Which ITR Form Should an NRI File? ITR-2, Almost Always

The short answer: ITR-2. If you're a non-resident with any mix of salary, house property, capital gains, and other sources — which describes the overwhelming majority of NRIs — ITR-2 is your form. Add business or professional income taxable in India, including F&O trading profits, and you graduate to ITR-3. The two forms you may never use, however simple your income looks, are ITR-1 (Sahaj) and ITR-4 (Sugam) — both are reserved for residents, and picking one anyway is the single most common NRI filing mistake. The e-filing portal will happily let you make it; the return just comes back later as defective.

For the returns being filed this season — FY 2025-26, assessment year 2026-27 — the familiar regime still governs; the Income-tax Act, 2025 applies to the year currently in progress, not the one you're filing for.

Form	Who may use it	Available to NRIs?
ITR-1 (Sahaj)	Residents (other than not ordinarily resident) with income up to ₹50 lakh from salary, one house property, other sources	No
ITR-2	Individuals without business income — salary, house property, capital gains, other sources	Yes — the NRI default
ITR-3	Individuals with business or professional income (including F&O trading)	Yes, when business income exists
ITR-4 (Sugam)	Residents with presumptive business or professional income	No

Why ITR-2 is the default — and when ITR-3 takes over

The ITR-1 bar is absolute. It doesn't matter that your only Indian income is ₹80,000 of NRO interest and rent from one flat — the eligibility conditions restrict Sahaj to residents, and a non-resident filing it has filed the wrong return. The same residence restriction bars ITR-4, the presumptive-taxation form, even if you'd otherwise qualify for presumptive treatment.

ITR-2 absorbs everything else a typical NRI has: part-year Indian salary from the departure year, rent from house property, capital gains on shares, mutual funds, or real estate, dividends and interest under other sources, and — importantly — the schedules NRIs specifically need: exempt income, special-rate incomes, and the treaty-relief schedules discussed below. It also asks the residency questions directly, so your day counts from the residency tests get declared on the form itself.

ITR-3 enters only when you have income taxable under the head "profits and gains of business or profession." The case that surprises people is derivatives: F&O trading on Indian exchanges is business income, not capital gains, so an NRI who traded futures through the year files ITR-3 even if everything else would fit ITR-2. Freelance or consulting income sourced to India does the same. The test is the head of income, not the size — ₹50,000 of professional receipts is enough to change your form.

When filing is mandatory — and when it's merely smart

You must file if your total Indian income exceeds the basic exemption limit — ₹4 lakh under the default new regime for FY 2025-26, or ₹2.5 lakh if you elect the old regime. Two resident-only concessions don't soften that arithmetic for you: the Section 87A rebate behind the "no tax up to ₹12 lakh" headline is unavailable to non-residents, and a non-resident cannot set an unused basic exemption against special-rate capital gains — ₹3 lakh of short-term equity gains as your only income still means real tax, and a filing obligation to go with it.

Beyond the threshold, the seventh proviso to Section 139(1) forces a return on high-value transactions regardless of income — deposits above ₹1 crore in current accounts and foreign travel spending above ₹2 lakh in a year are the classic triggers.

Then there are the two reasons to file when nothing compels you. First, the refund: your bank withholds roughly 31.2% on NRO interest under Section 195, and if your actual slab liability is lower — often zero — the only way that money comes back is a filed return. Second, loss carry-forward: capital losses can only be carried forward to future years if the return claiming them is filed by the due date. A bad year in Indian equities is worth eight years of future set-off — but only if you file on time.

Deadlines, and the price of missing them

The due date for non-audit cases is July 31 following the financial year — though the CBDT has extended it in several recent years, so check the portal rather than assuming either way. Miss it and you can still file a belated return until December 31 of the assessment year, and correct mistakes with a revised return on the same timeline. The belated route costs you: a late fee under Section 234F of ₹5,000 (₹1,000 if total income is under ₹5 lakh), interest on any unpaid tax, and — the quiet penalty — forfeiture of most loss carry-forwards, which require an on-time return.

The mechanics that actually trip NRIs

Selecting the right form is the easy half. These four mechanics generate most NRI filing failures.

E-verify within 30 days, and plan the method. A return isn't filed until it's verified, and the deadline is 30 days from submission. The default route — Aadhaar OTP — assumes an Aadhaar linked to an active Indian mobile number, which many NRIs don't have. Use net banking through your Indian bank's e-filing gateway or a digital signature certificate instead; both work from abroad. An unverified return is treated as never filed, which converts a punctual filing into a belated one — or into nothing.

Refunds need a pre-validated Indian bank account. The department pays refunds only into an account pre-validated on the portal, held in India, with your PAN linked. Your NRO account works fine for this; a closed resident savings account from a decade ago does not, and a failed validation is the most common reason an approved NRI refund sits undelivered.

Report exempt NRE interest — voluntarily. NRE interest is exempt while you're a non-resident, so it creates no tax. Reporting it in the exempt-income schedule (Schedule EI) is good hygiene anyway: it papers the trail for large NRE balances and costs you nothing.

Treaty relief has its own paperwork. Claiming credit for foreign tax, or treaty rates on Indian income, runs through Schedule FSI and Schedule TR in the return, backed by Form 67 — which can be filed up to the end of the assessment year, but a claim without it is a claim the department can deny. The full machinery — tax residency certificates, Form 10F, which article covers what — is in our guide to how DTAA works for NRIs.

And one schedule to skip: Schedule FA, the foreign-asset disclosure, applies only to residents who are ordinarily resident. As a non-resident or RNOR, your foreign accounts, brokerage holdings, and property stay off the Indian return entirely — filling it in anyway just invites questions about a status you don't hold.

Frequently asked questions

Can an NRI file ITR-1 if the only income is NRO interest?

No. ITR-1 is restricted to residents regardless of how simple the income is — a non-resident with a single line of NRO interest still files ITR-2. A wrongly filed ITR-1 is typically flagged as defective under Section 139(9), and if it isn't cured with the correct form in time, the return can be treated as invalid — as if you never filed. Most ITR-2 schedules simply won't apply to you; leave them blank.

Which ITR form does an NRI with F&O trading use?

ITR-3. Futures and options profits are business income under Indian law, not capital gains, so any F&O activity — even modest, even loss-making — pulls you out of ITR-2. Filing F&O losses in ITR-3 by the due date also preserves them for carry-forward against future business income, which is often the whole point of filing in a losing year.

How do I e-verify my return without an Indian mobile number?

Skip Aadhaar OTP entirely and use net banking: log in to your Indian bank's online portal, find the e-filing or e-verify link, and it authenticates you to the income-tax portal directly — no OTP to an Indian SIM required. A digital signature certificate also works, as does an EVC generated through a pre-validated bank account. Whichever route, do it within 30 days of submitting; the return doesn't legally exist until verified.

Do I report my foreign salary and foreign bank accounts in the Indian return?

Not as a non-resident. Your foreign salary isn't taxable in India, and Schedule FA — the foreign-asset disclosure — applies only to residents who are ordinarily resident, so your overseas accounts and investments stay off the form. What does go on the return is everything India-sourced: rent, NRO interest, dividends, capital gains on Indian assets. The year you become ROR after returning, both answers flip — worldwide income and Schedule FA arrive together.