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NRI and Filing of Income Tax Return in India



Non-Resident Indian (NRI) is an Indian living outside India. The Term NRI, generally, means a non-resident who is either an Indian Citizen residing outside India and includes Foreign Citizen of Indian origin residing outside India.

Taxable Incomes of NRIs– Following are the taxable incomes of NRIs –

  • Income accrued or to be accrued in India
  • Income sourced from India
  • Income received or to be received in India

Note – Double Taxation Avoidance Agreement works well in favor of NRIs. It is a contract made between India and a number of foreign countries by way of which an NRI can be saved from being taxed in the country of their residence.

As an NRI, they are liable to pay taxes if your earnings in India have been more than the exemption limit. You are exempt from filing income tax returns if your income is churned out by long term investments. Permanent Account Number (PAN) is the most essential ID that you need to hold for file income tax returns.

If you are an NRI, you would have to file your income tax returns if you fulfill either of these conditions:

  • Your taxable income in India during the year was above the basic exemption limit

“OR”

  • You have earned short-term or long-term capital gains from sale of any investments or assets, even if the gains are less than the basic exemption limit.

You may also file a tax return if you have to claim a refund. This may happen where the tax deducted at source is more than the actual tax liability. For Instance, suppose your taxable income for the year was below the exemption limits but the bank deducted tax at source on your interest amount, you can claim a refund by filing your tax return.

Another instance is when you have a capital loss that can be set-off against capital gains. Tax may have been deducted at source on the capital gains, but you can set-off (or carry forward) capital loss against the gain and lower your actual tax liability. In such cases, you would need to file a tax return.

Note: The enhanced exemption limit for senior citizens and women is applicable only to residents and not to non-residents.

There are two exceptions also –

  • If your taxable income consisted only of investment income (interest) and/or capital gains income and if tax has been deducted at source from such income, you do not have to file your tax returns.
  • If you earned long term capital gains from the sale of equity shares or equity mutual funds, you do not have to pay any tax and therefore you do not have to include that in your tax return

Due Date of Filing Income Tax Return for an NRI - The due date of filing income tax return for the financial year 2012-13 is 31st July 2013.

Consequences of Delay: -

If an NRI fails to file its income tax return on time, they can still file their return with the following consequences –

  • If you do not have any tax payable (that is all your tax has been deducted at source), you can still file your tax return by 31st March 2015 without any penalties
  • If you do have tax payable, you can still file your returns by 31st March 2014 but you will be charged an interest of 1% per month for every month of delay starting from 31st July 2011 till the time you file your tax returns
  • If you do not file your tax returns even by the 31st of March 2014, you may be charged a penalty of Rs 5,000 after 31st March 2014.

Thus, non filing of income tax returns will result in interest and penalty. In case there are any losses to be carried forward, the returns need to be filed. Without filing the returns, the losses cannot be carried forward for set-off against subsequent years’ incomes.

At, Taxmantra.com, we just require your personal details as well as income details to file income tax return in India. Taxmantra.com offers excellent tax support in addition to filing of return of income and comprehensive tax planning. After which we take care of online tax return filing in most hassle free manner, making online income tax filing an excellent experience.

About: 

Alok Patnia founded Taxmantra.com, an expert in tax advisory & compliance. He is a Chartered Accountant having prior exposure with Ernst & Young & KPMG.

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