Taxability of NRI and deductions available

  Just few days left to file your return within due date (31^st August 2015). Among all taxpayers, NRIs have numerous doubts regarding filing of their return in India. Confusion starts with when they need to file return in India and continues till which income shall be taxed where? Scroll down to get a clear picture of skepticism in your mind regarding filing of return by NRIs:

Income taxable in India

The Indian taxation laws are based on the ‘source rule’ i.e. all the incomes which accrues/arise in India will be taxable in India i.e., for NRI, income accrued or received in India shall be taxable.   Note:

• Certain exemption has been provided for such income earned in India, under the domestic tax laws and also under the DTAA.
• For Incomes that have been taxed in Home country and Foreign Country, NRI can claim Tax Credits. For this, they need to obtain the Tax Residency Certificate.

 

Filing of ITR

Any Non- Resident Indian earning income below the basic exemption limit in India i.e., Rs. 2,50,000 for F.Y. 2014-15 shall not be liable to file return in India. Note: In below mentioned cases, any income earned then filling of return in India by the NRI is mandatory:

• Short Term Capital Gain on securities such as equity shares or equity oriented mutual funds
• Long Term Capital Gain which are chargeable to tax.

  If income includes Investment Income or Income from Long Term Capital Gain on which tax is deducted at source than it is not mandatory to file the Income tax return.  

Why ITR should be filed by NRI

• If the Tax deducted at source is more than the actual tax liability of the NRI, then refund can be claimed by the NRI only after filling return along with interest at 6% p.a.
• If the NRI has incurred any loss on sale on sale of investments (either short term or long term) than NRI can set-off such losses from the Income in future years.
• Having details of the documentation of all the Income and Assets in India and in Foreign Country will help the NRI in complying with the Repatriation Rules for Income and Assets held in India and also when the NRI return to India.

 

Consequences of non- filing of ITR

The penalty of Rs. 5,000 shall be levied to the Individual for each year and further prosecution under section 276 CC may also be initiated by the Income tax department.  

NRE/NRO Account

Considering the interest income in NRE/ NRO Account, NRI can file their return in India. However it is to be noted that Income of NRE Account shall be exempt whereas, Income in NRO Account shall be taxable.  

Deductions Available

• Life insurance premium payment
• Tuition fee payment
• Principal repayments on loan for purchase of house property
• ULIPS or unit linked insurance plan
• Home Loan Interest
• Deduction under Section 80D
• Deduction under Section 80E
• Deduction under Section 80G
• Deduction under Section 80TTA
• Exemptions under section 54, Section 54EC and Section 54F on long-term capital gains

 

Deductions not allowed to NRIs

• Investment in PPF
• Investments made in NSCs
• Post Office 5 Year Deposit Scheme
• Senior Citizen Savings Scheme
• Exemption on sale of property for an NRI
• Long-term capital is taxed at 20 per cent
• Section 80CCG, 80DD, 80DDB, 80U

  For any assistance in filing income tax return visit: ITR Filing _____________________________________________________________________