How to File Income Tax Returns for NRIs in India? [Pro Tips]

Filing income tax returns is an essential obligation for every taxpayer in India, including Non-Resident Indians (NRIs). While the process may seem daunting, especially for those residing abroad, understanding the requirements and procedures can simplify the task significantly.

According to Indian tax laws, for any person earning more than the maximum amount not chargeable to tax (i.e. ₹2.5 lakh under the old tax regime; ₹3 lakh under the new tax regime) during the financial year, it is mandatory to file an ITR in India. Therefore, if you do not have any income you are not obliged to file returns in India.

In this guide, we will delve into the specifics of filing income tax returns for NRIs in India, covering everything from eligibility criteria to the step-by-step process.

Understanding Filing the Tax Return for NRIs in India

Before delving into the filing process, it’s crucial to grasp the concept of NRI status and its implications on taxation in India. An individual is deemed an NRI if they do not meet the criteria of being a resident or ordinarily resident in India during the financial year. NRIs are subject to certain tax implications based on their income sources and residency status.

Although it is not mandatory to file the ITR, certain high-value transactions need to be captured and reported by a reporting entity even if those transactions may not be connected with income.

• Some of the examples are:

Investing a gross amount of more than ₹10 lakh in non-residential external (NRE), non-resident ordinary (NRO ) or FCNR (foreign current non-resident account) fixed deposits (FDs) or subscribing to shares of an Indian company or mutual funds for more than that amount; acquiring immovable property in India worth more than ₹30 lakh. 

In such cases, the tax department may seek to verify the transactions and the concerned person may need to file a response diligently without which a reassessment notice could be issued

Income Tax Applicability for NRIs

NRIs are typically taxed on income earned or received in India, which includes salaries, rental income, capital gains from property transactions in India, interest income, and more. However, income earned outside India is generally not taxable in India for NRIs, except for income derived from a business controlled or set up in India.

Eligibility Criteria For Filling Income Tax Returns

NRIs must file income tax returns in India if their total income exceeds the basic exemption limit, which is INR 2.5 lakh for individuals below 60 years of age, INR 3 lakh for senior citizens (aged 60-80 years), and INR 5 lakh for super senior citizens (above 80 years).

Types of Income Tax Forms for NRIs

The income tax forms applicable to NRIs vary depending on their income sources and residential status. Commonly used forms include ITR-1 (Sahaj), ITR-2, and ITR-3. NRIs must choose the appropriate form based on their income sources and furnish accurate details to avoid discrepancies.

Step-by-step Guide to File Income Tax Returns for NRIs

Determine Residential Status: Assess whether you qualify as an NRI or a resident as per the provisions of the Income Tax Act.

Gather Documents: Collect essential documents such as PAN card, Aadhaar card (if applicable), bank statements, Form 16/16A, and foreign income details.

Choose the Right Form: Select the appropriate income tax return form based on your income sources and residential status.

Declare Income: Disclose all sources of income earned or received in India and abroad in the respective sections of the tax return form.

Calculate Tax Liability: Compute your tax liability after claiming deductions and exemptions available under the Income Tax Act.

File Tax Return Online: Use the Income Tax Department’s e-filing portal to file your tax return online. Ensure the accuracy and completeness of the information provided.

Verify and Submit: Verify your tax return using electronic verification methods such as Aadhaar OTP, net banking, or digital signature, and submit it to the Income Tax Department.

Key Points to Remember

• Maintain accurate records of income earned or received in India and abroad.

• Utilize tax-saving investment options available to NRIs such as NRE/NRO accounts, PPF, NPS, etc.

• Adhere to the deadlines for filing income tax returns to avoid penalties and legal consequences.

• Seek professional assistance if unsure about any aspect of the filing process or tax implications.

Conclusion:

Filing income tax returns as an NRI in India requires a clear understanding of the applicable laws, residential status, and income sources. By following the guidelines outlined in this comprehensive guide, NRIs can fulfill their tax obligations efficiently while maximizing tax benefits and avoiding legal complications. Stay informed, stay compliant, and ensure a smooth filing process for a stress-free tax season.