NRI Income Tax Slabs & Mandatory Return Filing (AY 2026-27)
NRIs must file income tax returns in India if their gross Indian-sourced taxable income exceeds the basic exemption limit, or if they wish to claim TDS refunds.
| ITR topic | Tax rules for NRIs | Key requirement |
|---|---|---|
| Basic Exemption Limit | Rs. 2.5 Lakh under the Old regime, and Rs. 3 Lakh under the default New regime. | NRIs must pay tax on any income exceeding this limit. Slabs apply normally. |
| Section 87A Rebate Exclusion | NRIs are NOT eligible for the Section 87A rebate. | The zero-tax result up to Rs. 7 Lakh or Rs. 12 Lakh is only for resident individuals. |
| ITR Form Selection | ITR-2 is standard for NRI salary, property, and capital gains. ITR-3 applies if business/profession income exists. | NRIs are strictly barred from using the simplified ITR-1 form. |
| Taxable Income scope | Includes Indian salary, rent from property in India, NRO interest, and capital gains on Indian assets. | Foreign-sourced income is completely exempt from tax in India. |
Important compliance checks for NRIs
- Physical stay rules: Verify if stay in India was less than 182 days (and does not meet 60 days + 365 days test) to confirm NRI status.
- TDS on NRI Payments: TDS is deducted under Section 195 on all payments to NRIs (rent TDS is 31.2%, property sale TDS is 20.8% LTCG / 30.9% STCG on gross value).
- NRE/NRO Account Setup: Interest on NRE and FCNR accounts is tax-free in India. NRO interest is fully taxable and subject to 30.9% TDS.
- DTAA Claims: NRIs can submit a Tax Residency Certificate (TRC) and file Form 10F online to reduce Indian TDS rates under tax treaties.
Documents to prepare for NRI tax filing
- Passport copy showing all pages with entry/exit stamps.
- NRE and NRO interest certificates and Form 16A TDS certificates.
- Form 16 from Indian employers (if salaried in India).
- Demat capital gains statement and transaction summaries.
- Tax Residency Certificate (TRC) and Form 10F (for DTAA claims).
PAN Card NRIs: year and source check
Last fact-checked: 18 June 2026.
AY 2026-27 means FY 2025-26 income and is filed under the Income-tax Act, 1961. Tax Year 2026-27 means FY 2026-27 income under the Income Tax Act, 2025. Do not mix the two.
Verify stay days, TRC validity, DTAA rates, NRO interest, and Form 15CA/15CB requirements against official CBDT guidelines, notifications, and portal utilities before taking a filing position.
FAQs
Does an NRI get the Section 87A rebate?
No. The Section 87A rebate (which provides zero tax up to Rs. 7 Lakh or Rs. 12 Lakh in the new regime) is only available to resident individuals. NRIs must pay tax if their income exceeds the basic exemption limit.
Which ITR form should an NRI file?
NRIs must use ITR-2 for salary, house property, capital gains, and other sources. If they have business or professional income in India, they must file ITR-3. NRIs cannot use ITR-1.
What are the criteria under which an NRI must file an ITR in India?
An NRI must file an ITR if their total gross income in India (before deductions) exceeds the basic exemption limit (Rs. 2.5 Lakh under the old regime, Rs. 3 Lakh under the default new regime for AY 2026-27), or if they want to claim a refund for excess TDS.
Frequently Asked Questions
1. What is the significance of PAN Card for NRI in tax reassessment and scrutiny notices?
Under the Income Tax Act, PAN Card for NRI often relates to scrutiny assessments or reassessment proceedings. If a notice is received, taxpayers must reconcile their filed ITRs and AIS records immediately.
2. How should a taxpayer respond to a notice regarding PAN Card for NRI?
For notices involving PAN Card for NRI, a detailed reply along with supporting documents (bank statements, computations) must be submitted online on the e-filing portal within the specified timeline (usually 15-30 days).
3. What is the time limit for responding to a Section 148A notice?
A taxpayer must submit a detailed reply to the show-cause notice within the time limit specified by the Assessing Officer, which is usually not less than 7 days and not more than 30 days from the date of issue.
4. What is the new time limit for reopening tax assessments?
The standard time limit for reopening assessments is 3 years from the end of the relevant assessment year. It can be extended up to 5 years (previously 10 years) only if the Assessing Officer has evidence that income escaping assessment exceeds ₹50 lakh.
5. What happens if I ignore an Income Tax notice?
Ignoring a notice will lead the Assessing Officer to pass an ex-parte order under Section 144 (Best Judgment Assessment) or Section 148A(d) based on available SFT records, which often results in heavy tax demands, interest u/s 234A/B, and penalties.
6. What is a DIN in tax notices, and why is it mandatory?
DIN stands for Document Identification Number. Every official communication from the Income Tax Department must carry a unique, system-generated DIN. Any notice issued without a DIN is legally invalid.
7. Can a tax assessment be reopened after the audit has been completed?
Yes, if the Assessing Officer has 'information' suggesting income has escaped assessment, they can initiate reassessment u/s 147 even after standard scrutiny under Section 143(3) was completed, subject to time limits.
8. What are the common grounds for issuing a reassessment notice?
Common grounds include mismatches between filed ITR and SFT data (like high-value cash deposits, property transactions, share trading, or foreign remittances shown in AIS), undisclosed capital gains, or foreign asset omissions.
9. Can I file an Updated Return (ITR-U) after receiving a Section 148 notice?
No. Once a notice for assessment, reassessment, or search/seizure is issued for a financial year, you are barred from filing an Updated Return (ITR-U) under Section 139(8A) for that year.
10. What is a Section 143(1) intimation notice?
An intimation u/s 143(1) is an automated processing letter showing whether your filed ITR calculations match the tax department's database. It is not a reassessment notice, but can contain tax demands or refund adjustments.
11. What is a Section 143(2) notice?
A notice u/s 143(2) is issued to select an ITR for detailed scrutiny. It requires the taxpayer to submit supporting evidence for claims, deductions, and income heads before an assessment order u/s 143(3) is passed.
12. What is Section 154 rectification?
Section 154 allows rectifying apparent mistakes in orders or intimations (like incorrect TDS credit, mathematical errors). It cannot be used to introduce new deduction claims or dispute legal interpretations.
13. How do I check notice status on the e-filing portal?
Log in to the income tax portal, go to 'Pending Actions' > 'e-Proceedings', where all active notices, show-cause letters, and response forms are listed.
14. Can I challenge a Section 148 reassessment notice in court?
Yes. If the procedural requirements (like not issuing a 148A notice, not providing sufficient time, or not obtaining prior higher authority approval) are violated, the taxpayer can file a writ petition in the High Court.
15. What is the penalty for underreporting or misreporting income?
Under Section 270A, the penalty for underreporting income is 50% of the tax payable, which rises to 200% of the tax payable if the underreporting is due to misreporting (undisclosed sources, fake invoices, etc.).