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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.

68 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

      • Hi Vivek,

        Many Thanks for your response !!

        Can you please answer my following queries as well. Would Appreciate your quick response.

        1. For NRIs chapter VI-A deductions are applicable or not, As in ITR2 form, In sheet PartB- TI-TTI-SAL 11th row, it is not taking the benefits for chapter VIA- 80C etc even though I have given details in schedule VI-A
        2. Is it required to include NRE Bank account interest and NRE Fix Deposit interest. If yes which schedule and section.
        3. In Schedule CG, for LTCG the purchase price to be taken without index or with index.
        4. Last Year I have shown loss from house property, Can I set off this in CYLA-BFLA sheet for remaining income amount. If yes then how?
        5. In Schedule CFL, I have entered last year house property loss, is it ok? My Last year ITR is not fully processed yet.

        Regards,
        Prashant

  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.

  6. Dear Sir,

    From last four years, I am working outside India and not having any source of Income in India.
    I am sending my Savings to my NRE account in India,
    Do I have to submit Income tax return form with Bank Statement ?
    Is there any issue if I spend my NRE savings in any asset purchase back home in India

    • Hi Sandeep,
      As NRE Interest is tax fre, you are not required to submit IT return in India.
      There is absolutely no issue in buying property from NRE Account. This is the most common option for NRI.

  7. Dear Sir / Madam,

    Advise about section 90 DTAA.

    I am NRI, resident in Europe where there is a DTAA treaty in force between my country and India.

    For the assessment year 2014-15 I have filed my income tax return in India.

    During this year I have only had salary income, and no other income. In Europe, I have paid income tax for the year. Lets assume it is INR 100.

    While submitting my return in India the tax calculator obtained a number as my tax liability to be (assume) INR 92.

    How can I apply to the Income Tax Department, CBDT that since I have already paid my income tax for the year I do not need to pay AGAIN this income tax in India?

    Sincerely,

    • Hi,
      1) It will depend on your residnetial status in India. Since when you are outside India ?
      2) If you are a Non-resident in India, any salary earned abroad is not required to show as Income in Indian IT Return.
      3) If your status is Resident in India for AY 2014-2015, then you need to file return in ITR 2 and fill schedule FSA & Schedule TR & Schedule FA. You can claim tax relief for the tax paid outside india by filling details in above schedules while filing IT return.

  8. Hi Vivek,

    I am working abroad since May 2013. I don’t have any taxable capital investments or any housing property in India. My only source of income in India for 2013-14 was Interest (bank interests and from FD/RD) and a small amount transferred by a non-relative the total of which is less than 2 Lacs. However, i have frequently transferred money back to India to a Savings Account and a NRO account.
    In this scenario, do I need to file IT returns in India ??

    Thanks,
    Rishav.

    • Hi Rishav,

      if your interest income is less than Rs 2 lakh, you are not required to file returns in India.

      However, it Bank has deducted TDS on Interest earned, you should file return online & claim refund.

  9. Hi Vivek,

    I am presently a NRI. I had bought some equity shares of listed Indian companies when I was a resident Indian. My queries are as:

    1. The dividends that I receive from my equity shares ( which I bought as a resident) are they taxable?
    2. Are long term capital gains from equity shares ( which I bought as a resident) taxable.

    Thanks,

    Mayur

    • 1. Any dividend received from Shares is TAX FREE ( irrespecitve of residential status)
      2. If you sell after 1 year (Long term capital Gain) – the LTCG on Shares is NIL. So it is NOT TAXABLE.

  10. Dear Vivek

    Thanks for your valuable inputs.
    I am a NRI and transferring my funds to NRE account. Normally i transfer some funds from NRE to NRO account from where I am sending it to my parents for their routine expenses. I bought a property and the funds were transferred from NRE Account, which I believe is absolutely fine. My question here is that since NRE interest income (both savings and FD interest) is exempted and I get some interest on NRO account which is very minimal due to the fact that I keep very low balance, do I need to file ITR.

    regards,
    Pankaj

    • Hi Pankaj,

      There may be a possibility that TDS is deducted by bank on your NRO Interest. If the amount is substantial, you can file return & claim the refund.
      Otherwise, there is no need to fiel the returns.

      Also, NRO account should be mainly used for any income generated in India e.g rent etc. You can transfer money to your parents directly from NRE account. For that you donot need to transfer the money to NRO.

      Which bank do you use for NRE & NRO. How is your experience with them?

  11. I am an NRI for the last 3 years. Last asst year i,e 2013-14 I have filed the return but got a demand notice.I have revised the return in ITR2 and submitted under the option rectification of mistake. Again my salary earned abroad has been taxed and demand raised by the IT dept.I do not know how to deal with the matter. Please advise

    • Hi, Could you pls provide more details as If you are NRI , any foreign salary cannot be taxed in India.

      What income did you show & under what head. How much tax did you paid.?
      How much is demand notice and for which income etc ?

  12. I was posted to Bangkok (Thailand) on official duty on temporary basis from 02.6.14 and returned to India on 21.7.14.
    Now I am again transferred to Muscat (Oman) for 3 years posting and shall proceed on 09.10.2014.
    In between I shall be visiting India from 24.12.2014 to 1.1.2015.
    What will be my tax liability in India as my stay outside India is more than 182 days in total for FY 2014-15(AY 2015-16) as the stay outside India is intermittent (not continuous for 183 days), but exceeds 183 in total.
    Can I claim refund for the excess amount deducted at source by my employer my means of IT return ?
    Or I have to pay tax on the total income for the relevant year. Do I have to file ITR ?

    • Hi Hirak, As youa re out of india for more than 182 days, and you left India for employment outside India, you will be treated as NON-resident in India for taxation purpose.

      As a non -resident, you only need to show your Income in India. So you should file your return in India showing the salary received in India for FY2014-2015. You can then claim the TDS deducted by your employer as well.

      You need to calculate the tax amount on your India income and then check if the TDS deducted as more or less. Accordinly, you need to either pay tax or claim refund.

  13. P.S. During my posting at Bangkok, my salary was credited to my bank account in india.

  14. I am planning to go abroad as Permanent Resident with my spouse and minor child. How much money can we take when we go abroad as Permanent Resident from my FD deposits in India.
    Also, can we open an NRE & NRO account before we travel ?

    • Under the RBI Liberalised Remittance Scheme (LRS), you can transfer upto USD 125000 (approx. Rs 75 lakh)

      You can convert your existing account ot NRO account if you show your passport & VISA to bank official.

      Once your normal account becomes NRO account, you can send upto USD 1 million from NRO to NRE Account.

  15. Hallo Mr. Jain,

    I am little confused with some contradictor statment on intererest earned on NRE FD deposited. I have a one simple question, let’S take a exampe, if I do a NRE FD for 1,000,000 INR and for 2 years, and at the endof tenure total maturity amount is 1,190,000 INR, that means I earned 190,000 INR. should this be free from Tax , as this is NRE FD amount or shall I need to pay 10% of this , means 19,000 INR to tax.

    Please clarify.

  16. 1) I was maintaining NRI status from 2004 to 2013
    2) In the year 2011 I had booked a house by making a Chq payment of Rs.12 lakh from my NRE Ac.
    3) Now The builder has failed to give me that house and returned Rs 14 lakhs by chq in Aug, this year.
    4) Do I have to pay any tax on this refunded money ?

    • Hi Dilip, As it is capital receipt, this is not subject to tax.
      However, the interest of Rs 2 lakh will be taxable on accrual basis.

  17. Can i transfer money from canadian account to Indian NRE/NRO account in INR through wire transfer
    Kuljit kaler

  18. Hi Vivek,

    I have moved to Australia in March 2013 but have not converted my resident saving accounts to NRO accounts. I have received interest in these accounts. I have equity dividends and short & long term capital gains in equities as well. Will there be an issue if I file my return as an NRI for FY 2013-14 and convert my accounts to NRO a/c now? How do I inform my NRI status to IT dept, will filing my return as NRI be enough?

    Thanks.

  19. Sir
    I have pension income in india. In which saving i can invest to minimise my tax liabilities.Please advise me as i am going to india very soon to open nre accounts and to designate resident accounts to nro.
    Thanks
    Kuljit Kaler

    • Hi Kuljit, How much is the pension amount per month ?

      You can open the NRE account without visiting India. You just need to call the bank & the official will send you the form & will get the form collected via courier.

  20. is there any tax liability arise on NRI If sell his ancestor house property in india and around Rs 50000/- long term capital gain arise and no other source of income in India ,although THIS GAIN IS below exemption limit and NRI want to take over this sell proceed from India to canada what is the procedure required for it

    • As an NRI, you need to pay tax on Long term capital gain even if it is less than exemption limit.

      The sale amount will be credited in your Indian account.

      After than you can transfer funds to foreign account by submitting some forms to the bank.

  21. I have a NRE account. I have been leaving in Europe for past 1.5 years. Recently, I opened NRE FD for a period of 10 years. Now I am scheduled to return to india in next 1 month.

    Can you let me know what will happen to the money in my NRE account and what will happen to my NRE FD. I have only completed 8 months of the FD.

    1. DO I need to close them now before traveling back to india?
    2. DO I have an option to close my NRE FD once I reach India?
    3. What will happen to the interest earned on the FD?
    4. What will be the tax % to be paid in india for the interest?

    Thanks
    Max

    • 1. You donot need to close before traveling
      2. Yes, you can do that within 6 months after coming to India
      3. Once your NRE FD is converted into normal FD, it will be treated as normal Interest and you need to show them in you income tax return.

  22. Navneet Singh Deol

    Sir,
    I am a seafarer. According to the rules if i stay for more than 182 days out of India in a financial year i am given nri status. My shipping company pays my salary in usd which is deposited in my nre account in ruppee (according to usd to inr rate on the day of deposit). I am planning to visit Europe on tourist visa where they require income tax returns also, how should i file my ITR if money earned outside India is not taxable. Also if my salary is taxable in India or not since i am working for a Danish company and salary is paid by its Indian office.

    • even if you are out of india for 182 days or more and become NRI, you will still have income in India for period in which you are in India. So you will get Form 16 for time you are in India. You can fiel return for that amount.

      ALso, normally for VISA you need to submit Income proof, which you can submit in Form of Payslips, Bank statements, Form 16, appointment letter & another salary letter from employer.

  23. Dear Mr.Vivek,

    I have read your blogs and appreciate your service. I am an NRI for longtime now and I have been
    using the Resident savings account also for longtime.

    I do have some old FD under this account,however the interest earned is much less than the limit.

    Will there be any issues.

    Also in all my investments and bank accounts , mutual funds etc, my indian address is apprearing
    will there be any issues.

    Would appreciate your reply.

    Thanks,

    Srikrishnan

    • Hi, Normally if you are NRI, you should declare it to your bank and also change the status in your investments.
      But many people forget to make these changes because they think they will be coming back to India in near future.

      You should at-least make sure that you file your tax returns declaring all income.
      In case you are planning to stay abroad for long time, you should get the status converted to NRI.

  24. Hi, On 25th July 2014 I left India after getting job opportunity in Australia. I have already left India and right now residing in Australia and will be upto minimum 4 years. Before July 2014 I was resident of India as per FEMA and taxation purpose. I would like to know in the next tax file return( after March 2015 i.e for th years 01 April 2014 to 31st march 2015)what will be my status from taxation rule ? Which option do I need to select while doing tax file return by myself ? Also do I need to change the residence status for all my Indian saving accounts ? Every month I am transfering the saving amount(australian dollars) to my indian saving accounts(which are on my name and my wife’s name). In this case do I need to pay tax for all the money I am sending to my Indian accounts ? Also I am making few FDs in indian accounts, for those FD interest TDS is getting deducted, can I file them for tax refund ?
    Your reply and clarificaion to all my doubts is highly appreciated.

    Thanks Manas Panda

  25. Dear Sir,

    i shifted my self to saudi arabia, and i have an india resident account in HDFC, i opended one NRI account in ICICI bank.

    what ever i am earning here i am giving it to my friends (as they came here for 3 months for tourisim) and they are transferring INR from indian bank account to my HDFC resident account. now my question is do they deduct tax on account deposited in HDFC account directly without informing me? just to avoid reimtance fees we are doing like this.

    provide me some inputs on Tax part.

    thanks in advance

    regards
    sandeep

    • If you still have HDFC resident account in India, they can deposit money in it. Any money deposited in that account doesn’t automatically attract TDS.

      Also, how much amount is transferred. If this is big amounts, then there can be an issue.

      • Dear Vivek,

        Thanks for the reply,

        amounts are in bits and pieces, 6 friends came to client place i am giving them local currency for their expenses and taking INR and they are depositing in my account directly. amount will be around Rs. 15,000 /- per head and per month total amount will come to 1 lakh.

        When i tried to access form 26as from saudi, it showing NRI link. does it mean they covert my account in to NRI!

        Thanks in advance.

        Regards
        Sandeep

        • Hi Sandeep,

          Getting that amount once should not raise issues. But If you are getting per month Rs 1 lakh in your account, you may need to explain the source of Income.

          Also, when you try the link for 26AS from outside India, it gives that message,. it doesnot mean that your account is converted to NRI.

  26. Vivek,
    I’m US citizen planning move to India and stay for couple of years for kids studies. I’m planning to invest in NRE FD or FCNR FD. I’m planning to work while I stay in India. Do I have to pay tax in India for the interest from FD. I was tihnking that I only declare that in US and pay US Tax as NRE FD are tax free.

    Thanks
    Surya

    • Hi Surya,

      NRE FD are tax free but these are open to Non residnets only.
      If you are working in India for whole year, you will be treated as resident in India.
      So you are obliged to notify Bank about your residential status and they will convert the NRE FD to normal FD.

      In that case, any Interest earned should be included in your Indian Income and pay taxes accordingly.
      You should be able to claim taxes paid in India while filing US returns.

      Also note that for US citizens, they may need to show the NRE FD as their Income & pay taxes in US ( even if they are tax free in India)

      • Mr.Vivek, Thanks for the quick response and detailed answer.
        I’m planning to have FCNR deposit in Dollars to avoid exchange fluctuations. will that be converted to INR when I convert the account to resident FD?

        Regards
        Surya

        • On your return to India, you can convert the FCNR deposit to RFC deposits ( Resident Foreign currency) deposits. and your money will remain in foreign currency.

  27. Do you provide TAX services for US Citiizens living in India? if so can you provide my contact details?

    Regards
    Surya

  28. Hi,
    I am working in US for last 2 years. In this year my net income in India is very low. But I have a refund claim which is also not more than 1500. I have filled my return online but I don’t think I will be able to submit my signed ITR-V form within deadline. What are the options?

    a) If I do this process when I am back in India which may be after March.
    b) Was it actually necessary to file my return at first place?

    • b) If you want to claim refund, you need to file the return.

      a) When you say in this year refund is Rs 1500, do you mean FY 2013-2014 or FY 2014-2015 ?

  29. Dear Mr Vivek Jain
    I left India by Aug 2014 for a job in Africa. I have opened NRE and NRO accounts and transferring my salary into NRE account. But before starting from India I have transferred money to my own brother Rs 6.5 Lacks from my Bank Account. My brother lives in India. He is paying back about 40 to 50 thousands every month into my NRO account from his bank account. there is no interest charged by me. I need to file tax returns in the coming year as I have to claim reimbursement of TDS detected by my employer between April and July.
    Whether IT Act will consider deposits from my brother as my Income? Should I pay tax for that also. Kindly clarify this.

    Thanks in advance

    • Hiram, As long as you can prove that your brother is repaying the amount which you have given, then there is no need to include that in your Income. In that case it is just repayment of loan. You should have details regarding when you have transferred that amount to your brother.

  30. Hi Mr Vivek.
    Great work, thanks.
    I am an NRI since 2000 and have been working in various countries since then and presently in Oman.
    I have both NRO and NRE joint account with my wife for easy access for my family.
    I have bought a house in my name in 2005 and other properties and recently I bought a house in my wife’s name to avoid the wealth tax for having morethan 1 house in my name. Is this any way taxable in name as both my bank accounts are joint accounts with my wife. Since I don’t have any source of income in india till date, I never filed IT. Is it advisable to file in near future.
    Thanks

    • Hi Rajendran,

      Just by having joint accounts, does not make it taxable.
      If you donot have any income, then you are not required to file the return. .

      Pls note that if you have taken home loan to buy properties, you can claim the tax benefit on interest paid by filing returns.

      You mentioned you have other properties, but does that not giving any income ?

  31. Sir,
    Currently , I m working in Saudi Arabia since 2 years, and frequently transferring my salary amount into my brother Indian Saving account! Is he / am i eligible under criteria of tax filing act.

    your rapid action is highly appreciated.

    thanks

    • Hi Jasim,

      1) if you are just transferring money to your brother account , & you DONOT have any Income is India, then you donot need to file return in India

      2) As your brother get amount from you, if the amount is large, then IT officer may ask for details. As these amount are not treated as Income for him. But any interest earned on these amount, will be taxable for your brother.

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