Filing of tax returns
When NRI Has To File Tax Returns in India
- As a thumb rule you must file an IT Return in India for AY 2014-15 if your Gross Income is more than Rs 2,00,000 (assuming you are less than 60 yrs old. Rs 2,50,000 if 60-80yrs 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.
- If you want to claim an Income Tax Refund you must file a return.
- Or if you have losses that you need to carry forward – a return must be filed by you.
Now ‘what does Income earned in India’ mean? 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’. Let’s look a few scenarios where you as an NRI would have ‘Earned’ Income in India.
- You have Fixed Deposits and Savings Bank accounts in India. Any returns in the form of interest in these accounts is income earned in India. If your Gross Income (from all sources ) is more than Rs 2,00,000 – you must file your IT Return.
- You moved abroad during the financial year 2013-14 and you are an NRI for purposes of Income Tax for this financial year. 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. If your Gross Income from this employer and including all your incomes in India for the entire financial year exceed Rs 2,00,000 – you are required to file a return in India.
- You have a house property in India which you rented out for an annual rent of Rs 3,00,000. That is your only income from India. As per rules of House Property – deduct 1/3rd of the rent and municipal taxes paid, if the resulting amount is greater than Rs 2,00,000 – you are required to file a return in India.
- 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, if your income exceeds Rs 2,00,000.
- You have Fixed Deposits in India and bank deducted TDS from your deposits – while your total Income in India is less than Rs 2,00,000. File a return in India to claim refund for the excess tax deducted.
- You have been settled abroad and you decide to sell your only house property in India which was given to you by your parents – any capital gain on this house property is liable to be taxed and therefore a return must be filed by you.
- You decide to buy a car for your parents who reside in India – no return of income is required to be filed by you – there is no tax on gifts to your parents.
- 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.
However, there are certain things that NRIs filing returns must take into consideration. By considering the following practical scenarios, one can ease out his/her tax-return filing process in India.
• When should an NRI file for the return?
There are three major criteria for filing the return. These includeif their income from the country exceeds the maximum limit permissible as basic exemption, or it can be filed to claim a return if the deducted tax is more than what was payable.To settle the claims for the amount set off as capital losses, one should file hisreturns.
• What all documents do you need as a non-resident Indian?
The documents that one should submit include their passport of the residence country. This shows the total number of days spent outside India for them to qualify as a non-resident Indian. Apart from this, they should provide their de-mat account statements, and the TDS certificates they received from other parties. The statements for de-mat accounts are required for the knowledge of their bank accounts and transactions held in India. • What are the exemptions and the deductionsfor which you are eligible? There are certain exemptions in India by which an individual can reduce his/her taxable income. These include certain investments, payment of the principal amount of the housing loan, etc. These exemptions are applicable to NRIs as well. Therefore, for those exemptions that are applicable, the NRIs can claim the same under the Income Tax, such as Section 80C. There are certain deductions that are specifically not applicable to NRIs. Firstly, NRIs do not benefit from differential exemption limits, based on age and gender, and applicable to resident Indians. Secondly, an NRI’s short-term or long-term capital gains from their investment sale in India, is also not included under tax exemption.
• What should you do to claim a refund?
To expect a refund from your filed tax return, you should ensure to put the exact bank details, which includes your account number and the branch MICR code. In case of an online filing of returns, the processing of your refund happens electronically. Therefore, precise bank account details are always helpful. • What are the alternatives available to file returns? The NRIs can file their return online via the Income Tax Department’s e-filing portal.Alternative to this, they may also use other ways to do the same. This includes taking the help of tax advisors, or by using other private and paid e-filing portals for getting their purpose served. Some more points to remember: A point to remember is that an NRI, whose total income during the concerned financial year comprises only of investment earnings and/or long-term capital gains, should not necessarily file the returns. Apart from this, if the tax deduction has already taken place at the income source, then too the non-resident Indian may not file the tax return.
With the help of above-mentioned tips, NRIs can simplify the whole process of filing their tax returns in their motherland, India.