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
Read the post on – How to file Income Tax return online for FREE
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.
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