Income Tax Filing For Nri’s : The Basic Summary

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About 31 million Non Resident Indians are dispersed across the world. But despite of the popular belief that NRI’s are not required to pay tax returns in India they are just as much liable to file tax returns if they have bank accounts, investments in shares/bank deposits, house property and other assets in India. This article will brief you from an NRI’s point of view in a simplified way, the necessary facts one needs to keep in mind while filing tax.

Determination of their residential status in India

income tax for NRIs

  • The period of stay in the country decides if you are responsible for paying the tax returns or not. The financial year is considered from 1st April to 31st March where any non resident Indian is responsible to pay the tax for the income he generates in India.
  • As per the Income Tax Act a person can stay in India up to 181 days and maintain his Non Residential Status.

Changes in the return of income for NRI

  • For reducing compliance burden ITR 1 – (SAHAJ) has been introduced replacing SAHAJ ITR-1 for individuals. NRIs having only passive income can use this simpler ITR-1 for filing their tax return.
  • If the Non residents have one house property , income out of interest or salary and have a total income less than Rs 5 million are applicable for ITR 1 – (SAHAJ).
  • The non resident Indians and also for HUFs (Hindu Undivided Family) who are not falling under the category of ITR 1 and gaining capital income from more than one housing property or any other taxable gains come under the category of ITR 2.
  • It is necessary the Non Resident Indians having an income of more than Rs 5 million need to show the cost of the necessary assets and the analogous liabilities under the schedule of assets and liabilities in ITR 2, 3 and 4.
  • Non resident Indians are required to submit their passport along with statement of their transactions and bank accounts in India along with TDS certificates acquired from respective parties.

Types of income that can be taxable for NRI’s

  • Interests from bank account other then NRE account are taxable.
  • If any part of the financial year if you have worked any time in India despite of your non residential Indian status you are liable to pay the income tax .
  • If you hold investments like shares and mutual funds then the income coming from it is taxable. Income from selling of valuable assets is also taxable.
  • If you own a property in India and have an income from the rent of that property then you are liable to pay the applicable tax on it.

DDTA Benefits :

  •  There are about 90 countries with which India has signed DDTA including USA, UK, UAE etc. If your residence country belongs in this list and your income is taxable the individual must get the TRC (Tax Residency Certificate) issued by the tax authority of the resident country and depending on the type of income the individual can claim DTAA benefits which enables them to get their income completely exempted or a tax with low rate is issued.
  • Where the taxable income of the NRIs are below the basic exemption limit, but the exempt income is more than the basic exemption limit (i.e. Rs 250,000), then also they are required to file the return of income.
  • A non resident Indian can file their income tax returns via government or private e-filing portal or through agents.
  • Non-residents who are not claiming refund or non-residents who are claiming a refund but have a bank account in India are not required to furnish details of their foreign bank account in the return of income but if the individual claiming the refund doesn’t hold a bank account has to give the details of the foreign bank account for crediting the refund although they are not required to report any information of the income or assets they hold outside India.
  • It is necessary to report exempt income such as dividends, interest on NRE/FCNR deposit, long-term capital gains on listed securities, interest on tax-free bonds, eligible gifts received, among others, even though it has no tax impact under the schedule of exempt income.
  • Aadhar card is not mandatory.The Central Board of Direct Taxes (CBDT) has clarified that the requirement to quote Aadhaar as per section 139AA of the Income TaxAct shall not apply to an individual who is not a resident as per the Aadhaar Act, 2016.

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