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Should NRI file Income Tax returns in India ?

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If you are an NRI, are wondering whether you need to file Income Tax returns in India, this post will help you . Any Income which accrue or arise in India, wil be taxable in India. For e.g common income which are taxable in India are – Bank Interest, Fixed deposit Interest, Profilt / Loss from Shares, Mutual Funds, Bonds, Rental Income, Profit / Loss from Sale of Property in India etc.

 When an NRI should File IT Returns in India?

As an NRI, you should file your income tax returns in India,  if you meet any of the following criteria –

1) Your taxable income in India during the year was above the basic exemption limit of Rs 2 lakh    OR

2) 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. (like Shares, mutual funds, property etc)   OR

3) If you need to claim Refund for TDS deducted more than actual tax laibility OR

4) If you have Income from House property & claiming Interest oh Home Loan and there is a Loss from “Income under House Property” and you need to adjust this loss against other income or carry forward.

 Important Points to Note

  • NRIs do not get the benefit of differential exemption limits on basis of age or gender that is available to Resident Indians. The enhanced exemption limit for senior citizens and women is applicable only to residents and not to non-residents.
  • For NRIs, certain short term or long term capital gains from sale of investments or assets are taxed even if the total income is below the basic exemption limit.

Are there any exceptions?

Yes, there are two exceptions:

  • 1) If TDS is already Deducted -   If your have 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.

BUT if the TDS is deducted more than actual tax liability, then you need to file IT return & claim Tax refund.

  • 2) Tax free Income :  If you have 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

File IT Return to Claim TAX REFUND

If the tax deducted at source is more than the actual tax liability, you may also file Income tax return & claim refund.

For e.g. If  your taxable income for the year was below Rs 2 lakh but the bank deducted tax at source on your interest amount, you can claim a refund by filing your tax return.

Also, if you have capital loss that can be set-off against capital gains and TDS was deducted 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.

Which IT Form is applicable for NRI

  • ITR 1 – If you just have Interest Income
  • ITR 2 – If you have Income from Capital Gains (buy/sell of shares, mutual funds properties etc)

What is the best way to file your returns?

There are 3 ways in which you can file your tax returns.

Do it yourself for FREE

You can do it yourself using Income Tax department Online Tax filing portal. It provides a free method to upload your tax return online.  File your return online & download the acknowledgement, Sign it & send it to IT dept within 120 days

Tax Filing Websites

There are many online portals which provide service to file returns, They also offer professional help in filing the returns.

Go with your Chartered Accountant

Get help from your trusted CA to file the returns.

 

How NRIs can save Tax on Income generated in India

  • by investing in eligible investments under 80C (limit Rs 1 Lkh) - Read Full Post
  • by taking health insurance policy in India for themselves, their family and dependent parents , and claim deduction up to 35,000 for the annual premium paid.(Section 80D)  Read Full Post
  • by investment in Capital gains Bonds (NHAI or REC) to save capital gain tax on property

 

Other Important Posts for NRI related to Best Exchange Rates, NRE FD Rate Comparison, NRI PPF Rules , NRI Bank Accounts etc.

http://wealth18.com/category/nri/

Feedback / Suggestion/ Query

Please use the comment box below for any Feedback / Suggestion/ Query.

If you have any queries related to this article or any other personal finance query ( Investment, Taxation etc), please ask in our Wealth18.com forum

http://wealth18.com/forum/index.php

About Vivek Jain

Vivek is a Chartered Accountant with 13+ years of Global Experience. He loves to write about Personal Finance, Wealth Management, Taxation etc.

10 comments

  1. Hi Vivek, thanks for the blog.i have touch based with you in past over another NRI blog.

    Kindly can you provide your views and guide on below situation with possible way forward to save tax on interest earned.

    1 i have got an NRE Indian rupee account. My current status is Residant Indian (RI), i need to travel overseas for work purpose

    2 When i am in India my NRE account status shall change to Residant Indian as per Bank and rules of RBI

    3 Assuming above is true what happens to my investment in NRE account (Fixed deposits), will they be taxable ?

    4 its a pretty surprising law, if a individual is outside India, then FD’s interest is not taxable and if in India then its taxable ?

    • Hi, When you become a Resident Indian, then you need to notify that to your bank. They will either close your NRE FD or convert the NRE FD into resident FD. Any interest earned in Residnet FD is taxable.

      Yes, NRE FD Interest is tax free in India because government is giving incentive to NRI to send their money in India.

  2. Hi Vivek

    Just needed a clarification:

    So unless your income is 2 lacs, you don’t need to do anything whatsoever? No need to file anything? And this is for both NRIs and residents?

    • For residnets, you need not file return if below exemption limt of rs 2 alkhs.

      But for NRI, you need ot file return if you have taxable long term or short term capital gain. even if income is below Rs 2 lakh

  3. I am an NRI. I have sold some shares in Fy 2013-14. These is a short term capital gain in shares and long term capital loss in Gold ETF.
    Can you please confirm:
    1) which section of schedule CG is applicable for me.
    2) Is it possible to set off short term capital gain with long term capital loss.
    3) Do I need to pay any taxes because of short term capital gain even if total income including all sources are less than 2 Lacs.

    Would Appreciate your quick response. Thanks you very much !!

    • Hi Prashant,

      1) You need to fill CG – A2 & B3 Section
      2) No you cannot set off STCG with long term loss
      3) Yes you need to pay taxes as limit of 2 lakh doesnot apply to non-residents

  4. Dear Sir,

    I am a NRI and I do not have taxable income in India more than Rs 2 lakhs but I have three houses in my name two in Bangalore city, one in Tamilnadu. All the three houses are NOT LET-OUT and income from these houses is NIL. Actually I spend money to maintain the houses like cleaning, watchman, gardening etc.. I would like to know whether I need to file IT returns or not. I dont have any shares or any other investments. Only some NRE FDs I have. I would appreciate if you can advise me regarding this.

    • Hi Rabindran,

      Even if the houses are not let out, it will be deemed to be let out ( 2 houses) . And 2 houses will be treated as ‘deemed to be let out’ and the estimated annual rent will be considered as the taxable value.

      However, you can claim following deductions:

      1) Municipal taxes paid: if the municipal taxes have been paid in the current year.

      2) flat standard deduction of 30% from the annual value for expenses incurred such as repairs and maintenance of house property, insurance, etc.

      3) Interest on housing loan: Actual interest paid without any limit.

  5. Hi Vivek,

    I am a NRI from last 3 years, i dont have any nri r nre account in india, i do have 2 savings account in 2 banks, i used to transfer around 30 to 40 thousand to banks monthly, if this money is taxable?

    • Hi Santhosh,

      the money which you transfer is not taxable. But any interest earned in that account will be taxable.
      But Interest in NRE Account is tax free.

      Also, if yuou have moved abroad for long duration, you should open an NRE Account.

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