed accordingly.

 

Higher threshold for reporting assets

 

Previously, individuals filing a form called ITR-2 had to disclose assets and liabilities if their total income exceeded Rs 50 lakh. This threshold has now been increased to Rs 1 crore, offering relief to many NRIs. Naveen Wadhwa, vice-president at Taxmann, said that “NRIs using ITR-2 are still required to report their Indian assets and liabilities if they cross this new limit. Foreign assets are not reportable for NRIs in ITR-2.”

 

Capital gains split by transaction date

 

Wadhwa explained that from July 23 last year, India’s capital gains tax regime has changed. Older tax rates apply for transactions before that date, and revised ones later. The new ITR-2 allows taxpayers to report capital gains separately for both periods, simplifying compliance for NRIs.

 

Deductions, exemptions

NRIs can claim deductions under Sections 80C and 80D and enjoy exemptions on interest earned from NRE and FCNR accounts, according to Vishwanathan Iyer, senior associate professor - finance & accreditation at Great Lakes Institute of Management, Chennai. They can avail of tax relief under Double Taxation Avoidance Agreements by submitting a Tax Residency Certificate (TRC) and Form 10F to Indian payers.

 

Common mistakes by NRIs in ITR filing

 

S R Patnaik, partner and head of taxation at law firm Cyril Amarchand Mangaldas, said that NRIs often misclassify their residential status or forget to update banks and mutual funds about their NRI status. “Timely filing of TRC and Form 10F is crucial to claim lower TDS rates and avoid discrepancies in Form 26AS,” he added.  Calculate Income Tax: Income Tax Calculator Tool 

 

“They also tend to use the wrong ITR form or misreporting Indian income such as interest earned in NRO accounts,” said Amit Bansal, partner at Singhania & Co, a global legal consultancy firm. He advised NRIs to maintain travel records, inform Income-Tax Department promptly, and consult a professional to ensure correct classification and filing.

 

Foreign income and reporting: What’s mandatory?

 

“If you’re an NRI for tax purposes, your foreign income is not taxable in India,” Patnaik said. “Also, unlike residents, NRIs are not mandated to disclose foreign bank accounts or assets under Schedule FA. However, they may do so voluntarily.”

 

What NRIs should do

 

-Check if their taxable Indian income exceeds Rs 2.5 lakh annually. They have to file tax return if it does.

 

-Ensure all documents, including TRC and Form 10F, are ready.

 

-Verify if you fall under the new capital gains tax slabs based on your transaction dates.