NRI Investors Failing to File ITR Despite TDS on Fixed Deposits: Understanding Late Filing and Amended Return Rules

Non-Resident Indians Must File Income Tax Returns Despite Tax Deduction

Many non-resident Indians (NRIs) mistakenly believe that if tax has already been deducted by banks on fixed deposit (FD) interest, there is no further compliance required. However, if the total income earned in India exceeds the basic exemption limit, filing an Income Tax Return (ITR) becomes mandatory, irrespective of residential status.

An NRI recently sought clarity on whether ITRs can still be filed for assessment years 2025-26 and 2026-27, despite not filing returns for several years despite earning taxable FD interest. The NRI, who has not filed ITRs for the past several years, has been earning income from bank FDs in India, which has exceeded the threshold exemption limit.

According to Section 139 of the Income Tax Act 1961, every individual must file their Income Tax Return (ITR) if their total income exceeds the basic exemption limit. This requirement applies to both resident and non-resident taxpayers equally.

Read also: Correcting Credit Score Errors: A Guide to Ensuring Accurate CIBIL Reports and Optimal Loan Eligibility

As per the expert's advice, deduction of tax at source and discharge of tax liability are two different things. Just deduction of tax at source from interest does not mean that the tax liability has been discharged. Since the NRI's income has exceeded the basic exemption limit, they were required to file their ITR for the assessment year 2025-2026 and prior years.

Although the ITR for the assessment year 2025-2026 cannot be filed in the regular course, the NRI can still file an Updated ITR for four years, including and up to the assessment year 2025-26. However, they will have to pay additional tax over and above the regular interest and tax payable while filing the updated ITR for these years, depending on the time period after the end of the assessment year they are filing the updated ITR.