Things to Consider for NRIs When Filing Returns in India

Kapil Rana 
on 31 July 2019


There are almost 16 million people of India living overseas which is one of the largest in the world. Many non-resident Indians (NRI) have their own bank accounts, investments in various sectors, house property, and other assets in India. Hence, they need to file income tax returns in India on or before the due date. There are a few points mentioned below that an NRI should keep in mind while filing their tax returns.

Determine residential status - Firstly, an NRI needs to establish their residential tax status in India depending on their period of stay in the current financial year. This is one of the essential factors because, for a resident of India, his/her global income will be considered taxable. On the other hand, in the case of non-residents, only their income earned from the sources in India is taxable. It should also be noted that the residency test under FEMA or Foreign Exchange Management Act is different from the test given under the Income Tax Act and the same might not be relevant for tax purpose.

Choosing the right return form - To reduce the burden of compliances for individuals, ITR-1 has been introduced by the government. NRIs who only have passive income can use the simpler ITR-1 to file their income tax return. It is applicable for individuals who have income from salary, one house property, and other sources of income like interest. One of the conditions for using this form is that the total income of an individual should be less than Rs. 5 million. Individuals who do not fall under the category of ITR-1 can file their return with ITR-2. NRIs who have taxable income from more than one house property shall file their income tax return in ITR-2.

Aadhaar Card Number not mandatory - According to Central Board of Direct Taxes (CBDT), the need to mention Aadhaar as per section 139AA of the Income Tax Act is not applicable to an individual who is not a resident as per the Aadhaar Act, 2016.

Mention details of assets and liabilities - Under the schedule of assets and liabilities (Schedule AL), NRIs who have a total income above Rs. 5 million are required to report the cost of certain assets, both movable and immovable, located in India and also the corresponding liabilities. This schedule is contained in ITR 2, 3 and 4.

Optional to report foreign bank account - CBDT on 24 July 2017, clarified that non-residents who are not claiming refund or non-residents who are claiming a refund but have a bank account in India are not obligated to provide the details of their foreign bank account while filing the income tax return (ITR). However, NRIs who are claiming a refund but do not have a bank account in India are required to furnish the details of one foreign bank account for the issuance of the refund. Furthermore, it is not mandatory for non-residents to report their assets and financial interests outside India.

Mandatory to file ITR in case of exempt long-term capital gain - If the taxable income of a non-resident is below the basic exemption limit, but the exempt income is more than the basic exemption limit, which is Rs. 250,000 then the person is required to file the income tax return. For instance, if an NRI has exempted long-term capital gains income of Rs. 585,000 and no income from other sources, he/she is still required to file ITR as the long-term capital gains exceed Rs. 250,000.

Conclusion

To stay away from dire consequences including heavy penalties and fines, it is important to comply with the latest income tax rules and provisions. Non-residential Indians (NRIs) are required to furnish all the necessary details in the most appropriate manner in their Income Tax Return form. This should also be done before the due dates. By keeping the aforementioned points in mind, NRIs can ease their experience while filing returns.


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