Guide to NRIs filing tax returns

Jul 25 2016,

 Only few days left to file tax returns and all are in a hurry to file it before due date. Indians are making all efforts to file tax returns error free and timely but many NRIs are still worried whether they also need to file the India tax return. If yes, then do they have to file it by 31st July? Or whether they get some relaxation due to the reason of them being outside the county? Read on to find out the details.

Why should NRIs file their taxes?

There are few conditions when one must file a return. For ex: you must file a return if you want to claim refund or if you want to carry forward losses.

Vaibhav Sankla, Director, H&R Block India says - "Under the Indian tax laws, the taxability of your foreign income depends on your residential status. Your earnings outside India will get taxed only if you qualify to be resident and ordinary resident of India." But when it is about either taxing the Indian income of NRIs or filing the tax return by them, the tax laws are same for all. As such if one is earning some income in India then they may have to file tax returns within the same due dates (31st July for individuals in general) as are applicable to any other resident Indian, he adds.

So, any income received by you in India or income which is deemed to be received in India on your behalf is earned in India or income that accrues or arises in India is also earned in India is what actually defines 'Income earned in India' and for that you must have to file tax return.

Archit Gupta, Founder and CEO, cleartax.com says- "As a thumb rule you must file an IT Return in India for FY 2015-16 if your gross income is more than Rs 2, 50,000 (assuming you are less than 60 yrs old. Rs 3, 00,000, if 60-80years old and Rs 5, 00,000 if more than 80 years old). This is irrespective of what your residential status is - therefore the rule applies to NRIs too. However, NRIs are only taxed in India for Income that is earned in India. Your Income outside India is not taxed in India."

Why NRIs have to file tax return in India?

  • If an NRI has to claim a refund, then he or she must have to file a return. This may happen where the tax deducted at source is more than the actual tax liability e.g. a bank may deduct the tax on an NRO fixed deposit at 30.9% but as per Double Taxation Avoidance Agreement (DTAA) this income may be taxed at lower rate, or say if income for the year was below the exemption limits but the bank deducted tax at source on interest amount, a refund can be claimed by filing a tax return. Prior to your move, you spent a few months in India and earned salary in India, your employer has provided you a Form 16 and all taxes are duly deducted by your employer. For an NRI, it is must to file a tax return in India, if his or her gross income from this employer and including all your incomes in India for the entire financial year exceed Rs 2, 50,000.
  • If you have a house property in India you might need to file a return. "You own two or more than two house properties in India, though none of these is let out. There is no rental income. In such a case - as per Income Tax Act - only one house property shall be considered to be self-occupied and its income shall be considered nil and all others will be considered deemed to be let out properties and therefore you will have resulting Income from House Property and you will be required to file a return in India." opines Gupta
  • You have been settled abroad and you decide to sell your only house property in India which was given to you by your parents. Remember, any capital gain on that particular house property is liable to be taxed and therefore a return must be filed by you in India.
  • Note, if you decide to buy a car for your parents who reside in India, then no return of income is required to be filed by you. For an NRI, there is no tax on gifts to their parents

Tax free income: If an NRI has earned long term capital gains from the sale of equity shares or equity mutual funds, he does not have to pay any tax and therefore, does not have to include that in his tax return. In general an NRI should file his tax return declaring all his India source income but if someone qualifies as Resident and Ordinarily Resident of India for a particular financial year then he has to report his worldwide income in India. It can be summarized as under:

 


 

TDS already deducted: If the taxable income consists only of investment income (interest) and/or capital gains income from certain specified investments and if tax has been deducted at source from such income, tax returns do not have to be filed by an NRI. "You have a bank account in India to which you transfer Rs 1, 00,000 each month to pay for ongoing insurance & health costs for your parents and to pay your home loan installments. As long as your incomes in India are within Rs 2, 00,000, you are not required to file an IT Return." also adds Gupta. So if you are an NRI, do keep the above points in minds while filing your tax return for this year.

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