non-resident individual in general or a non-resident Indian (NRI) particularly, pays less income tax in India on his income as per the Income Tax Act, 1961, in comparison with a resident individual. Taking a job abroad or settling overseas may not absolve an individual from filing an income tax return in India. Filing of tax return depends upon the taxability of income earned by the individual. This in turn depends on his/her residential status as per the domestic tax laws. A non-resident Indian can save a good deal of income tax in India by adopting the legally accepted methods of tax planning provided by Taxmantra.com.
Incomes of NRIs liable to income tax
Income tax is payable by a tax payer whether a resident, non-resident or a non-resident taxpayer on the total income computed by the Assessing Officer under the provisions of the Income Tax Act,1961. As per Section 5(2) of the said Act a non-resident is liable to pay income tax on the total income of a particular year derived from whatever source, which:
(a)Â Â Is received or is deemed to be received in India in such year by or on behalf of such persons, or
(b)Â Â Accrues or arises or is deemed to accrue or arise to him in India during such year.
Types of income which to accrue or arise in India:
(a)Â Â Income through any business connection in India, or through or from any property in India, or through or from any asset or source of income in India or through the transfer of a capital asset situated in India.
(b)Â Â Salary income for service rendered in India; and
(c)Â Â Â Salary for the rest period or leave period which is preceded and succeeded by services rendered in India and forms part of the service contract of employment from the A.Y. 2011-12.
(d)Â Â Salary payable by the Government to a citizen of India for service outside India.
(e)Â Â Â A dividend paid by an Indian company outside India.
(f)Â Â Â Interest by the Government, etc.
(g)Â Â Royalty payable by the Government or others in some cases.
(h)Â Â Fees for technical services payable by the government or others in some cases.
Situation where NRI is required to file income tax return in India
(a)Â Â For F.Y. 2011-12, India sourced income exceeds the exemption limit of Rs. 180000 and Rs. 190000 for male and female(below 60 years ) respectively and Rs. 250000 for citizens above sixty years of age.
(b)Â Â If income for citizens above eighty years of age having an income above Rs. 500000.
(c)Â Â Â Any rental income or profit derived from the property assets he inherits in India or its sale.
(d)Â Â Shares and debentures of an Indian Company sold having been acquired using foreign currency, the taxation will require currency conversion and re-conversion for capital gain calculations, and these will be taxable at the rate of 10% without any indexation benefits.
(e)Â Â Â Any income from â€˜long term capital gainsâ€™ arising to a non resident will be taxable at a flat rate of 20%.
Due date for filing of returns:-
The last date for filing of returns by NRIs is 31st July, 2012 for F.Y. 2011-12.Â NRIs should file their within the due date in order to avoid interest and penalty on the same.
Mode of Income Tax Return Filing:-
- Electronic Filing of income tax return without digital signature- A signed of the acknowledgement is required to be mailed to CPC Bangalore via regular post within a period of 30 days. Sending the acknowledgement by any other medium like courier or speed post is not permitted. Accordingly, there is no system to track the acknowledgement and confirm if it has reached the CPC within the prescribed time.
- Electronic Filing of income tax return with digital signature- an acknowledgement slip is generated which requires no further processing. The ITR acknowledgement generated is the proof for filing return.
It is hereby concluded that NRIs should prefer to their tax returns online with Digital Signature since it is easy, convenient and less time consuming process of return filing. One can easily file and get the acknowledgement receipts andÂ Â confirmation of filing tax returns.