All you need to know about NRI’s Income Tax Return

A non-Resident Indian is an individual who is not a resident of India. If we make a survey asking Indians about the tax payment by the NRI. The majority of the people will say that NRI does not pay any kind of tax. This answer seems true because they are doing their work or business abroad and don’t come under the Indian tax system. But, if NRIs have taxable income in India then they have to file an income tax return under the ITR form 2 and 3. So, in this blog, we will talk about NRIs Income Tax Return.  

Non-Resident Indian (NRI)

A non-Resident Indian is an individual who does not live in India. An individual said to live in India:

• if such person has resided in India in that year for 182 days or more or
• such a person in the last 4 years has been in India for 365 days or more and is in India for 60 days or more in that year.

A Non-Resident Indian (NRI) is an Indian Citizen who:

• lives in India for less than 182 days during the previous financial year, or
• has left India or who stays outside India for the employment purpose, or
• has left India or who stays outside India for carrying any kind of business or vocation aboard, or
• who has left India or; who stays outside India for any other purpose indicating his intention to stay outside India for an uncertain period.

What is Income Tax Return?

The type of tax that the central government charges from the businesses and individuals on the income-generating during a financial year are known as Income Tax.

An Income tax return (ITR) is a procedure to file information about the income and tax on such income to the Income Tax Department. The tax accountability of a taxpayer is measured on the basis of a person’s yearly income. According to the tax laws of India, it is essential to file once income tax returns once the income is more than the basic exclusion limit.

However, if the tax return displays that there is excess tax payment during a year, then the person will receive an income tax refund from the Income Tax Department. Further, if there is a delay in filing returns then it will not only attract late filing fees but also obstructs the chances of getting a loan or a visa for travel purposes.

NRIs Residency Status

Residency for tax determinations is certain on the basis of a person’s physical presence in India. Following are the three conditions that help to determine NRI residency for tax purposes:

• If the person’s presence in India is less than 60 days in that particular financial year
• When the stay is more than 60 days but less than 182 days and the cumulative stay in the four years preceding the year in question is less than 365, and
• when the person leaves from India for taking up employment outside India and the duration of stay is lesser than 182 days in the year of departure

Thus, on the basis of the above conditions, the Income Tax specialists decide whether such an individual shall be a resident of India for a particular financial year.

NRIs Income Tax Returns in India

If there is a question like Should NRIs file Income Tax Returns in India? Then the answer is Yes, NRIs have to file an income tax return if they have taxable income under the ITR-2 Form in India. Further, NRIs with business income files their return under ITR-3 and not under ITR-2. 

For instance, an NRI Mr. ‘T’ has a property in India, and he earns rental-shop income. Then he will have to file an income tax return if the rental-shop income increases the exception amount. On the following type of income, the tax is applicable for NRIs:

• Any income that accumulates or arises in India
• Any income received in India
• Income that is deemed to accumulate or arise in India
• Income that is deemed to receive in India

Additional, the losses of a specific financial year are permissible to be carried forward for being set off against the income of future financial years. This happens only when the return of income for the year of loss has been submitted accordingly.

Further, a delay in the filing of a tax return invites a penal interest at the rate of 1% per month on the balance tax due. There is a penalty of Rs 5,000 if the filing of the return is not done within one year from the expiration of the applicable financial year.

NRIs are liable to pay advance tax if their tax liability is more than Rs. 10,000/- in a particular financial year. If the advance tax is not paid, then interest under section 234B and section 234C will be applicable.

When is NRI Income Tax Return NOT necessary?

There is no necessary obligation on NRIs to file an income tax return in India while having income in India if the definite condition is fulfilled. The condition is that the NRI’s total income in the financial year shall consist only of investment income.

Otherwise, their income may arise from long-term capital gains which are exempted from tax. Nevertheless, in either case, the income tax must have been removed from the income at source.

Due Date for NRI Return Filing

The due date for filing an NRI Income tax return is on or before 31st July following the financial year. The due date is can be September 30 if the NRI is a working partner of a firm whose accounts are necessary to be audited. But, if the taxpayer has missed the due date, then they can file a late return.

Process for Filing NRI Income Tax Return

The filing of NRI income tax returns can be online easily. Following is the process of filing the return, apart from e-filing:

• Giving the return electronically using a digital signature
• Communicating the income tax data in the return by electronic means under the electronic verification code
• Communicating the data in the return by electronic means and subsequently submitting the verification of the return in Return Form ITR-V
• If the taxpayer is using Form ITR-V, then the assessee should print out a copy of such form. That copy has to be sent by post to the Electronic Data Processing Centre in Bangalore after signing it.
• Giving the return in a paper form (manual filing of Income Tax return)
• It is important to note that manual filing of Income Tax returns is only in the case of assesses who are more than eighty years of age.

Conclusion

Therefore, it is clear from the above discussion that the NRIs have to file an income tax return under the ITR-2 Form. NRIs with business income files their return under ITR-3. If they are earning any kind of income in India. The filing of returns will only be applicable if they have taxable income in India. Filing of the return is through online mode.