NRI TAXATION- NRI TAX RETURN FILING IN INDIA

 NRI Tax Return


There are approx. 30 Million Nonresident Indians all over the world which comprises of Overseas Citizen of India as well as Person of Indian Origin. Like Residents, Nonresidents are also liable to pay taxes in India and file their Income Tax Return.

A question comes in mind as to how NRI tax return filing is different from Resident tax return filing?

First of all, income earned abroad will not form part of NRI Tax return. Thus, they are liable to pay taxes and file their Income tax return only on the income earned in India. Accordingly, NRIs are liable to pay taxes on rental income, salary income, capital gain on sale of property, interest on fixed deposits and capital gains on sale of shares and mutual funds in India. However, NRIs are liable to pay taxes on aforesaid income and file their tax returns in India only if such income exceeds the basic exemption limit of Rs.2.5 lac during a financial year.

NRI taxation is a wide concept covering not only Income tax but also wealth tax, property tax etc.




Some important features of NRI Taxation in India

1)      Since NRI are taxable on basis of “source”, instead of “residence”, their taxes are withhold at the highest rate on all types of income like interest on Fixed deposits, shares and mutual funds. As per law, in case the taxes of NRI are withhold and they have limited income in India, no need to file NRI tax return in India. However, in case, excess TDS has been deducted from their income, it will result in tax refund which compels NRI to file their tax returns in order to claim refund of excess taxes deducted.

 

2)      Unlike Residents, who get exemption in tax slab based on age, gender etc., income of NRIs is based only on the income earned in India.

 

3)      Unlike residents who are liable to deduct TDS in excess of threshold limits, in case of NRIs, there is no threshold for deduction of TDS and entire income is liable for TDS deduction.

 

4)      In case income of NRIs falls under section 115G of the Act, they are normally not required to file their tax return in India.

 

5)      NRIs are not allowed any nominal deductions on investment income barring some exceptional situations.

 

6)      NRIs can opt to be taxed under special provisions mentioned in section 115E to 115I of the Act.

 

7)      Unlike Residents, form 15G and 15H are not applicable in case of NRIs. Accordingly, tax is deducted on entire income and excess tax deducted can be claimed as refund by filing their Income tax return in India.

 

8)      In case NRI are subject to double taxation, first owing to source of income in India and second owing to residence in other country, in such cases, NRIs may avail the benefit of DTAA and claim credit of taxes paid in one jurisdiction against total tax liability in another jurisdiction.

All the above are important points for consideration at the time of NRI Tax return filing in India and should be kept in mind by every tax payers.


Location: India

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