NRIs need to file tax returns in India if their taxable income exceeds ₹2.5 lakh

The taxable income should be computed before giving effect to the various deductions such as under 80C.

If a non-resident Indian (NRI) has one house that is vacant and locked and has bank interest income of less than ₹2.50 lakh, is it necessary for him to file income tax return (ITR)? He was filing ITR in the previous years as he had taxable income.
—Dolly Moga

Under the income-tax law, the taxable rental income from a house property situated in India is considered as nil in case of up to two self-occupied house properties. A house property is considered as self occupied if it is:

a) A self-occupied house property for residential purposes or

b) A house property that cannot be occupied by the owner due to his employment, business or profession carried on at any other place, or he or she has to reside at the other place in a building not belonging to him or her. In any other case, the individual is liable to notional rent in respect of the vacant property, subject to deductions.

Since the NRI has one house in India, which is vacant and kept locked, he or she needs to evaluate whether the house property can be considered as self-occupied. If the house property is not considered as self-occupied, the method of computing taxable rental income is prescribed as follows:

Gross annual value less municipal taxes gives the net annual value. Reduce standard deduction of 30% of the net annual value and interest on housing loan from this, which will then be the taxable rental income. Gross annual value is the higher of the following:

(c) The amount at which the property might reasonably be expected to be let out; or

(d) The actual rent received or receivable.

In other words, gross annual value compares the actual rent received or receivable with the expected rent from the property. Also, any repayment of the principal amount against a housing loan taken from eligible lenders for acquisition of such property is also eligible for deduction under Section 80C (up to ₹1.5 lakh) .

Further, under the India income-tax law, an individual, who qualifies as an NRI is required to file India tax returns if the taxable income exceeds the maximum amount not chargeable to income-tax; for FY20, it is ₹2.5 lakh. However, for the purposes of determining the threshold limit for the obligation to file tax returns, the taxable income should be computed before giving effect to the deductions under Chapter VI-A (such as under Section 80C, 80D and so on).

Note that the tax law has been recently amended for mandatory furnishing of tax returns in case an individual:

1. Has deposited an amount exceeding ₹1 crore in one or more current accounts maintained with a banking company or a co-operative bank.
2. Has incurred expenditure of an amount exceeding ₹2 lakh for himself or any other person for travel to a foreign country.
3. Has incurred expenditure of an amount exceeding ₹1 lakh towards the consumption of electricity.

Accordingly, in case your taxable income is below the maximum amount not chargeable to tax in India ( ₹2.5 lakh) and you are not covered under the specified circumstances mentioned above, you are not required to file tax returns.