First ITR After Moving Back to India | RebaseNest

✍️ RebaseNest Team · Last updated 24 May 2026

·11 min read
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Educational only. Not investment, tax, legal, or immigration advice. RebaseNest is not a registered investment adviser under SEBI, SEC, or FCA. Indian tax, FEMA, and DTAA rules change frequently — verify every threshold and citation with a qualified cross-border CA before acting. Full disclaimer.

Assuming you moved back to India sometime in the previous financial year, finished a US tax season for the part-year you were there, and are now staring at the Indian e-filing portal in late July trying to figure out which form to pick. You have a W-2, a 1099-DIV or two, an E*TRADE statement with RSU sales, a 401(k) you didn't touch, a couple of US bank accounts still open for credit card payments, and maybe an HDFC NRE account that hasn't been redesignated yet.

The first ITR back is mostly a paperwork problem, not a tax problem. Most returnees in their first year are still RNOR, which means their foreign income is largely outside the Indian tax net. The trap is over-declaring out of caution, putting foreign salary on the return that wasn't earned as a resident, and then chasing credit that didn't need to be claimed in the first place.

This walks through the four decisions that actually matter: which form, which schedules, what to leave off, and how to claim Form 67 credit cleanly when you do owe.

1. ITR-2 or ITR-3

The form depends on what income heads you have, not on whether you are a returnee.

ITR-1 (Sahaj)    Resident-and-ordinarily-resident only, single house, income < 50 lakh,
                 no foreign assets, no foreign income, no FTC claim, no signing authority abroad
ITR-2            Salary + house + capital gains + other sources + foreign assets
ITR-3            ITR-2 inclusions + business / professional income
ITR-4 (Sugam)    Presumptive business income under 44AD / 44ADA / 44AE

Most returnees use ITR-2. ITR-1 is ruled out by multiple things at once for the typical returnee: RNOR or NR status, any foreign asset (a US brokerage, a 401(k), even a dormant Chase checking account), any foreign income, any FTC claim, or signing authority over a foreign account. If you also do consulting on the side, even one invoice raised, you cross into ITR-3.

The form does not change based on residency status. RNOR and ROR both file ITR-2 if their heads fit. What changes is which schedules inside the form become mandatory.

2. Residency status drives everything else

Before you touch a schedule, lock down your residency for the year. Section 6 of the Income-tax Act decides this. The day count is mechanical: 182 days in the financial year, or 60 days in the year plus 365 in the preceding four years. A separate concession (the 182-day or 120-day relaxation) applies to Indian citizens and PIOs coming on a visit — that is not the typical permanent-returnee path, so do not rely on it if you have actually moved back.

If you qualify as Resident, you then check the "Ordinarily" test under Section 6(6). You are RNOR if either you were Non-Resident in 9 of the last 10 financial years, or your stay in India in the last 7 financial years was 729 days or less. Most returnees comfortably satisfy both.

The two-year (sometimes three) RNOR window is the single most valuable thing in the Income-tax Act for returnees. Foreign income that does not arise in India and is not from a business controlled in India is not taxed during RNOR. That includes US salary for the period before you returned, US dividends, capital gains on US-held shares, and interest on US bank accounts.

The mistake is treating RNOR like ROR out of nervousness. If you are RNOR, large chunks of the return are simply not your problem this year.

3. The schedules you actually need

Schedule S          Salary — Indian employer for the period after return
Schedule HP         House property — rental from any Indian flat
Schedule CG         Capital gains — Indian MFs, shares, property sold this year
Schedule OS         Other sources — interest from NRO, FD, savings, dividends
Schedule TR         Tax relief claimed under Section 90 / 90A (DTAA)
Schedule FSI        Foreign-source income on which relief is claimed
Schedule FA         Foreign assets — ROR only, not RNOR
Schedule AL         Assets and liabilities — total income > 50 lakh

The two pairs to understand are FSI plus TR (you cannot have one without the other) and Schedule FA on its own.

Schedule FSI lists every item of foreign income on which you claim DTAA relief. Schedule TR aggregates the credit you are claiming. They must reconcile to Form 67. If you report foreign income in FSI but never file Form 67, the credit will be denied at processing.

Schedule FA is the one returnees over-fill. It is mandatory only for ROR. The form itself prints the instruction at the top of the schedule. RNOR filers leave it blank and tick the residency box correctly.

4. The four things returnees over-report

This is the part nobody tells you. Over-reporting is not safer than under-reporting, it creates reconciliation work, triggers refund delays, and sometimes inflates your tax liability when the DTAA credit doesn't fully offset.

Foreign income earned before the return date during the RNOR period. US salary earned in January to June while you were still on H-1B is foreign-source, and under RNOR it is not taxable in India. You do not put it on the return. Some CAs add it "for transparency" and then claim full Section 90 relief. The net tax is the same on paper but you have invited scrutiny on income the Act does not require you to report. Don't.

Roth IRA distributions taken during RNOR. Whether and how India taxes a Roth distribution is genuinely unsettled. The analysis depends on residency status, whether the distribution is of basis (your post-tax contributions) or earnings, whether the distribution is qualified or non-qualified under US rules, and whether you have elected the deferral regime under Section 89A (operationalised by Rule 21AAA and Form 10-EE, notified by CBDT via Notifications 24/2022 and 25/2022). DTAA Article 20 on private pensions is sometimes invoked but its application to Roth lump sums is not settled. There is no blanket "safe" bucket here — get case-specific advice before taking a large Roth distribution after returning.

US-only Traditional IRA balances that you did not draw from. Holding a 401(k) or Traditional IRA is not income. You report the asset in Schedule FA when ROR, you do not report the balance as income. Returnees sometimes list the full account value as "other sources" out of caution. That is wrong and inflates the bill.

NRE interest after redesignation. NRE interest is tax-free under Section 10(4)(ii) only while you are a "person resident outside India" under FEMA. The day you become resident under FEMA, the account must be redesignated to Resident Savings or RFC, and interest from that day forward is taxable. The over-report version is declaring the full year of NRE interest as taxable. The correct version is splitting it on the redesignation date and taxing only the post-redesignation portion. If your bank hasn't redesignated yet (this is on you, not them), interest is still taxable from your FEMA residency date — the account label is irrelevant, the residency status is what controls.

5. Form 67 and the credit chain

When you do owe Indian tax on foreign income (typical post-RNOR), the relief route is Section 90, DTAA Article 25, Rule 128, and Form 67.

The chain in plain language:

Section 90        Authorises treaty-based credit
DTAA Article 25   Specifies India-US double-tax relief mechanism (credit method)
Rule 128          How to compute and claim the credit
Form 67           The actual filing (timing per amended Rule 128(9))

Per Rule 128(9) as amended by CBDT Notification No. 100/2022, Form 67 can be furnished on or before the end of the relevant assessment year, provided the return is filed under Section 139(1) or 139(4). Tribunals have generally treated the Form 67 filing as procedural rather than fatal, but waiting until the back-end of the AY is asking for grief at processing. Furnish Form 67 before or together with ITR-2.

The credit is the lower of (a) the foreign tax actually paid that is covered by the treaty — typically US federal income tax — or (b) the Indian tax computed on that same income at average effective rates. US state income tax is a separate question; credit for state tax is not clearly available under the India-US DTAA and most practitioners treat it as a case-by-case discussion with a cross-border CA. Convert at the SBI telegraphic transfer buying rate on the last day of the month preceding the month in which the income accrued (Rule 115).

What this means in practice: if your US tax credit (after the state-tax question is settled with your CA) exceeds your Indian liability on the same income, the excess is not refunded — the credit is capped at the Indian amount.

6. The actual filing sequence

If you have nothing complicated, the order is:

  1. Confirm residency status under Section 6 and Section 6(6).
  2. Pull Form 26AS, AIS, and TIS from the income-tax portal. Reconcile against your TDS certificates and bank interest.
  3. Compute foreign income (only what is taxable given your residency) and the corresponding foreign tax paid.
  4. File Form 67 (online utility, separate from the ITR filing).
  5. File ITR-2 with the relevant schedules. Validate. E-verify within 30 days via Aadhaar OTP or net banking.
  6. Track the intimation under Section 143(1). Statutorily it can issue up to 9 months from the end of the FY in which the return is furnished; in practice, refunds with no mismatches usually arrive 30 to 60 days after processing.

If you are filing more than one schedule (FSI, TR, FA, CG, OS), do not use the online quick utility. Use the offline JSON utility from the portal — the validation is stricter and catches reconciliation issues before submission.

7. When to stop reading articles and call a CA

Three flags that mean this article is no longer enough:

  • You exercised stock options or had a vesting event spanning your return date (split-residency RSU income needs apportionment).
  • You sold US real estate, US partnership interests, or a US LLC that gave a K-1 in your first Indian year.
  • You have possible exposure under the Black Money Act for undisclosed foreign assets — particularly once you are resident / ROR and reporting obligations under Schedule FA kick in. Holding accounts during your non-resident years is not by itself a BMA trigger; non-disclosure once required is.

Each of those has a fork in the road that the standard returnee playbook doesn't cover. The fee for a competent cross-border CA on a one-time complex year is far less than the cost of an assessment notice three years later.

A note on what this is. This article is one returnee's working notes, not personalised advice. Numbers age. Rules change. The only person who can sign off on your specific case is a qualified cross-border chartered accountant looking at your full facts. Use this as a checklist of questions to take to that conversation, not as the answer.

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Reviewed by RebaseNest CA Review Panel — an independent panel checking all tax-related claims against IndiaCode and RBI primary sources.

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