ITR-2 for NRIs: Eligibility, Documents & Filing for FY 2024-25 (AY 2025-26)

The Income Tax Department of India categorizes taxpayers based on their source of income and other relevant factors to ensure smooth compliance with tax laws. Income Tax Returns (ITRs) are official forms used by taxpayers to report income, claim eligible deductions and exemptions, and disclose their total tax liability to the department. Currently, there are seven types of ITR forms prescribed under the Income Tax Act, each designed for different categories of taxpayers.

ITR-2 is one such return form that can be filed by individuals and Hindu Undivided Families (HUFs) who do not earn income from profits or gains of business or profession. This form is typically applicable to taxpayers earning income from sources such as salary, house property, capital gains, or other sources. In this guide, we will explain what ITR-2 means, who is eligible to file Form ITR-2, the latest changes introduced, and provide a step-by-step overview of how to file ITR-2 correctly.

What Is ITR-2 and When Is It Applicable?

Form ITR-2 is used by individuals and Hindu Undivided Families (HUFs) to file their income tax returns when they have no business or professional earnings. Generally, it is used by individuals who receive income from sources such as salary, pension, capital gains, or other sources.

Who Is Eligible to File ITR-2 for FY 2024-25?

If you don't know who can file ITR-2 for the FY 2024-25 (AY 2025-2026), then to clear your confusion, the ITR-2 form is for individuals, NRIs, and HUFs who are getting income from the following sources:

• Income from salary/pension
• Income from house property in India from one or more house properties
• Resident not ordinarily resident (RNOR) and non-residents.
• Capital gains, both short-term and long-term
• Agricultural income less than INR 5000
• Income from other sources, such as interest income and lottery winnings.

You can file ITR-2 even if your total income from these sources exceeds ₹50 lakhs, provided you do not have income from business or profession.

Who cannot file ITR-2? (Ineligibility Criteria)

• If they are a director of a company in India.
• NRIs receiving income from either a business or a profession in India.
• If they trade in shares, F&O, or crypto as business income.
• They get income from a partnership firm or LLP.

If the NRI meets any of these conditions, they must use the ITR-3 form instead of ITR-2.

ITR-2 Changes for AY 2025-26 (Latest Updates Explained)

The major changes made in the form ITR-2 for FY 2024-25 (AY 2025-2026) are listed below:

ITR-2 Form Structure: Sections and Schedules Explained

ITR-2 is divided into a few parts for an NRI, which are as follows:

Basic Information & Taxpayer Details

• Declaration by the taxpayer
• Return Preparer Section: Information to be filed only if a tax return preparer has prepared the return
• Tax Payments: Details of payment of advance tax, self-assessment tax, and TDS
• Part A: It will include general information. In this, you need to disclose your residential status.
• Part B-TI/Part B-TTI: Computation of total income and tax liability on total income

Income Schedules (Salary, Capital Gains, Other Sources)

• Schedule S: Salary income details only if earned from India
• Schedule HP: Contains details of income from house property in India, like rent received
• Schedule CG: Calculation of income under capital gains from shares, property, or mutual funds in India
• Schedule OS: Income from NRO, dividends, or other income sources in India
• Schedule E I: Exempt income details like NRE interest (if applicable)
• Schedule PTI: Details of pass-through income from business trust or investment funds in India as per Section 115UA, Section 115UB
• Schedule VDA: Income from the sale of crypto or virtual digital assets in India
• Schedule S I: Statement of income, which is liable to special income tax rates, like LTCG/STCG
• Schedule 112A: Sale of a company's equity share or a unit of equity-oriented fund/business trust in which STT is paid
• Schedule 115A (1)(b)0iii) proviso: It is specifically for NRIs for the sale of equity shares of a company or a unit of equity-oriented fund/ business trust, where STT is paid

Foreign Income, Foreign Assets & DTAA Disclosure

• Schedule FA: Declaration of foreign assets and income from any other source outside India
• Schedule TR: Details of taxes paid outside India, required to claim DTAA relief
• Schedule FSI: Statement of income accrued or received outside India (if taxable in India under RNOR/DTAA)

Losses, Carry Forward & Set-Off Rules

• Schedule CYLA: Income statement after set off current year's losses
• Section BFLA: Income statement of set off of unabsorbed loss brought forward from previous years
• Schedule CFL: Statement of losses to be carried forward to future years

Deductions and Exemptions Claimed

• Schedule VIA: Deductions from total income under Chapter VI-A, such as 80C, 80D
• Schedule 80G: Donation statements entitled for deduction u/s 80G
• Schedule 80GG A: Statement of donation for scientific research or rural development
• Schedule 80GGC: Statement of contribution made to political parties
• Schedule 80DD: Deduction details in respect of maintenance, including medical treatment of a person who is dependent due to disability

Special Tax Rates & Computation Sections

• Schedule AMT: Calculation for those subject to the alternative minimum tax payable under Section 115JC
• Schedule AMTC: Computation of tax credit under Section 115JD

Documents Required to File ITR-2 for NRIs

• Bank Passbook/ FDR receipts: To calculate the amount of interest income from a savings account or an NRO Account
• Foreign Tax Credit (Form 67): Essential for NRIs, if claiming relief under the DTAA Act
• TDS Certificate (Form 16A): If you have earned interest on NRO fixed deposits, savings, etc., and TDS has been deducted on the same, get Form 16A issued by the deductor
• ITR-V: You will require a copy of ITR-V for the previous year, referencing the said loss. If you want to carry forward the previous year's losses
• Rent Receipt/Local Tax Payment: If you are earning rent from an Indian house property, then you will require your tenant/local tax payment/ interest on borrowed capital details (if any) to calculate income and deductions from house property
• Document to Claim Losses: If claiming losses from capital gains, house property, or other sources in India during the current year, you will require the relevant document stating the loss
• Form 26AS: To determine TDS on your Indian income, like salary, rent, interest, etc, you will require Form 26AS. This form can be downloaded from the e-filing portal.
• Proof of Deductions Under 80C/80D/80G/80GG: You will also require documents or proofs for claiming tax savings deductions under section 80C, 80D, 80G, and 80GG, like life and health insurance receipts, donation receipts, rent receipts, tuition fees receipts, etc., if not claimed via employer or were not mentioned in your Form 16
• Form 16: If you have salary income, you will need a Form 16 issued by your employer.
• Capital Gain Statements: If you have any capital gains transactions in shares, then you will require a summary or profit/ loss statement of capital gain transactions of shares or securities during a year, if any, for the calculation of capital gains.

ITR-2 Changes for NRIs: AY 2023-24 vs AY 2024-25

The following changes are added in the ITR-2 form for the FY 2022-2023, and are also applicable for FY 2023-2023:

• Schedule 80G Clauses D-ARN required: Additional details are required in Schedule 80G Clause D for ARN (Acknowledgement Reference Number) if claimed donations.
• Relief u/s 89A: A clause has been added related to relief to NRIs with a foreign retirement benefits account, like 401(k), IRA, or superannuation. Applicable if tax is delayed in a foreign country.
  • Point No.1(e)4: Income subject to taxes during the previous year on which relief was claimed u/s 89A in any earlier year
• Schedule VDA: NRIs receiving income from the sale of virtual digital assets, a new schedule is added to calculate income from cryptocurrencies or other virtual digital assets (VDAs)
• Schedule SI (Section 115BBH): A new point added 115BBH, in which Income from Virtual Digital assets is taxed at 30% without deductions. 

Common Mistakes NRIs Must Avoid While Filing ITR-2

Carefully considering accuracy and completeness when filing the ITR-2 form is vital to claiming benefits. Here are some of the common mistakes to avoid while filing the ITR-2, along with the impact the mistake could make and ways to prevent them:

Non-Disclosure of Foreign Assets and Bank Accounts

• Mistake: An NRI who has become a resident again, forgetting to declare foreign assets or foreign-sourced income (if any)
• Impact: Will be considered a violation of the tax laws and may attract heavy penalties under the Black Money Act
• Prevent: Make sure to disclose foreign-sourced income and any income earned from foreign assets as per the rules of the Black Money Act or any other laws as applicable.

Missing or Under-Reporting Income

• Mistake: Not disclosing other Indian income sources, such as rental income, bank interest, capital gains, or agricultural income (if applicable)
• Impact: Not reporting or underreporting may attract penalties
• Prevent: While filing the tax returns, ensure to declare all Indian-sourced income, even if it seems a small amount, or even if the income earned abroad is exempt

Incorrect Personal or Residential Status Details

• Mistake: Mentioning old or wrong personal details, like address, bank account number, contact number, or mispelling your name.
• Impact: Refunds might get delayed, and problems may arise during ITR processing
• Prevent: Ensure to cross-verify all information before submitting the form.

Late Filing and Interest/Penalty Exposure

• Mistake: Filing a return after the due date
• Impact: Filing late may attract penalties as well as interest on due taxes
• Prevent: An NRI must stay well-prepared to file the Income Tax Return (ITR) before the deadline to avoid any issues at the last moment.

Errors in Capital Gains Calculation

• Mistake: Wrong or missing calculation of capital gains from the transfer of property, shares, or mutual funds in India
• Impact: May attract penalties and might result in overpayment or underpayment with financial differences
• Prevent: Calculate gains using actual purchase and sale prices. Also, use accurate rates against short-term and long-term capital gains.

Wrong Deduction or Exemption Claims

• Mistake: Claiming deductions that are not available to NRIs, such as 80DD, 80DDB, 80U, or missing valid deductions, like 80C, 80, 80E
• Impact: Higher tax liability or loss of benefit to save on taxes
• Prevent: Check all eligible deductions and sections available to NRIs and apply them accordingly. Also, ensure to provide supporting documents to support your claim.

How NRIs Can File ITR-2 Online

Filing an ITR-2 online has a well-structured process. With a little systematic approach, the process can be managed easily. Follow the steps mentioned below for filing ITR-2:

Step 1: Collect and Organize Required Documents

Gather Form 26AS, bank statement, capital gains details, foreign income details, information about loans/investments, proof of deductions, and Form 16 (if worked in India). NRIs must primarily focus on Indian bank accounts and property and determine which deductions they are eligible to claim.

Step 2: Log In to the Income Tax e-Filing Portal

Visit the Income Tax e-filing portal. If you are a new user, log in by entering your PAN number as your User ID. If you have already registered, enter your user ID, password, and the captcha code to log in.

Step 3: Select Online Filing or Download ITR Utility

Opt for the online method for an easy process, or download the utility. If you want to file the ITR-2 form online, click on "Downloads" to use the utility provided by the Income Tax Department. However, if you are an NRI staying abroad, file it online directly through the portal. Click on "e-file," then ITR, and then click "file income tax returns."

Step 4: Choose Assessment Year 2025-26

Always check the relevant year to avoid any mismatch later. For the financial year 2024-2025, choose assessment year 2025-2026.

Step 5: Select Filing Mode (Online/Offline)

Select the mode you would like to use to file your return. Choose the "online filing" option through the portal and ensure good internet connectivity, and try to avoid filing offline to experience an easy process.

Step 6: Fill and Validate the ITR-2 Form

Fill out your personal and income details accurately in the form, including Indian assets, tax paid, TDS, Capital Gains, and eligible deductions. Also, ensure you correctly mention your NRI status and any foreign income that is taxable in India.

Step 7: Pay Tax Due (If Any)

It is often required if the NRI sells a property or receives rental income. If the tax is payable after determining TDS and advance tax, then use the challan link and enter the challan details in the tax return.

Step 8: Preview and Submit your ITR

Cross-verify all the entered information and ensure it is accurate, especially your residential status and the summary of your Indian income. Once you are sure everything is correct, submit your ITR. You will be redirected to the verification page for your return upon submitting your ITR.

Step 9: Verify ITR (e-Verification Methods)

Your ITR will not be considered complete until you do the verification. You can complete the verification through a variety of options, such as receiving an OTP via Aadhaar number, sending a signed physical copy of ITR-V to CPC, Bengaluru, and using your bank account. Usually, NRIs file their ITRs either through net banking or by courier.

Step 10: Download ITR-V Acknowledgement

Download the acknowledgment after verification, which was earlier called ITR-V. Keep a copy of the filed ITR and the acknowledgement for future reference.

Step 11: Track ITR Status and Processing

You can log in to the e-filing portal and track the status of your ITR. Verify the processing of your ITR to ensure that it has been accepted and processed without any issues. This is to ensure you are aware of any steps you need to take on your end.

To Conclude

As an NRI, you need to choose the correct ITR form based on your income source, capital gains, and financial holdings in India to avoid any issues. Choosing the right form will ensure faster processing, proper tax compliance, and help you avoid issues or notices.

Do you find the Income Tax for NRIs filing complex, and are you unsure which ITR form to file? Don't worry, Savetaxs experts can help you file your ITR with the correct Form. Our team of professionals with more than a decade of experience can help you avoid paying penalties and getting a tax notice by assisting you with every tax complexity. Claim what is legally yours with the help of Savetaxs.