Non-Resident Indians (NRIs) navigating the Indian income tax landscape for the Financial Year (FY) 2024–25 (Assessment Year 2025–26) are facing significant delays in e-filing due to technical updates to the Income Tax Department’s portal. In response, the Central Board of Direct Taxes (CBDT) has extended the filing deadline for non-audit cases to September 15, 2025, offering relief to NRIs worldwide. This article, brought to you by NRI News Club, breaks down the reasons behind the delays, critical updates from the Income Tax Bill 2025, and actionable steps to ensure compliance, helping NRIs stay ahead in their tax obligations.
Why the Delay in NRI Income Tax Filing for 2025?
The Income Tax Department has notified all seven Income Tax Return (ITR) forms for AY 2025–26, but the e-filing utilities for ITR-2 and ITR-3, the primary forms used by NRIs are not yet fully operational. These delays stem from extensive technical modifications required to align the forms with new tax provisions, including updated capital gains reporting and Tax Deducted at Source (TDS) requirements introduced in the Income Tax Bill 2025. According to tax experts, the portal’s backend updates are critical to ensuring accurate processing but have pushed the e-filing rollout to late June or early July 2025.
The CBDT’s press release on May 27, 2025, confirmed the extension of the ITR filing deadline from July 31 to September 15, 2025, for non-audit cases, including most NRIs. This extension applies to taxpayers filing under Section 139(1) and ensures that ITRs submitted by the new deadline are treated as timely, with interest on eligible tax refunds payable from April 1, 2025. However, taxpayers requiring audits (e.g., NRIs with business income exceeding ₹60 lakh or professional income exceeding ₹10 lakh) must file by October 31, 2025.
Key Tax Updates for NRIs in 2025
The Income Tax Bill 2025, introduced in Parliament on February 13, 2025, and set to take effect from April 1, 2026, brings significant changes for NRIs while retaining core residency rules. Here are the most impactful updates:
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No Return Filing for Certain Cases: NRIs whose only income is from investment income (e.g., interest from Non-Resident Ordinary (NRO) accounts) or long-term capital gains (LTCG) from specified foreign exchange assets (e.g., shares, debentures, or government securities) may not need to file an ITR if TDS has been deducted. This applies under the special tax regime of Chapter XII-A, which taxes LTCG at 12.5% (increased from 10% as of June 23, 2024) and investment income at 20%.
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Capital Gains Tax Exemptions: NRIs can claim full or partial exemptions on LTCG by reinvesting proceeds into specified assets (e.g., shares, debentures, or government securities) within six months, subject to a three year lock-in period under Section 115F. This is particularly relevant for NRIs selling Indian real estate or unlisted equity shares.
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Residency Rules Unchanged: The bill retains the Resident but Not Ordinarily Resident (RNOR) status for NRIs earning over ₹15 lakh from Indian sources without tax liability abroad. Only Indian-sourced income is taxable, ensuring global income remains tax-free in India. For NRIs visiting India, the 60-day residency threshold extends to 120 days if Indian income exceeds ₹15 lakh, providing flexibility for extended visits.
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Stricter TDS and Reporting: TDS rates for NRIs remain high (20–30% on rental income and capital gains), often exceeding actual tax liability, necessitating ITR filings to claim refunds. The process for obtaining lower withholding certificates is time-consuming, and buyers transacting with NRIs must now secure a Tax Deduction and Collection Account Number (TAN), adding complexity. Additionally, NRIs must report all Indian bank accounts (NRE, NRO, FCNR) and foreign assets if classified as Resident and Ordinarily Resident (ROR).
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New Tax Regime as Default: The Finance Act 2024 made the new tax regime the default for AY 2025–26, offering simplified compliance with lower tax rates and a ₹75,000 standard deduction for salaried NRIs. However, NRIs can opt for the old regime to claim deductions under Sections 80C (e.g., life insurance, ELSS), 80D (health insurance), and 80E (education loan interest) by filing Form 10-IEA before the deadline.
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Increased Rebate Limits: The Section 87A rebate, unavailable to NRIs, has increased to ₹60,000 for residents, allowing tax-free income up to ₹12 lakh (₹12.75 lakh for salaried individuals with the standard deduction). NRIs with taxable income below ₹2.5 lakh (old regime) or ₹3 lakh (new regime) are exempt from filing unless they have capital gains or seek refunds.
Implications of Filing Delays
The extended deadline offers NRIs more time to gather documents and ensure accuracy, particularly for complex income sources like rental income, capital gains, or business income. However, delays in e-filing utilities could slow refund processing, with experts warning that systemic bottlenecks may increase the government’s interest payout burden under Section 244A. For NRIs, this means potential delays in receiving excess TDS refunds, which can be critical for those with high deductions on NRO account interest or property sales.
Filing a belated return after September 15, 2025, is possible until December 31, 2025, under Section 139(4), but incurs a late filing fee of up to ₹5,000 (₹1,000 if total income is below ₹5 lakh) and 1% monthly interest under Section 234A on unpaid tax. Revised returns can also be filed by December 31, 2025, if errors are detected.
Actionable Steps for NRIs
To navigate the delays and comply with the latest rules, NRIs should take the following steps:
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Gather Essential Documents: Prepare your PAN card, passport (with immigration stamps), NRE/NRO/FCNR bank statements, Form 26AS, Annual Information Statement (AIS), TDS certificates (Form 16A), and proof of foreign residency for Double Taxation Avoidance Agreement (DTAA) benefits.
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Choose the Correct ITR Form: Use ITR-2 for income from salary, house property, capital gains, or other sources, and ITR-3 if you have business or professional income. ITR-1 is not applicable for NRIs.
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Monitor E-Filing Portal: Check www.incometax.gov.in regularly for updates on ITR-2 and ITR-3 utility releases, expected by early July 2025.
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Leverage DTAA Benefits: If your country of residence has a DTAA with India (over 90 countries do), submit Form 10F and a Tax Residency Certificate to reduce TDS or claim exemptions.
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Plan for Refunds: File an ITR to claim excess TDS, especially on NRO account interest or property sales, as refunds are only processed post-filing.
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Consult a Tax Expert: Engage a chartered accountant or tax consultant specializing in NRI taxation to navigate complex cases, ensure compliance, and optimize deductions.
Strategic Considerations
The extended deadline provides a window to strategically choose between the old and new tax regimes. NRIs with significant deductions (e.g., home loan interest under Section 24(b) up to ₹2 lakh or Section 80C investments) may benefit from the old regime, while those with simpler income profiles may prefer the new regime’s lower rates and minimal documentation. Additionally, NRIs should track their days in India to avoid unintended residency status changes, especially if earning over ₹15 lakh from Indian sources.
For NRIs investing in Indian real estate or startups, the Income Tax Bill 2025’s provision to calculate capital gains on unlisted equity shares in foreign currency can reduce LTCG tax by up to 72%, making these investments more attractive. However, stricter TDS and TAN requirements necessitate careful planning to avoid liquidity issues.
Conclusion
The 2025 ITR filing delays, while challenging, offer NRIs additional time to ensure compliance and optimize their tax strategies. The extended September 15 deadline, combined with favorable provisions like capital gains exemptions and unchanged RNOR rules, presents opportunities to manage tax liabilities effectively. By staying proactive, gathering necessary documents, and consulting experts, NRIs can navigate the complexities of Indian tax laws with confidence.
For the latest updates on NRI income tax regulations and filing guidance, visit nrinewsclub.com. Stay informed and ensure your financial planning aligns with the evolving tax landscape.
Disclaimer: This article is based on information from the Income Tax Department, Business Today, and other credible sources. NRI News Club assumes no responsibility for the accuracy or completeness of the content. Always consult a tax professional before making financial decisions.