NRI ITR filing: slabs, surcharge, rebate and marginal relief explained (AY 2026-27)

Assuming you are an NRI with Indian-source income — rental from the Pune flat, interest on an NRO deposit, capital gains from a mutual fund redemption, a one-off consulting fee paid into your NRO account — the question of "do I need to file an ITR, and if so, how much do I owe?" comes up every July. Most filing-season write-ups compress the slabs into a single graphic and leave the NRI-specific exceptions in the footnotes. The exceptions are the whole story.

This is a checklist of what is officially set for assessment year 2026-27 (financial year 2025-26), grounded in the Income-tax Act, 1961 and the Finance Act, 2025. Wherever a rule is rumored or under consultation but not yet notified, it is called out as unconfirmed.

1. Residency first, then everything else

Before any slab matters, your residential status under Section 6 of the Income-tax Act decides what is taxable in India at all. The basic tests for an individual, in plain form:

Resident 182+ days in India in the FY, OR 60+ days in the FY AND 365+ days in the preceding 4 FYs

Carve-outs For an Indian citizen leaving India for employment abroad, the 60-day threshold relaxes to 182 days for that FY. For an Indian citizen or PIO visiting India whose total Indian income (other than foreign-source income) is up to ₹15 lakh, the 60-day threshold relaxes to 182 days. For an Indian citizen or PIO visiting India whose total Indian income exceeds ₹15 lakh, the 60-day threshold becomes 120 days (Finance Act 2020 amendment).

Deemed resident Section 6(1A) deems an Indian citizen "not liable to (6(1A)) tax in any other country or territory by reason of domicile or residence" a resident of India, if total Indian income exceeds ₹15 lakh. This is different from "not tax-resident anywhere" — it turns on actual liability to tax in another jurisdiction.

Non-resident Anyone who fails every resident test above.

The financial year in India runs 1 April to 31 March. If a taxpayer fails every resident test, only India-source income is taxable in India under Section 5(2). The slabs and rebate discussion below apply to that India-source taxable income.

2. Which ITR form

ITR-1 (Sahaj) is explicitly barred for non-residents per the form's own instructions. The practical options are:

ITR-2 NRI with no business/profession income — salary, rent, capital gains, interest, dividend ITR-3 NRI with business or professional income in India ITR-4 Not available to non-residents

The Income-tax Department's e-filing portal (eportal.incometax.gov.in) is where the return is filed. Verification can be done via Aadhaar OTP (if linked to an Indian mobile), netbanking, or by posting a signed ITR-V to CPC Bengaluru within 30 days. NRIs without Aadhaar typically use the ITR-V route.

3. Slabs — the new regime is now the default

Section 115BAC made the new regime the default from AY 2024-25 onwards. The Finance Act 2025 revised the new-regime slabs for FY 2025-26 (AY 2026-27) as follows:

Up to ₹4,00,000 Nil ₹4,00,001-8,00,000 5% ₹8,00,001-12,00,000 10% ₹12,00,001-16,00,000 15% ₹16,00,001-20,00,000 20% ₹20,00,001-24,00,000 25% Above ₹24,00,000 30%

The old regime continues to be available. A non-business individual can choose the old regime within the ITR itself at the time of filing. A taxpayer with business or professional income has to file Form 10-IEA to opt out of the default new regime, on or before the due date under Section 139(1), and the choice has lock-in consequences.

Old-regime slabs for an individual below 60 years remain:

Up to ₹2,50,000 Nil ₹2,50,001-5,00,000 5% ₹5,00,001-10,00,000 20% Above ₹10,00,000 30%

For an NRI, the age-based higher basic exemption for resident senior citizens (₹3,00,000) and resident super senior citizens (₹5,00,000) under the old regime does not apply — the ₹2,50,000 basic exemption is the floor regardless of age. This is a recurring point of confusion.

4. Surcharge — bands and the special-rate carve-out

Surcharge is an additional levy on the tax amount once total income crosses ₹50 lakh. Standard bands:

₹50L - ₹1Cr 10% ₹1Cr - ₹2Cr 15% ₹2Cr - ₹5Cr 25% Above ₹5Cr 25% (new regime cap) / 37% (old regime)

The Finance Act 2023 capped the maximum surcharge under the new regime at 25%, removing the 37% top band that still applies under the old regime for income above ₹5 crore.

A separate carve-out: for LTCG on listed equity / equity-oriented funds (taxed under Section 112A), STCG on the same (Section 111A), and dividend income, the maximum surcharge is capped at 15% regardless of total income. This is true under both regimes. For an NRI with a large one-off mutual fund redemption, this cap meaningfully softens the bill.

After surcharge, the Health and Education Cess of 4% is added on tax plus surcharge.

5. The 87A rebate — and why it does not apply to non-residents

Section 87A allows a rebate on tax payable, currently structured as:

Old regime Up to ₹12,500 rebate if total income ≤ ₹5,00,000 New regime Up to ₹60,000 rebate if total income ≤ ₹12,00,000 (per Section 115BAC(1A) post Finance Act 2025)

The statutory language of Section 87A opens with "An assessee, being an individual resident in India". That single phrase — resident in India — is the gate. A taxpayer filing as non-resident is not eligible for the 87A rebate, even if Indian taxable income is well under the threshold. This is the single biggest difference between a resident's tax computation and a non-resident's at the lower end of the slab.

A returnee who has become RNOR or ROR in the year of filing is treated as resident for this purpose and can claim the rebate; a person filing as NR cannot. Confirming residency status under Section 6 for the year is therefore a prerequisite before assuming either way.

6. Marginal relief — how it actually works

Marginal relief prevents the cliff effect when income just crosses a surcharge threshold. Without it, earning ₹50,00,001 (one rupee over the threshold) would attract surcharge on the entire tax amount, leaving a taxpayer worse off after tax than at ₹50,00,000. The relief ensures the additional tax plus surcharge on the excess income above the threshold never exceeds the excess income itself.

Concrete example at the ₹50 lakh boundary (new regime, AY 2026-27, illustrative numbers):

Income Tax + surcharge + cess (illustrative) ₹50,00,000 Tax computed, no surcharge ₹50,00,001 Tax + 10% surcharge would create a jump of several lakh With relief Liability capped so post-tax income at ₹50,00,001 is at least equal to post-tax income at ₹50,00,000

A similar marginal-relief computation kicks in at ₹1Cr, ₹2Cr, and ₹5Cr. The principle is the same — the additional surcharge cannot exceed the income above the threshold. The ITR utility computes this automatically; the surcharge line in the prefilled return should be reviewed carefully, particularly in cases where slab income and special-rate income combine across a surcharge boundary.

7. Special-rate income — the bigger story for many NRIs

For many NRIs the headline slab is academic. Taxable income is dominated by special-rate buckets that have their own flat rates:

Income type Rate LTCG on listed equity (112A) 12.5% above ₹1,25,000 (post 23-Jul-2024) STCG on listed equity (111A) 20% (post 23-Jul-2024) LTCG on debt / unlisted 12.5% without indexation NRO interest Taxable at applicable slab rates; bank TDS for NRs is generally 30% plus surcharge and cess unless a DTAA-based or lower-rate certificate is in place FCNR / NRE interest Exempt while account holder is NR (Section 10(4)(ii), Section 10(15)(iv)(fa)) Dividend Section 115A specifies 20% as the domestic rate for NRs; the DTAA rate applies under Section 90 if it is beneficial and treaty conditions are met

The DTAA between India and the residence country can lower several of these rates. Under the India-US treaty, for example, Article 10 caps dividend withholding tax at 25% on portfolio holdings and 15% on substantial holdings; relief from double taxation on the US side flows through Article 25 (credit method) read with Section 90 of the Income-tax Act (the treaty-override provision). Section 91 is the non-treaty unilateral relief route and does not apply to the India-US case.

To claim a beneficial DTAA rate on Indian withholding, a Tax Residency Certificate from the residence country is mandatory. Form 10F is additionally required only if the TRC does not contain all the particulars prescribed under Rule 21AB read with CBDT Notification 3/2013 (status, nationality, tax identification number, residential status period, address). The form is filed electronically on the e-filing portal.

8. Due dates, late fees, refunds

For FY 2025-26 (AY 2026-27), the statutory dates under Section 139 (subject to CBDT extensions, which are common):

Non-audit individuals (e.g. salaried, capital-gains-only) 31 July 2026 Audit cases under Section 44AB 31 October 2026 Transfer pricing cases (Form 3CEB) 30 November 2026 Belated return 31 December 2026 Revised return 31 March 2027

Late fee under Section 234F: ₹5,000 if total income exceeds ₹5 lakh, ₹1,000 otherwise. Interest under Section 234A on unpaid tax accrues from the original due date.

For refunds, CBDT credits refunds only to a pre-validated bank account linked to the PAN. Many NRIs route refunds to an NRO savings account (an NRE account works too if pre-validated). The portal will reject the refund credit and ask for re-validation if the IFSC or account number does not match.

Checklist of questions to take to a CA

1. Confirm residential status for FY 2025-26 against the Section 6 day-count, including the visiting-citizen 120-day / ₹15L rule and the 6(1A) deemed-resident test
2. Regime choice — new is default; old via in-ITR election (non-business) or Form 10-IEA (business/profession) on or before the 139(1) due date, tested against deductions actually available (80C, HRA, home-loan interest)
3. Form 26AS plus AIS plus TIS download from the portal; reconcile TDS against NRO interest, dividend, and capital gains line items before filing
4. For special-rate income, review the auto-computed 15% surcharge cap on equity LTCG/STCG and dividend lines in the prefilled return
5. TRC from residence country (mandatory) plus Form 10F (if TRC is missing prescribed particulars) for DTAA rate on any withholding
6. Cross-border CA review if total income crosses ₹50 lakh — surcharge and marginal-relief computation interacts with special-rate income in ways that warrant careful review

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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Sources:

• Income-tax Act, 1961 (full text): https://www.indiacode.nic.in/bitstream/123456789/2435/1/a1961-43.pdf
• Income-tax Department e-filing portal: https://eportal.incometax.gov.in/
• Income-tax Department portal (forms, instructions, FAQs): https://www.incometax.gov.in/iec/foportal/
• CBDT Notification 3/2013 — particulars to be contained in a Tax Residency Certificate (Rule 21AB)
• Sections cited: Section 5(2), Section 6 and Section 6(1A) (residential status), Section 10(4)(ii) and 10(15)(iv)(fa) (NRE/FCNR exemption), Section 87A (resident-only rebate), Section 90 (treaty override / FTC for treaty countries), Section 111A (STCG on listed equity), Section 112A (LTCG on listed equity), Section 115A (special rates for NR), Section 115BAC and 115BAC(1A) (new regime default and revised rebate), Section 139(1) (due dates), Section 234A (interest), Section 234F (late fee), Section 44AB (audit) — as enacted in the Income-tax Act, 1961 with Finance Act 2025 amendments.
• India-US Double Taxation Avoidance Agreement — Article 10 (dividends) and Article 25 (relief from double taxation). The treaty text is published by the Income-tax Department in the DTAA section of its portal: https://www.incometax.gov.in/iec/foportal/