NRI Income Tax Return Filing

NRI taxation under the Indian Income Tax Act of 1961 applies to individuals who earn income outside their home country. The income tax rules and benefits given to them differ significantly from those that apply to resident Indians. A non-resident Indian (NRI) is an Indian citizen or person from India who is not a resident of India. 

Residency Status of NRIs

NRI Income Tax Return Filing

The tax residence is determined based on the individual’s physical residence in India. There are three conditions that can determine the place of residence of an NRI. 

First, if you spend less than 60 days in India in a particular fiscal year 

Second, if the length of stay is  60 days or more and less than 182 days, and the total length of stay for the four years of the previous year is less than 365 days. 

Finally, if a person leaves India for  employment outside India and stays for less than 182 days in the year of departure 

Depending on the above conditions, the income tax authorities will determine whether a particular person will be treated as a resident of India in a particular fiscal year.

Should NRIs File Income Tax Returns In India?

Yes. NRI is required to file an income tax return in India if it has taxable income in India. For example, an NRI that owns a home in India and earns rental income must file an income tax return if the rental income is unacceptable. Taxes apply to NRIs of the following types of income:  

  • All income accrues or is generated in India 
  • Income generated or deemed to be generated in India 
  • All income earned in India 
  • Income considered earned in India 

In addition, losses from a particular financial year can only be carried forward to offset income from a future fiscal year if the income tax return for the year in which the loss occurred is filed accordingly. Finally, if you delay your tax return, you will incur a 1% monthly penalty interest on the remaining tax paid. In addition, a fine of  5,000 rupees may be levied if the tax return is not filed within one year after the end of the relevant fiscal year. Therefore, NRI needs to file a final tax return promptly.

When is NRI Income Tax Return NOT Required?

An NRI isn’t always required to document an income tax return in India at the same time as having profits in India, most effective if the desired circumstance is satisfied. The specified circumstance is that the NRI`s general profits withinside the financial year have to consist most effectively of funding profits. Alternatively, the NRI`s profits can also additionally get up from long-term period capital profits which can be exempt from tax. However, in both case, profits tax have to be deducted from the income at the source. 

Due Date For NRI Return Filing

NRI Income tax return needs to be filed on or earlier than the thirty-first July following the financial year via way of means of an individual. However, the due date is taken into consideration on September 30 if the NRI is an operating associate of an organization whose debts are important to be audited. However, if the taxpayer has ignored the due date, the taxpayer can be documented a belated return.

Procedure For Filing Return

NRI Income Tax Return Filing

NRI can easily file an income tax return online. In addition to electronic filing, you can also submit using the following methods:  

  • Digitally signed electronic returns (DSC) 
  • Electronic submission of income tax data for filing under electronic verification code 
  • Electronic return data and subsequent return confirmation on the ITR-V return form 
  • If the taxpayer uses the ITR-V form, the beneficiary must print a copy of the form. A copy officially signed by the assessor must be mailed to Bangalore’s Electronic Data Processing Center. 
  • Submission of paper tax return  (manual submission of income tax return) 

Taxpayers should be aware that manual filing of income tax returns is only permitted for taxpayers over the age of 80. For the 2020-2021 assessment, assessors submitting ITR1 and ITR4 will be able to file their tax returns in manual mode.

How Can NRIs Avoid Double Taxation?

NRI can avoid double taxation (i.e., double taxation on the same income in the country of residence and India) by applying for an exemption under the Double Taxation Avoidance Agreement (DTAA) between the two countries. 

Under DTAA, there are two ways to apply for a tax credit: tax exemption and tax credit. The tax exemption method means that NRI is taxed in only one country and exempted in another country. You can claim a tax exemption in your country of residence through an attribution procedure in which your income is taxed in both countries.

In Budget 2021, FM proposes a new section 89A that announces rules that eliminate NRI (specific person) difficulties from double taxation of money accumulated in foreign retirement accounts. This provision applies if income from such accounts is not taxed on an accrual basis, but is taxed by the foreign country notified at the time of withdrawal or return of funds from such accounts.