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For Assessment Year 2026-27, an NRI who has Indian rental income, bank interest and capital gains, but no income chargeable under the head Profits and Gains of Business or Profession, will ordinarily use ITR-2 if an Indian income-tax return is required or is being filed voluntarily. Where business or professional income is chargeable, ITR-3 generally becomes relevant.
For this article, “NRI” refers to an individual who is non-resident under section 6 of the Income-tax Act, 1961 for FY 2025-26, unless a provision uses a separate statutory definition.
But choosing ITR-2 is only the first decision.
Rent credited into an NRO account, interest appearing in a bank certificate and proceeds received from selling mutual funds do not all enter the income-tax return in the same way. Each amount must first be classified under the correct income head, computed according to the applicable law and then reported in the relevant schedule.
Tax deducted at source (TDS) is a separate matter. It must be reconciled with the underlying income, not treated as proof that the correct taxable amount has already been determined.
Applicable period: Financial Year 2025-26, Assessment Year 2026-27. The Income-tax Act, 1961 applies to this return. Position checked on 29 October 2026.
Which ITR form should an NRI select?
For AY 2026-27, the normal choice is between ITR-2 and ITR-3, depending primarily on the nature of the income.
| Income situation | Ordinarily applicable form |
|---|---|
| Indian house-property income, taxable bank interest and capital gains, without business or professional income | ITR-2 |
| Salary, pension, house-property income, capital gains or other-source income, without business or professional income | ITR-2 |
| Income chargeable under profits and gains of business or profession | ITR-3 |
| Business income together with rental income, interest or capital gains | ITR-3 |
ITR-1 and ITR-4 are not available to a non-resident individual under the AY 2026-27 eligibility conditions.
An important point: ITR-2 is not restricted to income below ₹50 lakh. An eligible individual can use it even when total income exceeds ₹50 lakh. Additional disclosures may apply at higher income levels, but that does not automatically change ITR-2 into ITR-3.
For example, the AY 2026-27 ITR-2 instructions generally require Schedule AL when total income exceeds ₹1 crore. A non-resident completing that schedule reports the applicable assets situated in India and related liabilities, rather than treating it as a requirement to disclose every overseas asset.
Similarly, earning substantial capital gains does not by itself make the income business income. The nature of the underlying transactions and their correct income-tax classification control the form selection.
For example, an NRI who redeems investments held as capital assets would ordinarily examine capital-gains reporting. Where securities or derivatives transactions are properly chargeable under the business-income head, ITR-3 may be necessary.
The official eligibility criteria are provided in the Income Tax Department’s ITR-2 guidance.
Does every NRI with Indian income have to file an ITR?
No. The filing obligation must be examined separately from the selection of the form.
Under section 139 of the Income-tax Act, 1961, the general filing requirement depends on the applicable total-income threshold and other statutory filing conditions. Special rates of tax, relevant income classifications and specific filing triggers may affect the analysis.
There are also limited statutory exceptions.
Section 115A(5) provides conditional relief from furnishing a return under section 139(1) where the assessee’s total income chargeable under the Act consists only of income specified in section 115A(1)(a) or (b) and tax deductible at source has actually been deducted from that income at a rate not lower than the rate specified in the applicable clause of section 115A(1).
Both conditions must be satisfied. Merely having TDS deducted, without meeting the specified income-composition and withholding-rate requirements, does not establish eligibility for this exception.
Section 115G provides a separate exception from furnishing a return under section 139(1) for a qualifying non-resident Indian whose total income chargeable under the Act consists only of investment income, long-term capital gains or both, as those expressions apply under Chapter XII-A, and where the tax deductible at source has been deducted from that income.
For this purpose, section 115C uses a specific definition of non-resident Indian: an individual who is an Indian citizen or a person of Indian origin and is non-resident. It also defines foreign exchange asset by reference to specified assets acquired, purchased or subscribed to in convertible foreign exchange.
Accordingly, section 115G does not cover every person colloquially described as an NRI or every investment merely because money was invested from abroad.
These conditions should be examined before applying either exception. An individual receiving Indian rent alongside other income should not assume that one of these provisions applies simply because TDS has been deducted.
Conversely, a person eligible to claim a refund may have a reason to file even where a statutory exception removes the obligation to furnish a return.
The correct sequence is therefore to establish whether a return must be filed, or is being filed for a legitimate purpose, and then identify the appropriate form.
How should rental income from Indian property be reported?
An NRI who owns a flat in Nagpur, Pune or Mumbai and receives rent from it will ordinarily examine that income under the head Income from House Property.
For AY 2026-27, ITR-2 contains Schedule HP for this purpose.
The schedule asks for details such as the property address, ownership, co-owners, tenants, rent, relevant local taxes and eligible borrowing interest.
The taxable house-property income is not necessarily equal to the rent deposited in the landlord’s bank account.
Gross rent is only the starting point
The computation begins with the property’s annual value determined under section 23 of the Income-tax Act, 1961.
For a let-out property, actual or receivable rent, expected rent, vacancy and unrealised rent may be relevant under the statutory conditions.
Municipal taxes borne by the owner and actually paid during the relevant year are considered in determining net annual value.
Section 24(a) generally permits a deduction equal to 30% of the annual value determined under section 23. Eligible interest on borrowed capital is considered separately under section 24(b), subject to the applicable conditions.
This means an NRI should not simply enter all rent credited to an NRO account as final taxable house-property income.
Suppose rent received during FY 2025-26 is ₹4,80,000.
That figure may be relevant to the calculation, but the actual Schedule HP result requires consideration of the annual-value rules, municipal taxes and permitted deductions.
If the property is jointly owned, the ownership shares and applicable computation must also be established. Receiving the entire rent in one person’s bank account does not, by itself, settle the tax ownership question.
What about TDS deducted by the tenant?
Where a payment to a non-resident is chargeable under the Income-tax Act, section 195 may require the payer to deduct tax, subject to the applicable legal conditions.
The tenant’s withholding obligation and the landlord’s final income-tax computation are distinct.
A tenant may deduct tax on an amount that differs from the landlord’s final income chargeable under the house-property head. This does not mean the landlord should ignore the deducted tax. It means the income computation and the TDS credit must be reported and reconciled separately.
For this purpose, the NRI should retain the lease agreement, rent ledger, relevant municipal tax receipts, eligible loan-interest certificate, TDS certificate and Form 26AS details.
Does the tax regime affect rental-property reporting?
Yes. The new tax regime under section 115BAC is the default regime for AY 2026-27, with the prescribed mechanism for opting out.
The chosen regime can affect deductions and loss set-off. In particular, interest on borrowed capital for a self-occupied property is not deductible under the new regime in the manner available under the old regime. House-property loss adjustments also require attention.
For an individual without business or professional income, the option to use the old regime must be exercised in the return furnished within the time allowed under section 139(1). A taxpayer filing a belated return should not assume that an old-regime election can first be made after that deadline.
An NRI should therefore determine the applicable tax regime before finalising the return, not after completing all its schedules.
Where should NRO, NRE and FCNR(B) interest be disclosed?
Bank interest is generally considered under the head Income from Other Sources, except where another provision changes its treatment.
In ITR-2, the relevant reporting schedule is Schedule OS.
The first task is to identify the type of interest and whether it is chargeable to Indian income tax.
NRO account interest
Interest earned on an NRO savings account or NRO fixed deposit is ordinarily taxable in India, subject to the applicable law and treaty position, where relevant.
The bank may deduct TDS. However, that deduction does not necessarily represent the final Indian tax liability.
The taxpayer must identify the interest attributable to the relevant financial year, report it under the appropriate category in Schedule OS and reconcile the available tax credit.
A bank’s annual interest certificate is therefore more useful for computing interest than relying only on individual interest-credit entries in the account statement.
NRE account interest
Interest on an eligible NRE account may qualify for exemption from Indian income tax under section 10(4)(ii) of the Income-tax Act, 1961.
The exemption is conditional. It depends on the relevant FEMA residence or RBI permission requirements, as provided by the section.
This distinction matters particularly when someone has returned to India but continues to hold an account bearing the NRE designation.
The account name does not prove that the exemption conditions remain satisfied.
Where interest qualifies as exempt under Indian income-tax law, the relevant exempt-income disclosure requirements, including Schedule EI where applicable, must be examined rather than automatically placing that interest in taxable Schedule OS income.
FCNR(B) deposit interest
Qualifying interest on foreign-currency deposits may be exempt from Indian income tax under section 10(15)(iv)(fa), including where the statutory conditions concerning the deposit and eligible residential status are satisfied.
The FCNR(B) exemption must not be confused with the separate NRE-account exemption.
For return preparation, the taxpayer needs the deposit details, applicable income-tax residential status, eligibility for the relevant exemption and interest certificate.
These are Indian income-tax conclusions. Whether the same interest is taxable or reportable in the country where the NRI resides is a separate foreign-law question.
How should capital gains from Indian shares, mutual funds and property be reported?
Capital gains require more than recording the amount received upon selling an investment.
For AY 2026-27, Schedule CG is the principal reporting schedule for capital gains. Additional schedules, including Schedule 112A and the special-rate reporting schedules, may apply depending on the asset and relevant statutory provision.
The main distinction is between sale proceeds and capital gain or loss.
Consider an NRI who redeems Indian mutual fund units for ₹10,00,000.
That ₹10,00,000 is the redemption consideration. It is not automatically the amount of taxable capital gain.
The proper computation requires the relevant acquisition cost, acquisition and transfer dates, fund classification, applicable expenses and any statutory adjustments or relief.
Indian equity shares and mutual funds
For shares and mutual funds, the correct return treatment depends on the instrument and the legal character of the transaction.
Listed equity shares, equity-oriented mutual funds, specified debt-oriented instruments and other fund units cannot all be treated as one undifferentiated category.
The applicable holding-period conditions, short-term or long-term classification, special tax provisions and treatment of losses must be established before completing Schedule CG.
Where section 112A applies, the additional Schedule 112A requirements must be considered. Other investment categories may require different fields within Schedule CG.
Broker statements and capital-gains statements can assist with the computation. They should not replace examination of the underlying transaction history where a discrepancy or classification issue exists.
The law determines the gain and the appropriate tax treatment. The broker’s report is supporting evidence.
Sale of Indian immovable property
If the NRI has sold an Indian flat or other capital asset, Schedule CG may require property-specific information.
The consideration, eligible acquisition and improvement cost, transfer expenses, holding period, ownership share and any available capital-gains relief must be examined.
A property purchased or inherited years earlier may require historical documents to establish acquisition information and the relevant cost basis.
The sale deed alone may not contain everything necessary to compute the gain.
The AY 2026-27 ITR-2 instructions also require separate computation details for transfers of individual land or building assets.
Tax deducted by a buyer from the sale consideration must be reconciled separately. It should not simply be deducted from the sale consideration to arrive at capital gain.
Likewise, any claim for capital-gains relief must satisfy its own statutory conditions. The availability of a reinvestment exemption should not be assumed merely because the taxpayer purchased another property.
What if the investment was sold at a loss?
Capital losses also require correct reporting.
Schedule CG identifies the relevant gain or loss. Where applicable, Schedule CYLA, BFLA and CFL address current-year adjustment, brought-forward losses and loss carry-forward.
Short-term and long-term capital losses have different set-off conditions.
Importantly, the ability to carry forward capital losses generally depends on furnishing the loss return within the time prescribed under section 139(1), read with sections 139(3) and 80.
A taxpayer should not assume that filing a belated return preserves every future loss benefit.
Why must AIS, Form 26AS and bank records be reconciled?
An Annual Information Statement entry is information reported to the Income Tax Department. It is not necessarily the complete legal determination of income chargeable to tax.
Form 26AS principally shows tax deducted or collected at source. AIS contains wider categories of information, while the Taxpayer Information Summary (TIS) aggregates relevant information for reporting and pre-filling purposes.
The Department itself explains that some transactions may not be available in AIS and that the taxpayer remains responsible for reporting complete and accurate information.
That creates three distinct questions:
| Record | What it helps establish | What it does not settle by itself |
|---|---|---|
| AIS or TIS | Information reported to the Department by identified sources | Final income classification or taxable amount |
| Form 26AS or TDS certificate | Tax deduction or collection and relevant credit information | Final tax liability |
| Lease, bank, investment and sale records | Underlying receipts, transactions, ownership and computation evidence | Every legal exemption or treaty entitlement without further analysis |
For example, a mutual fund redemption reported in AIS may reflect transaction value. The correct Schedule CG entry must still follow the applicable capital-gains computation.
Similarly, rent credited into an NRO account does not mean the entire credit is the final house-property income.
The reconciliation should establish whether the source records, income schedules and tax-paid schedules refer to the same underlying income and correct period.
Where AIS contains an incorrect or duplicated entry, the Department provides a feedback mechanism. The return should reflect the correct reportable position supported by records, rather than blindly reproducing an incorrect pre-filled figure.
The account receiving money, the income-tax character of that money, the withholding record and the final return disclosure are different checkpoints. They should not be substituted for one another.
A practical example: three Indian income streams, one ITR
Consider a hypothetical individual living outside India who qualifies as non-resident under Indian income-tax law for FY 2025-26.
Assume the individual has no income chargeable under the business or professional income head.
| Indian transaction | Amount | Return treatment to examine |
|---|---|---|
| Rent received from an Indian flat | ₹4,80,000 | Schedule HP, after statutory computation |
| NRO fixed deposit interest | ₹60,000 | Schedule OS |
| Mutual fund redemption proceeds | ₹10,00,000 | Schedule CG, based on actual capital gain or loss |
For these facts, ITR-2 is the ordinary form-selection starting point if the individual files an Indian return.
But adding ₹4,80,000, ₹60,000 and ₹10,00,000 would not produce the taxpayer’s taxable income.
The house-property amount requires computation. The interest requires the applicable income and tax-credit treatment. The mutual fund proceeds require a capital-gains calculation.
Any tax deducted from these payments must then be reviewed in the tax-paid schedules.
The example illustrates the reporting structure only. It does not determine the individual’s final tax payable, applicable tax regime or treaty entitlement.
How should an NRI file and verify ITR-2?
For AY 2026-27, the Income Tax Department provides online filing through its e-Filing portal and an applicable offline utility.
The ordinary filing sequence is:
- Identify the assessment year and residential status. For income earned from 1 April 2025 to 31 March 2026, select AY 2026-27. Confirm the correct Indian income-tax residential status rather than relying solely on the NRI description used by a bank.
- Check the filing obligation and select the return form. Determine whether filing is required or chosen. Select ITR-2 where eligible, or ITR-3 where the income classification requires it.
- Review the general information and tax regime. Verify PAN, contact and address information, bank details, residential status, return-filing category and the tax-regime election. Check whether the election was made within the prescribed time.
- Prepare the income schedules. Complete Schedule HP for house-property income, Schedule OS for taxable interest and Schedule CG and other applicable schedules for capital gains. Enter exempt income, losses and other disclosures where required.
- Reconcile taxes and review the computation. Compare AIS, TIS, Form 26AS, TDS certificates, advance tax and self-assessment tax with the underlying income. Review applicable special rates, deductions, relief and tax payable or refundable.
- Validate, submit and verify the return. Pay any self-assessment tax that is due, complete portal validation, submit the return and finish the permitted electronic or ITR-V verification procedure within the applicable time limit.
The Department currently prescribes a 30-day verification period from the date of filing. A return submitted but not validly verified can have significant procedural consequences.
The official ITR-2 User Manual explains the filing sequence and the schedules.
What if the original filing deadline has passed?
For an ordinary non-audit ITR-2 case for AY 2026-27, the original filing deadline was 31 July 2026.
Position checked on 29 October 2026: An eligible taxpayer who missed that deadline can ordinarily furnish a belated return under section 139(4) by 31 December 2026, or before completion of assessment, whichever is earlier, subject to applicable late-filing consequences.
A return already furnished under section 139(1) or 139(4) may, where permitted, be revised under section 139(5) up to 31 March 2027, or completion of assessment, whichever is earlier.
Under the Income Tax Department’s current AY 2026-27 guidance, a fee under section 234-I applies to qualifying revised returns filed from 1 January 2027. The specified fee is ₹1,000 where total income does not exceed ₹5 lakh and ₹5,000 otherwise. This is separate from any late-filing fee applicable to a belated return.
These limits should not be confused with the 31 August 2026 due date applicable to certain non-audit business cases or the separate extensions applicable to specified audit-related cases.
Late filing may also affect particular loss carry-forward claims and other statutory benefits. The mere availability of a belated or revised return does not preserve every filing-related right.
Any subsequent CBDT extension or procedural change should be checked before filing.
Do foreign assets or overseas tax returns change the Indian ITR?
They may, but Indian income-tax residential status must be determined first.
An NRI filing for Indian rent, bank interest and capital gains should not assume that all overseas bank accounts, brokerage holdings and retirement assets must also be reported in Schedule FA.
The AY 2026-27 ITR-2 instructions specify that Schedule FA need not be completed by a non-resident or a resident but not ordinarily resident (RNOR).
A person who becomes resident and ordinarily resident (ROR) in India may face a materially different foreign-income and foreign-asset reporting position.
Schedule FSI, Schedule TR and foreign tax credit questions are separate from the ordinary reporting of Indian rental income, bank interest and Indian capital gains.
Similarly, a person living in the USA, UK or UAE may have tax or reporting obligations in that country concerning the same Indian income.
An India-country DTAA may modify the tax treatment where its conditions are satisfied. It does not automatically eliminate Indian tax, withholding or the requirement to substantiate a treaty claim.
The tax and reporting consequences in the country of residence require consideration under that country’s law by an appropriately qualified professional there.
Does the Income-tax Act, 2025 change this filing guidance?
The period must be kept clear.
For income earned during FY 2025-26, the return for AY 2026-27 continues under the Income-tax Act, 1961, even though the Income-tax Act, 2025 commenced on 1 April 2026.
For income earned from 1 April 2026 to 31 March 2027, the Income-tax Act, 2025 governs, subject to its operative provisions and transitional rules.
The broad questions of income classification, residential status, form eligibility and reporting remain relevant. However, taxpayers must use the return forms, statutory provisions and procedural instructions notified for the applicable tax year.
The AY 2026-27 ITR-2 schedules should not be assumed to be the prescribed form structure for Tax Year 2026-27.
What should an NRI establish before finalising the return?
The correct ITR form is selected from the taxpayer’s residential status and the nature of income. The figures reported in it must then follow the relevant statutory computations.
For an NRI with rental income, interest and capital gains, the most useful records are those that establish what the income represents, when it arose, who legally owns it, what deductions or exemptions apply and how much tax has already been deducted or paid.
A complete return should reconcile those facts with the appropriate income and tax-paid schedules.
ITR-2 identifies the filing route. It does not decide the taxable figure merely because a bank, tenant, broker or buyer has reported an amount.
That difference is central to reporting Indian income accurately while living abroad.
Official legal and procedural references
Law and notifications: Section 115A, Section 115C, Section 115G, Section 115BAC and CBDT notified ITR-2 for AY 2026-27.
Income Tax Department procedural guidance: ITR-2 eligibility and FAQs, ITR-2 User Manual, AIS guidance, Income-tax Acts transition FAQs and ITR verification guidance.
This article provides general India-side educational information for the specified assessment year. It is not personalised income-tax, FEMA, legal, investment or foreign-jurisdiction advice. An individual’s position depends on the applicable law, relevant period, residential status, income character, supporting facts and documents. Foreign-country tax and reporting matters require review under the relevant jurisdiction’s law by an appropriately qualified professional there.
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