What are the Income Tax Rules for NRI?

The biggest misconception I hear is that all NRIs have to report every rupee they earn worldwide in India. That isn't always the case.

For most NRIs, the important questions are:

• Are you actually a non-resident for that financial year?
• Is the income earned or received in India?
• Is there any business or professional income?
• Are you claiming benefits under a DTAA?

I usually prepare a list of all my Indian and foreign income before starting my return. Once I know which income is taxable in India, the filing process becomes much simpler.

Requirements can change from year to year, so I always verify the latest instructions before submitting my return.

My experience was a little different because I live in Canada and sold an apartment in India last year.

Besides rental income and bank interest, I had capital gains, so I had to report those as well. I also claimed relief under the India-Canada DTAA because part of my income had tax implications in both countries.

I ended up filing Form 67 along with my return because I was claiming Foreign Tax Credit. If you're not claiming any foreign tax credit, you may not need it, but that's something you'll want to verify based on your situation.

One thing I'd definitely recommend is checking your AIS and Form 26AS before filing. I found a couple of TDS entries that I had forgotten about, which helped avoid mistakes in my return.

I filed my return recently from the UK as an NRI, and my understanding is that your residential status determines what is taxable in India, not your citizenship.

In my case, my UK salary wasn't taxable in India because the services were performed outside India and the salary was received there. However, I did report my rental income from Chennai, NRO account interest, and capital gains from selling Indian shares.

Initially, I was confused because different websites explained it differently, but once I identified which income actually arose in India, choosing the correct ITR became much easier. I used ITR-2 because I don't have any business income.

If you're only earning employment income abroad and your Indian income is limited to rent and investments, your situation may be similar. Still, I'd recommend checking the latest Income Tax Department guidance because the applicable rules can depend on your residential status and specific facts.