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 tax liability 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.

Tax Liability of Income received by NRI

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:

• Is received or is deemed to be received in India in such year by or on behalf of such persons.
• Accrues or arises or is deemed to accrue or arise to him in India during such year.

Types of income which accrue or arise in India:

Income which accrues or arises in India is taxable in India. Below is mentioned the list of income which accrues or arises in India:

• Income through any business connection in India
• Income through or from any property in India
• Income through or from any asset or source of income in India
• Income through the transfer of a capital asset situated in India
• Salary income for service rendered in India; and
• 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.
• Salary payable by the Government to a citizen of India for service outside India
• A dividend paid by an Indian company outside India.
• Interest by the Government, etc
• Royalty payable by the Government or others in some cases
• 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

• For F.Y. 2012-13, India sourced income exceeds the exemption limit of Rs. 200000 and Rs. 200000 for male and female(below 60 years ) respectively and Rs. 250000 for citizens above sixty years of age.
• If income for citizens above eighty years of age having an income above Rs. 500000.
• Any rental income or profit derived from the property assets he inherits in India or its sale.
• 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.
• Any income from ‘long term capital gains’ 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 NRI is 31^st July, 2013 for F.Y. 2012-13.  NRI should file their return within the due date in order to avoid interest and penalty on the same.

Modes of Filing Income Tax Returns-

NRI can file their income tax return in 2 modes as mentioned below:

• Offline filing – This mode is not generally preferred as it is time consuming and cumbersome process. One needs to submit the form to the Assessing Officer who will further carry the process making it lengthy and difficult process.
• Online filing – This mode of filing return is less time consuming and easy mode for NRIs. Online filing can be done with any of the following two processes:-

a)  File with Digital Signature Certificate – In this acknowledgment slip is generated and no further processing is required. The ITR acknowledgment is the proof for filing return. NRI should generally prefer this mode as it is easy and less time consuming to file returns in India.

b)  File without Digital Signature Certificate – In this ITR –V is generated and the same is required to be sent to the processing centre in Bangalore within the prescribed time limit. This method is bit cumbersome for NRI as sending the same to Bangalore from outside India will be a difficult and time consuming process for NRIs.

Conclusion:-

It is hereby concluded that NRI 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 and confirmation of filing tax returns.

We at Taxmantra.com would be able to help you in filing of tax returns and also other tax related issues. Please feel free to check this page – Income tax return Filing  OR call us at +91 88 208208 11, +919230033070  OR email us at ‘info@taxmantra.com’