If you are an NRI you have to file Income Tax Returns (ITR) in India only if their total income earned in India surpasses the basic exemption limit. However, any income earned in their residing country is not taxable in India. Here’s a step-by-step guide on how to file an ITR for NRIs
Things we covered for you
+
Step 1: Confirm if you have NRI Status
Are you an NRI? The Income Tax Act of 1961 provides clear guidelines for determining your status. You are considered a resident if:
- you are in India for 182 days or more during a financial year OR
- If you have spent at least 60 days in the current year and a total of 365 days in the preceding four years.
Step 2: Align Your Income & Taxes with Form 26AS
Make sure your income and taxes match with Form 26AS. The form 26AS is a tax report for you in India. It shows how much money you’ve earned and how much tax has already been taken out of that income.
This form is linked to your PAN (Personal Account Number), and it helps you check that you’re paying the right amount of tax. You can see the Tax Deducted at Source (TDS) associated with your PAN. It’s crucial to ensure that your reported income and deductions align with this form to avoid any discrepancies.
Step 3: Calculate Taxable Income and Assess Tax Liability
Your taxable income as an NRI may include various types of earnings such as capital gains from shares or property in India, rent, and interest from Indian bank accounts. Make sure that you claim deductions that are applicable to you to minimize your taxable income. Your tax liability will be based on the prevailing income tax slab rates.
Step 4: Utilize Double Taxation Treaty Relief
If your income is taxable in both India and another country, you might be eligible for relief under the Double Taxation Avoidance Agreement (DTAA). This agreement helps to ensure you’re not taxed twice on the same income. Check the different types of incomes covered under the DTAA and follow the given guidelines to claim this relief.
Step 5: Choose the Appropriate ITR and Detail Exempt Income
NRIs are required to file returns using ITR, except when reporting business income, for which ITR 3 is used. Be sure to accurately report any exempt income such as Long-Term Capital Gains (LTCG) on listed securities, interest on certain deposits and bonds, and dividends.
Step 6: Report Your Bank Account Details
For NRIs claiming a tax refund without an Indian bank account, disclosure of one foreign bank account is mandatory. However, if you have an Indian bank account or are not claiming a refund, this step is not necessary.
Step 7: Detail Your Assets and Liabilities
If your total income exceeds Rs 50 lakh, you are required to provide detailed information about your assets and liabilities in India. This step ensures comprehensive reporting and assists in accurate tax assessment.
Step 8: Complete Your ITR Verification
After filing your Income Tax Returns, remember to verify them within 120 days. Unverified returns are treated as invalid, potentially leading to legal complications. Verification can be done electronically through net banking or physically by sending a signed ITR-V form to the Income-tax Centralized Processing Center in Bengaluru.
Taxable Income for NRIs: What You Need to Know
Understanding the tax implications for Non-Resident Indians (NRIs) in India is essential for effective financial planning and compliance with Indian tax laws. Below is a guide to taxable income for NRIs.
1. Income from Salary
A. Salary Received in India
Tax Liability: Yes
Conditions: If any individual earns a salary more than INR 2.5 lakhs from any Indian entity, they shall be liable to file an income tax return under Section 139 (1).
Tax Rate: According to the applicable income tax slab.
B. Salary Earned in India
Tax Liability: Yes
Read: Learn about Axis Bank NRI Account Opening for India in 2024
Book Best Packers & Movers with Best Price, Free Cancellation, Dedicated Move Manager
This is third
This is third
This is fourth
This is fourth
This is fifth
This is fifth
This is six
This is six
This is seven
This is seven
This is eight
This is eight
Conditions: Salary earned for services rendered in India.
Tax Rate: According to the applicable income tax slab.
2. Income from House Property
Income generated from a property in India is subject to the prevalent tax rates.
- All capital gains obtained through renting, selling, or leasing a property are taxable.
- NRIs can avail of a 30% deduction on home loans taken in India and can claim deductions for principal repayment, registration fees, and stamp duty under Section 80C.
- If a property is rented out to a tenant by an NRI, the tenant is entitled to deduct 30% tax and must complete Form 15CA.
3. Income from Other Sources
Tax Liability on Interest:
- Taxable: Interest on fixed deposits and savings accounts in Indian banks, and interest on NRO accounts.
- Non-taxable: Interest on NRE and FCNR accounts.
4. Income from Capital Gains
Both short and long-term capital gains and income from securities held by NRIs in India are subject to tax. Any gains from shares and capital gains on asset transfers in India are also taxable.
- 20% on Long-term capital gains.
- 30% on Short-term capital gains.
5. Investments
NRIs can enjoy certain tax benefits on their investment income in India.
- When an NRI invests in specific assets in the country, they are subject to a 20% tax rate.
- However, if Tax Deducted at Source (TDS) has been subtracted from the investment income, they are not required to file tax returns.
- Investments in securities issued by the central government, shares in Indian companies, and deposits with publicly listed companies are among the options that qualify for these tax benefits.
Here is a table showing NRI income sources which will be taxed and which aren’t
| Nature of Income | Taxed | Not Taxed |
| Income which arises in India | ✓ | |
| Income which is deemed to accrue or arise in India | ✓ | |
| Income which is received in India | ✓ | |
| Income which is deemed to be received in India | ✓ | |
| Income accruing outside India from a business controlled from India or from a profession set up in India | ✓ | |
| Income other than above (i.e., income which has no relation with India) | ✓ |
Deductions for NRIs on Income Tax in India
Available Deductions for NRIs
- Section 80C: NRIs are entitled to claim deductions under Section 80C for specific investments and expenses. These include tuition fees for children, Unit Linked Insurance Plans (ULIPs), premiums for life insurance policies, and principal amount repaid on housing loans under Equity Linked Savings Scheme (ELSS).
- Section 80D: Premiums paid for health insurance policies qualify for deductions under Section 80D.
- Section 80G: NRIs can claim deductions for donations made to charitable organizations under Section 80G.
- House Property: Income arising from house property situated in India, property tax payments, and interest on home loans are eligible for deductions for NRIs.
- Section 80E: NRIs can avail deductions on the interest earned from student loans under Section 80E.
- Section 80TTA: Interest income on savings accounts is deductible up to Rs. 10,000 under Section 80TTA.
Deductions Not Available to NRIs
- Section 80CCG: NRIs are not eligible for deductions under Section 80CCG, which pertains to investments under the Rajiv Gandhi Equity Savings Scheme (RGESS).
- Sections 80U, 80DD, and 80DDB: Deductions under these sections, which are available for differently-abled individuals, do not apply to NRIs.
- Other Investments: Certain investment vehicles including the Senior Citizen Savings Scheme, National Savings Certificates (NSCs), 5-Year Post Office Deposit Scheme, and Public Provident Fund (PPF) are also not available for deductions to NRIs.
How NoBroker Legal Services Simplifies NRI Tax Filings?
NoBroker Legal Services will hel you simplify the filing process of ITR for NRI by offering comprehensive tax-related assistance. Our seasoned team adeptly clarifies tax obligations, ensuring accurate and timely return filings. The variety of services provided includes efficient tax planning, meticulous tax preparation, seamless electronic tax filing, and steadfast tax compliance support.
Read: Demat Account for NRIs: Your Key to Participating in India’s Booming Economy
Frequently Asked Questions
Q. Can NRI file ITR 1 in India?
A. No, Non-Resident Indians (NRI) cannot file ITR 1 in India. ITR 1, also known as SAHAJ, applies only to resident Indians. NRIs have to file their income tax returns using ITR-2 or ITR-3 forms, depending on the source and type of income. ITR-2 is applicable for NRIs who have income from salary, house property, and other sources, while ITR-3 is for NRIs having income from a business or profession. Ensure to choose the correct ITR form to avoid any issues with the Income Tax Department in India.
Q: What income of NRIs is taxable in India?
A: The following income of NRIs is taxable in India:
1. Income earned in India, such as salary, rent, business income, etc.
2. Income received in India, such as interest on NRO deposits, dividends from Indian companies, etc.
3. Income from assets located in India, such as capital gains on sale of property or shares.
Q: When is the deadline for filing ITR for NRIs?
A: The deadline for filing ITR for NRIs is July 31st of the financial year following the assessment year. The assessment year is the year in which the income is earned or accrued.
Q: Can NRIs file ITR online?
A: Yes, NRIs can file ITR online on the website of the Income Tax Department of India.
Q: What are the consequences of not filing an ITR on time?
1. Possible initiation of prosecution proceedings for willful failure to file a return.
2. Imprisonment ranging from three months to two years.
3. Extended prosecution period of up to seven years for higher tax dues.
4. Imposition of a penalty of up to 50% of the tax due in case of underreporting income.
5. Inability to set off losses (except house property losses) against future gains.
6. Carrying forward losses allowed only for losses under house property.
7. Interest charged under Section 234A at 1% per month or part thereof on tax due.
8. Interest accrues from the date immediately after the due date.
9. Filing before the due date ensures timely receipt of refunds for excess taxes paid.
