ITR Filing for NRI Shareholders in Indian Companies [2025 Guide

Introduction:ITR Filing for NRI Shareholders in Indian Companies [2025 Guide]

For Non-Resident Indians (NRIs), investing in Indian companies is not just about staying connected to their roots—it’s also a smart financial move. Whether through equity shares, mutual funds, or dividends, NRIs often enjoy strong returns from the Indian stock market. But with these gains comes a responsibility many overlook: Income Tax Return (ITR) filing in India.

A common misconception among NRI shareholders is that TDS (Tax Deducted at Source) deducted by companies on dividends or capital gains is the final step. They believe no further filing is required. However, that’s not always true. If your tax liability is higher than the TDS deducted, or if you wish to claim a refund for excess TDS, filing ITR becomes essential.

Some of the most frequent questions that confuse NRI investors include:

Do I need to report my dividend income in India if TDS is already deducted?
What about capital gains from selling shares or mutual funds—are they taxable in India?
How do Double Taxation Avoidance Agreements (DTAA) work when I pay tax in both India and my resident country?

This is where professional assistance makes all the difference. Filing ITR as an NRI shareholder may seem complex, but with the right guidance, it ensures compliance with the Indian Income Tax Act, 1961, helps avoid penalties, and can even maximize refunds on TDS.

At SSCOIndia, our experts simplify this journey by reviewing your Form 26AS, Annual Information Statement (AIS), and investment details so you never miss a claim or deduction.

Who is Considered an NRI for Tax Purposes?

Before we dive deeper into NRI taxation and ITR filing, it’s important to clarify who qualifies as an NRI under Indian tax law. Many investors assume that simply living abroad makes them an NRI, but the Income Tax Act, 1961 lays down clear rules.

✅ Definition as per the Income Tax Act, 1961

An individual is considered a Resident in India if they satisfy either of these conditions:

They stay in India for 182 days or more in a financial year, or
They stay in India for 60 days or more in that year AND 365 days or more in the preceding four years.

If neither condition is met, the individual is treated as a Non-Resident (NRI) for that financial year.

✅ Residential Status Rules Explained

Let’s simplify this with an example:

If you work in Dubai and visit India for just 100 days in a financial year, you are an NRI because you don’t meet the 182-day rule.
If you are working in the US and visit India for 90 days, but in the last 4 years you have spent more than 365 days in India, you may still qualify as a Resident unless you claim otherwise.

This distinction is crucial because tax liability in India depends on your residential status.

Resident Indians must pay tax on their global income.
NRIs are taxed only on the income earned or received in India.

✅ Difference Between NRI, OCI, and RNOR

There is often confusion between NRI, OCI (Overseas Citizen of India), and RNOR (Resident but Not Ordinarily Resident).

NRI: An Indian citizen or Person of Indian Origin (PIO) who lives abroad and does not meet the resident criteria under the Income Tax Act.
OCI: A person who holds foreign citizenship but enjoys certain rights in India, including the ability to invest. However, taxation for OCIs is treated the same way as NRIs.
RNOR: A special status for returning NRIs. They are considered residents but taxed only on income earned in India (not global income), making it different from full residents.

✅ Why This Matters for ITR Filing
If you’re classified as an NRI or OCI, you only pay tax in India on your Indian income (dividends, capital gains, rent, etc.). But if you mistakenly file as a resident, you might end up declaring global income unnecessarily and paying extra tax. Similarly, if you ignore filing altogether, you risk penalties, notices, and loss of refunds.

That’s why determining your residential status accurately is the first and most critical step in ITR filing for NRI shareholders in Indian companies.

When is ITR Filing Mandatory for NRI Shareholders?

Filing Income Tax Return (ITR) for NRIs in India is not just about compliance—it is also about protecting your money and ensuring you don’t end up paying more tax than required. Many NRI shareholders in Indian companies believe that since tax is deducted at source (TDS), they don’t need to file ITR. But that’s only half true. There are several situations where ITR filing becomes mandatory for NRIs:

📌 Income Exceeding ₹2.5 Lakh in India

As per the Income Tax Act, 1961, if your total income in India exceeds ₹2.5 lakh in a financial year, you must file ITR—regardless of whether TDS has already been deducted. For NRI shareholders, this income could include dividends from Indian companies, capital gains on shares, or rental income.

📌 Claiming Refund of Excess TDS

Indian companies deduct TDS at 20% (plus surcharge and cess) on dividends paid to NRIs under Section 195. In many cases, your actual tax liability may be lower because of the Double Tax Avoidance Agreement (DTAA) or due to basic exemption limits. To claim back the excess TDS deducted, you need to file an ITR in India. Without filing, you lose that refund.

📌 Capital Gains from Shares, Mutual Funds, or Property

If you sell shares of Indian companies or redeem mutual funds, capital gains are taxable in India. For short-term capital gains (STCG) on listed shares, tax is 15% u/s 111A, and for long-term capital gains (LTCG) above ₹1 lakh, tax is 10% u/s 112A. Since these transactions are reported in your Form 26AS and AIS, filing ITR ensures compliance and avoids future tax notices.

📌 Dividend Income Beyond the Threshold

Dividend income is fully taxable in the hands of NRIs, with companies deducting 20% TDS. However, if your total income (including dividends) is above the exemption limit, or if you want to adjust deductions or treaty benefits, filing ITR becomes essential.

👉 In short: If you are an NRI shareholder earning income in India, filing ITR is not optional—it’s the only way to claim refunds, report investments, and stay compliant with Indian tax laws.

Taxability of Income for NRI Shareholders

One of the most common doubts NRI shareholders have is: “What part of my income is taxable in India?” The rule is simple—only income earned or accrued in India is taxable. Let’s break down the key income types that affect NRI shareholders:

📌 Dividend Income – Taxed in India, TDS @ 20% u/s 195

Earlier, dividends were tax-free for investors, but now they are fully taxable in the hands of shareholders. For NRIs, Indian companies deduct TDS at 20% (plus cess and surcharge) before paying dividends.

Example:
If an Indian company declares a ₹1,00,000 dividend, you will receive only around ₹80,000 in your NRO account, as ₹20,000 is deducted as TDS. However, if your actual tax liability is lower under DTAA (Double Tax Avoidance Agreement), you can claim a refund by filing ITR.

📌 Capital Gains on Shares – STCG vs LTCG Rules

When NRIs sell shares of Indian companies, the tax treatment depends on how long you held them:

Short-Term Capital Gains (STCG): If shares are sold within 12 months, tax is 15% u/s 111A.
Long-Term Capital Gains (LTCG): If shares are sold after 12 months, gains above ₹1 lakh are taxed at 10% u/s 112A.

The same rules apply for mutual funds, but equity and debt-oriented funds have different holding period criteria. Importantly, since STT (Securities Transaction Tax) is already paid on listed shares, no additional surcharge is applied in most cases.

📌 Interest on NRO Accounts – Fully Taxable

Interest earned on Non-Resident Ordinary (NRO) accounts is fully taxable in India at 30% (plus surcharge and cess). Banks deduct TDS before crediting the amount. If the TDS exceeds your actual liability (for example, due to DTAA), you need to file ITR to claim the refund.

On the other hand, interest on NRE and FCNR accounts is exempt from tax, provided you qualify as an NRI under FEMA rules.

📌 DTAA Relief Available

India has signed Double Tax Avoidance Agreements (DTAAs) with over 85 countries, including the USA, UK, UAE, Canada, and Singapore. This helps NRIs avoid being taxed twice on the same income. For instance:

Under the India-USA DTAA, dividends may be taxed at 15% instead of 20%, if the shareholder files Form 10F and provides a Tax Residency Certificate (TRC).
For capital gains, some treaties allow taxation only in the country of residence, depending on the type of gain.

By filing ITR, NRIs can claim these DTAA benefits and reduce their effective tax burden.

✅ Pro Tip for NRI Shareholders:
Even if you have already paid TDS in India, filing an ITR is the only way to:

Claim a refund of excess TDS.
Report capital gains and avoid future scrutiny.
Claim DTAA benefits.
Maintain a clean tax record for future investments or property purchases in India.

Documents Required for ITR Filing for NRI Shareholders

For smooth ITR filing for NRI shareholders in India, gathering the right documents is the most crucial step. Since NRIs often have multiple income sources—dividends, capital gains, or interest on NRO accounts—having accurate paperwork ensures that your return is filed correctly and that you can claim any tax refunds without delays. Below is a complete checklist:

🔹 PAN & Aadhaar (with NRI Exemptions)

A Permanent Account Number (PAN) is mandatory for NRIs earning taxable income in India. Aadhaar is generally not compulsory for NRIs, though it is required for residents. If you are an NRI who doesn’t meet the 182-day stay condition, you are exempt from linking Aadhaar with PAN.

🔹 Form 26AS & Annual Information Statement (AIS)

Both Form 26AS and AIS act as tax passbooks. They contain details of TDS deducted by companies on dividends, brokers on capital gains, or banks on NRO account interest. Cross-checking these statements ensures that all deducted taxes reflect properly, so you don’t miss out on a refund.

🔹 Dividend Credit Statement from Company/Broker

Since dividend income of NRIs is taxable in India at 20% TDS under Section 195, companies directly deduct tax before crediting the dividend. NRI shareholders must collect dividend statements from their company or broker to match the credited amount with their ITR filing.

🔹 Capital Gains Statement from Demat or Broker

If you sold shares, mutual funds, or ETFs, your broker or demat account provides a capital gains statement. It separates short-term capital gains (STCG) and long-term capital gains (LTCG). Since STCG is taxed at 15% and LTCG at 10% beyond ₹1 lakh, this document is critical for accurate reporting.

🔹 Bank Account Details (NRO/NRE)

ITR refunds for NRIs are credited only to Indian bank accounts. Hence, you must provide details of your NRO or NRE account. Note: Refunds cannot be issued to foreign bank accounts, so ensure your NRO/NRE account is active and linked with PAN.

👉 Having these documents ready makes NRI tax filing in India hassle-free, minimizing errors and preventing notices from the Income Tax Department.

Step-by-Step Process of Filing ITR for NRI Shareholders

Once your documents are in place, the next step is understanding the ITR filing process for NRIs. Many NRI shareholders believe that since TDS is already deducted, they don’t need to file returns. However, if you want to claim a refund or adjust capital gains against DTAA benefits, filing ITR becomes essential. Here’s a step-by-step guide:

1. Collect All Income Documents

Gather all supporting documents such as Form 26AS, AIS, dividend statements, and capital gains reports. Also, keep details of NRO interest income and any rent received from Indian properties. This forms the base of your ITR.

2. Reconcile Dividend Income & Capital Gains with AIS

One common reason NRIs get notices is mismatch of income figures between the filed ITR and the Annual Information Statement (AIS). Before filing, reconcile all dividend credits, capital gains, and interest with what appears in AIS. If any income is missing, add it manually.

3. Choose the Correct ITR Form

For NRI shareholders, the most commonly used form is ITR-2. This form applies if you:

Earn dividend income,
Have capital gains from shares or property,
Receive interest on NRO deposits, or
Have income from multiple sources except business/profession.

👉 Using the wrong ITR form may lead to defective return notices, so selecting ITR-2 is critical.

4. Claim DTAA Relief (If Applicable)

Many NRIs live in countries that have a Double Tax Avoidance Agreement (DTAA) with India. For example, if you are in the USA or UK, you may get credit for taxes paid in India against your home country tax liability. While filing ITR, use Form 67 to claim DTAA benefits and avoid double taxation.

5. File Online via the Income Tax Portal

Log in to the Income Tax e-filing portal with your PAN. Enter all income details, verify TDS reflected in 26AS/AIS, and add deductions (like Section 80C or 80D, if applicable). Once done, submit the return electronically.

6. E-Verify Your ITR

The last step is verification, without which your return is invalid. As an NRI, you can e-verify using:

Net banking of NRO/NRE account, or
OTP on registered email/mobile.

Once verified, you’ll receive an acknowledgment (ITR-V). Keep it safely for future reference.

✅ Pro Tip for NRI Shareholders: Even if your income is below the ₹2.5 lakh limit, filing ITR is beneficial if excess TDS is deducted. For instance, if your dividend income is ₹1.5 lakh but the company deducted ₹30,000 as TDS (20%), you can only claim this refund through ITR filing.

Common Mistakes NRIs Make While Filing ITR

Filing Income Tax Returns (ITR) as an NRI shareholder in Indian companies can feel tricky, especially with multiple rules around dividend income, capital gains, and DTAA relief. Even seasoned investors often make mistakes that lead to unnecessary tax payments, delayed refunds, or penalty notices. Let’s look at the most common errors NRIs should avoid.

🔹 Not declaring dividend income (assuming TDS is final):
A big misconception among NRIs is that once the company deducts TDS at 20% on dividend income, no further action is required. In reality, dividend income must still be reported in your ITR. If your total tax liability is lower due to DTAA relief, you may be eligible for a refund of excess TDS, but only if you file your return.

🔹 Claiming wrong DTAA benefits:
Many NRIs are entitled to reduced tax rates on dividends or capital gains under the Double Tax Avoidance Agreement (DTAA). However, incorrectly applying the DTAA or failing to provide a valid Tax Residency Certificate (TRC) often leads to rejection of claims. This mistake can result in higher tax liability or missed refunds.

🔹 Using resident bank accounts instead of NRO/NRE:
NRIs must route Indian income, including dividends and capital gains, through an NRO account. Using a resident savings account for these transactions not only violates FEMA regulations but also complicates tax compliance during ITR filing.

🔹 Missing refund claims due to TDS mismatch:
Sometimes the TDS reflected in Form 26AS or AIS does not match the actual TDS deducted by the company or broker. NRIs often skip reconciling these figures, leading to missed refund opportunities. Cross-checking dividend and capital gain statements with AIS is essential before filing.

✅ Pro tip: Always double-check income declarations, reconcile TDS, and consult a professional to claim the correct DTAA relief.

Penalties & Consequences of Non-Compliance

Non-compliance with NRI ITR filing rules can have serious financial and legal consequences. If you miss deadlines or fail to declare certain incomes, the Income Tax Department may impose penalties, interest, and restrictions on future investments. Here are the major risks NRIs face:

🔹 Interest under Sections 234A/B/C:
If you delay filing your ITR or paying advance tax on time, you may be liable for interest charges under Sections 234A, 234B, and 234C. These add up quickly and increase your overall tax burden.

🔹 Late filing fee under Section 234F:
Missing the due date (generally 31st July for NRIs) invites a late filing fee of up to ₹5,000 under Section 234F. If your taxable income is below ₹5 lakh, the penalty reduces to ₹1,000, but the hassle remains.

🔹 Trouble in future remittances or investments:
If your tax compliance is not up to date, you may face restrictions in repatriating funds abroad or making new investments in India. The Income Tax Department may also issue notices questioning your income sources, delaying remittances.

🔹 Risk of scrutiny or double taxation:
Improper filing or not claiming DTAA benefits correctly can expose you to double taxation—paying tax both in India and your country of residence. In addition, repeated non-compliance may increase the chances of tax scrutiny in India.

✅ Bottom line: Timely ITR filing is not just about avoiding penalties—it ensures smooth investment, quicker refunds, and peace of mind.

How SSCOIndia Helps NRI Shareholders with ITR Filing

Filing ITR as an NRI shareholder can feel overwhelming with multiple documents, DTAA rules, and dividend/capital gain reconciliations. This is where SSCOIndia’s expert tax team makes the process simple and stress-free.

Here’s how we assist NRI investors worldwide:

✔ Expert guidance for dividend & capital gains reconciliation:
Our professionals carefully match your income with Form 26AS and AIS, ensuring no mismatch and helping you avoid refund delays.

✔ DTAA claim filing for lower tax liability:
We assist in filing DTAA claims correctly by using your Tax Residency Certificate (TRC) and Form 10F, ensuring you are taxed at the lowest applicable rate.

✔ Quick refunds for excess TDS deducted:
Many NRIs overpay tax due to TDS on dividends and capital gains. We help you claim these refunds quickly by filing accurate and compliant ITRs.

✔ End-to-end online filing support for NRIs globally:
No matter where you live—UAE, USA, UK, Singapore, or Australia—we provide 100% online ITR filing assistance, eliminating the need to visit India or handle complex paperwork alone.

With SSCOIndia, NRI shareholders can be confident of error-free filing, maximum refunds, and complete compliance with Indian tax laws.

Conclusion + Call to Action

As an NRI shareholder in Indian companies, timely ITR filing is more than a legal requirement—it’s a way to protect your income, avoid penalties, and maximize refunds. By declaring dividend income, claiming correct DTAA relief, and reconciling capital gains properly, you can ensure smooth tax compliance in India.

However, small mistakes—like assuming TDS is final, skipping DTAA claims, or using the wrong bank account—can lead to higher tax liability and delayed refunds. That’s why seeking expert guidance is crucial.

👉 At SSCOIndia, we specialize in NRI ITR filing services, ensuring accurate reporting of dividend income, capital gains, and DTAA benefits. With our end-to-end online support, you can file your returns from anywhere in the world—hassle-free and stress-free.

💡 Don’t wait for penalties or notices. Consult SSCOIndia today for hassle-free NRI ITR filing and get your tax compliance sorted.