Income Tax Return Preparation For NRIs (Non Resident Indians)

Are you from abroad ? Do you hold partnership in a business in India while living abroad ? Do you have bank accounts, investment in property, shares or any other asset in India ?.While living abroad is your income sources in India taxable ?

It is often that you have such queries in mind when you have a settled business abroad with some good investments and income sources in India and you are classified under category of an NRI. In India, NRIs (Non resident Indians) have to file their tax return by 31st July.

Taxable status of an NRI in India is concerned with his/her residential status depending on

the number of days spent in India which is not more than 181 days

(including the day of arrival and departure )

or

Not more than 60 days (2 months) in previous year

and 365 days in last four years.

Filing Income Tax Return for NRIs

1. Selection of ITR Form : After determination of residential status, out of the required ITR forms one is to be selected to submit payable tax.

  • ITR-1 : NRIs having only passive income can use this form.
  • ITR-2 : NRIs having income from house property, taxable capital gains etc can file their return using this form.

2. Computation of Taxable Income : Income of an NRI can be computed under all heads as :

  • Income from Salary :In India, If as an NRI you or someone on your behalf receive some salary for rendering some services directly to an Indian bank account, it will be held taxable as per Indian tax laws . Hence normal tax slabs would be applied to such income sources.
  • Income From House Property :Income from property owned , whether lying vacant/rented out/ or being used for some productive purpose is taxable in India as per normal slab rates . However while filing ITR for NRIs,  various deductions can be claimed under Section 80 C and deductions available in interest and home loan payments including a standard deduction of 30%.
  • Income From Other Sources : Income received from saved bank deposits and FDs is also taxable in India. While complete exemption on interest receipts on NRE and FCNR has been allowed.
  • Income from Business Sources and Capital Gains :Income as received from any business unit being LLP/Company/Partnership or gains arising from sale of any asset or securities held as investments is completely taxable as per tax laws. Subjected to the fact that no deduction would be allowed to an NRI under Section 80 in case of gains received from investment

3. Sorting Out Available Deductions : NRIs as considered under normal individual group have been allowed various deductions under section 80, adding a max. allowable deduction upto Rs 1,50,000 of the total taxable income.

  • Deductions under 80C :Out of computed taxable income an NRI can claim deduction over life insurance premium paid ( self/spouse/child), education expenditure made, payment made against home loan instalments and interest, investments made in ULIPS/ELSS.
  • Deductions under 80D: To claim deductions against premium paid on health insurance of the family group/senior citizens/self /spouse etc. The max deduction can be claimed in this section is Rs 40,000 .
  • Deductions under 80E: NRIs can claim a deduction against interest paid on education loan of children under this section.
  • Deductions under 80TTA : Under this section a claim over interest received on deposits/saving deposits held with any cooperative bank and post office can be taken upto Rs 10,000.

After computation of total taxable income the required amount of tax is then calculated on the basis of the preferred tax slab.

FAQs

Will Aadhar be required to file ITR for NRI ?

Allotment of Aadhar to NRIs is not applicable as per Aadhar Act 2016, thus it is no where required to file an ITR with Aadhar details for NRIs.

How will I get access to refunds if I don’t have an Indian Bank Account?

As if an NRI have not applied for an Indian bank account for claiming refund he can provide details of a foreign bank account , considering that no other details other than bank account is to be disclosed to department .

What is DTAA?

DTAA is Double Taxation Avoidance Agreement  which is signed between different countries to avoid the payment of double taxation on the income earned by the NRIs.

What other points should I consider before submission of return finalized?

  • It is necessary to report accurate bank/post office interest received on deposits made.
  • Authentic reporting of dividends, long term capital gains, interest on bonds, gifts received or made is to be done.
  • Advance taxes paid or TDS Credits should be reconciled too before.

Also Read : Can Income Tax Return be filed if PAN and Aadhaar details don’t match?