The number of Indians living abroad for business or permanent settlement is rising at a greater pace.
These Indians work abroad and earn there but have some investments, deposits and properties that earn income back in India. Hence many of them need to file taxes in India. For the purpose of tax liability in India, it is essential to determine the residential status of a taxpayer. In case of resident taxpayer, all his income would be taxable in India irrespective of the fact that income is earned or has accrued to taxpayer outside India. However, in case of non-resident, income which accrues or arises outside India would not be taxable in India.
Like every other individual, NRIs too need to file Income Tax returns by 31st July every year.
Non-Resident Indian (NRI) is an Indian living outside India. The term NRI generally means a non-resident who is either an Indian Citizen residing outside India or a Person of Indian origin.
Under the Income-tax law, an individual will be treated as a resident in India for a year if he satisfies any of the following conditions:
If an individual does not satisfy any of the above conditions he will be treated as non-resident in India.
An NRI’s income taxes in India will depend upon his residential status for the year. If a person’s status is ‘resident’, his global income is taxable in India. If his status is ‘NRI’, his income which is earned or accrued in India is taxable in India.
|Income which accrues or arises in India||Taxable|
|Income which is deemed to accrue or arise in India||Taxable|
|Income which is received in India||Taxable|
|Income which is deemed to be received in India||Taxable|
|Income accruing outside India from a business controlled from India or from a profession set up in India||Not Taxable|
|Income other than above (i.e. income which has no relation with India)||Not Taxable|
Taxable income in India during the financial year was above the basic exemption limit i.e. Rs. 2,50,000
He has 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. These include short term capital gains on equity shares and equity mutual funds where tax rate is 15% and long term capital gains on securities and assets where tax rate is either 20% or 10% without indexation.
It is imperative to note that the enhanced exemption limit for senior citizens is applicable only to residents and not to non-residents.
He has to claim a refund – This may happen where the tax deducted at source is more than the actual tax liability. For Instance, if income for the year was below the exemption limits but the bank deducted tax at source on interest amount, a refund can be claimed by filing a tax return.
There is a capital loss that can be set-off against capital gains – Tax may have been deducted at source on the capital gains, but the capital loss can be set-off (or carried forward) against the gain and lower the actual tax liability. In such cases, a tax return would have to be filed.
TDS already deducted – If the taxable income consists only of investment income (interest) and/or capital gains income and if tax has been deducted at source from such income, tax returns do not have to be filed by an NRI.
Tax free income – If an NRI has earned long term capital gains from the sale of equity shares or equity mutual funds, he does not have to pay any tax and therefore, does not have to include that in his tax return.
NRIs can save their income from taxation by investing in mediclaims, life insurance policies, tax saving mutual funds, etc. Most of the tax saving deductions under section 80 are also available to NRIs. For FY 2016-17, a maximum deduction of up to Rs. 1,50,000 is allowed under section 80C from gross total income for an individual.
With the help of above-mentioned tips, NRIs can simplify the whole process of filing their tax returns in India.