26/03/2026
Many Non-Resident Indians (NRIs) believe that if their income in India is below the basic exemption limit (₹2.5 lakh under the old regime), they do not have to pay tax or file an Income Tax Return in India. However, this is not always true.
Under the Income-tax provisions applicable to NRIs, the basic exemption limit is not available for certain types of income. This means that tax may be payable even if the income is very small.
For example, the following incomes earned by NRIs in India do not get the benefit of the basic exemption limit:
• Capital gains from sale of Indian equity shares or equity mutual funds
• Dividend income received from Indian companies
• Interest from certain specified investments
• Other investment incomes that are taxed at special rates
These incomes are generally taxed at special rates such as 10%, 15%, or 20%, and the tax is calculated from the first rupee itself, without adjusting it against the basic exemption limit.
Because of this rule, an NRI who earns even a small amount of such income (for example ₹5,000 dividend or a small capital gain from selling shares) may still have a tax liability in India.
In such situations, the NRI may also be required to file an Income Tax Return (ITR) in India, especially if:
Tax has not been fully deducted at source (TDS), or
They want to claim a refund of excess TDS deducted.
This video explains why the basic exemption limit is not available for certain incomes of NRIs and when an NRI may still need to file an ITR in India, even if their total income appears to be very small.
Understanding these provisions is important to avoid non-compliance and ensure proper tax filing in India.
Disclaimer: This content is intended solely for informational and educational purposes. Income-tax provisions may change pursuant to amendments, circulars, or judicial rulings. Please refer to the latest provisions or consult a professional before taking any action.
