In this guide
NRIs can receive Income Tax queries even when there is no deliberate tax evasion. Indian banks, registrars, deductors and other reporting entities supply substantial financial information to the tax system, so an ITR that does not reconcile with available data can attract questions.
However, claims that a fixed number such as “1.5 lakh NRIs recently received notices” should not be repeated without an official source. More importantly, ordinary transactions such as buying property or sending overseas savings to India do not automatically create taxable income or guarantee a notice.
Here are five areas NRIs should check before filing AY 2026-27 returns.
1. Assuming Every ₹30 Lakh Property Purchase Makes ITR Filing Mandatory
A property transaction of ₹30 lakh or more is reportable under the Statement of Financial Transaction framework by the registrar/sub-registrar. But this reporting threshold is not itself a general rule saying every purchaser must file an ITR.
Mandatory-return triggers below the normal income threshold instead include specified cases such as:
- Current-account deposits exceeding ₹1 crore;
- Foreign-travel expenditure exceeding ₹2 lakh;
- Electricity expenditure exceeding ₹1 lakh;
- Business turnover exceeding ₹60 lakh;
- Professional receipts exceeding ₹10 lakh;
- Specified TDS/TCS of ₹25,000 or more, subject to the senior-citizen threshold; and
- Savings-account deposits exceeding ₹50 lakh.
Therefore, buying a ₹55 lakh apartment does not, by itself, create an automatic “nil-return requirement.”
That said, the transaction can be visible through SFT/AIS. NRIs should maintain evidence showing the source of funds.
2. Selecting Resident Status by Habit
Residential status must be determined separately for every financial year.
A non-resident is generally taxable in India on income received/deemed received in India and income accruing/deemed to accrue in India. A Resident and Ordinarily Resident has much broader exposure, including foreign income. RNOR sits between these two categories.
The biggest practical mistake is assuming:
“I live abroad, so I am automatically NRI.”
Day-count rules, the 60/365-day test, special 120/182-day rules for Indian citizens/PIOs and the deemed-resident provisions may all matter.
There is also an important Schedule FA correction. The Income Tax Department’s ITR-2 instructions expressly say that Schedule FA need not be filled by a Non-Resident or RNOR.
So foreign-asset reporting should not be imposed merely because someone loosely describes themselves as “resident.” The exact status must first be determined.
3. Treating an Overseas Transfer to NRO as Indian Income
Sending your own overseas savings into an NRO account does not automatically convert the remittance into taxable Indian income.
RBI expressly permits inward remittances from outside India to an NRO account.
For example, an NRI transferring ₹25 lakh of accumulated Dubai salary into an Indian NRO account for family expenses is not necessarily earning ₹25 lakh of Indian income merely because the money reached India.
The practical issue is documentation.
Maintain:
- Foreign bank statement showing the debit;
- Salary/income records establishing the source;
- Indian bank credit advice/remittance records; and
- Any additional source-of-funds documentation requested by the bank.
It is also too broad to say that every substantial foreign transfer to NRO is automatically reported to the Income Tax Department and treated by an automated system as unexplained income. The applicable reporting depends on the underlying reporting rules and transaction.
The better compliance principle is: keep the source trail ready rather than inventing taxable income to match a bank credit.
4. Omitting Capital Gains Because Section 54 Makes Tax Zero
This is a serious filing mistake.
Suppose an NRI sells an Indian residential house, generates a long-term capital gain and buys another qualifying residential house in India.
Section 54 can provide an exemption subject to its conditions, but the original capital gain still needs to be computed and the exemption claimed appropriately.
More importantly, Section 139 requires the filing threshold to be examined before giving effect to exemptions such as Sections 54, 54B, 54EC and 54F.
Therefore:
Capital gain ₹20 lakh
Section 54 exemption ₹20 lakh
Final taxable capital gain ₹0
does not mean the transaction can simply disappear from the ITR.
Use the correct capital-gains schedule and report the exemption.
5. Confusing “Exempt From Tax” With “Ignore It Completely”
NRE-account interest is exempt for eligible NRIs/PIOs under Section 10(4)(ii). Qualifying foreign-currency deposit interest, including relevant FCNR deposits, can also be exempt for non-residents/RNORs.
When an NRI is otherwise filing ITR-2, the form contains Schedule EI for exempt income.
Accordingly, applicable exempt income should be reviewed and disclosed in the relevant return schedule rather than automatically ignored.
But another correction matters: it is inaccurate to say banks necessarily report every tax-exempt interest amount into AIS. Current SFT guidance specifically says certain exempt interest—including FCNR interest—need not be reported under the interest-reporting framework.
So taxpayers should reconcile their own records instead of assuming AIS is a complete substitute for them.
The Best NRI Pre-Filing Check
Before submitting AY 2026-27 ITR:
| Check | What to verify |
|---|---|
| Residential status | NR, RNOR or ROR |
| ITR form | Correct form for income and status |
| AIS/TIS | Third-party reported transactions |
| Form 26AS | TDS/TCS information |
| NRO/NRE/FCNR | Correct taxable/exempt treatment |
| Capital gains | Sale plus exemption correctly reported |
| Remittances | Source-of-funds documentation |
| Schedule FA | Required only where applicable |
AIS provides a broad information view, while Form 26AS from AY 2023-24 mainly contains TDS/TCS data. AIS also allows taxpayers to submit feedback where reported information is incorrect.
Frequently Asked Questions
Does buying property above ₹30 lakh automatically require an NRI to file ITR?
No. ₹30 lakh is an SFT property-reporting threshold, not by itself a universal ITR-filing trigger.
Is money transferred from my foreign bank account to NRO taxable?
Not merely because it was transferred. RBI permits overseas inward remittances to NRO accounts. The underlying source and nature of the money determine taxation.
Does an NRI need Schedule FA?
A Non-Resident or RNOR does not need to fill Schedule FA under the current ITR-2 instructions.
Must capital gains be reported if Section 54 reduces tax to zero?
Yes. The gain and applicable exemption should be properly reported, and return-filing thresholds are examined before specified capital-gain exemptions.
Should NRIs check AIS before filing?
Yes. AIS is designed to show reported financial information and allows feedback on incorrect entries. Reconcile it with your own bank, investment and property records before filing.
