NRI Tax Filing – 5 Things You Must Know| North Loop Official Blog
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31 Aug 2020

NRI Tax Filing – 5 Things You Must Know

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NRI taxation can become a subject of confusion for many of you living abroad, especially if you wish to create an investment plan in India or repatriate money back home.

Also, with new laws coming in and India moving towards a more stringent tax regime to reinforce its economy, understanding how NRIs can file tax in India can become quite arduous.

To clear your doubts and make things easier, we have compiled the five key points you should remember for filing an income tax return in India.

1. Eligibility for NRI tax filing –

If you qualify as an NRI, you are required to file tax returns in India if your taxable income exceeds the maximum amount not chargeable to tax as per the Indian income-tax law.

The taxable income includes only those that are earned or accrued here, and any income that you earn outside India is not taxable here. So if your annual income from India exceeds the basic exemption of Rs.2.5 lakh, you meet the requirements of eligibility for NRI tax return filing in India.

However, before you determine the threshold limit to ascertain your eligibility for NRI tax filing, you must ensure that your taxable income gets computed before giving effect to deductions applicable to you under Section 80 of the Income Tax Act, 1961.

Another point to note here is that, if TDS gets deducted on your salary, interest income etc. more than the amount payable, you can claim refunds only by filing your income tax return. Read all about TDS here. The same criterion applies if you want to settle claims for an amount that you set off as capital losses.

Also, as per the latest amendment of Section 139 of the IT Act which came into effect from April 1, 2020, it becomes mandatory to file an income tax return if you deposit an amount exceeding Rs.1 crore in one or more current accounts maintained with a bank or a co-operative, or incur an expenditure of more than Rs.2 lakh for travel to a foreign country, or an expense exceeding Rs.1 lakh towards consumption of electricity during the previous year.

In case your taxable income before deductions does not exceed Rs.2.5 lakh and you do not cover any of the conditions mentioned then the eligibility for NRI tax filing does not apply to you.

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2. Documents required for filing taxes in India –

The most important document required for filing NRI tax in India is a copy of your passport. That is because it is the primary source to determine the number of days you spent outside India and whether you qualify as an NRI or not.

Besides the passport, the other documents that are required include the bank statements for the accounts held in India like your NRE or NRO account and Form 16 if you earn salary income in the country.

This certificate gets issued under Section 203 of the IT Act for tax deducted at source by your Indian employer on your salary income. The certificate aids in providing a detailed summary of the amount paid to you and the tax deducted.

Another important document is Form 26AS which is a consolidated annual tax statement including information on all your tax deducted at source, or those collected by you, details of your advance tax payments and self-assessment details. You can easily download this form on the Income Tax website.

3. Tax deductions and Exemptions Available to NRIs -

Just like resident Indians, as an NRI you get entitled to claim various deductions on your total income. Most of the deductions under Section 80 of the IT Act are also available to you, and the maximum deduction allowed under this section on your gross total income is Rs.1.5 lakh for the current financial year.

Some of these deductions include expenses on children’s tuition fee payment, principal repayments on loan for the purchase of a house property, life insurance premium payment, or investments in Unit-linked insurance plan (ULIP) and Equity-linked savings scheme (ELSS).

Other deductions allowable on NRI tax in India include those under Section 80D for a premium paid on health insurance, 80E for interest paid on education loan, 80G deduction on donations for social causes, and 80TTA that allows a maximum deduction of Rs.10,000 on income from interest on your NRO savings bank account.

However, as per the NRI tax rules, you cannot claim deductions under Section 80DD, 80DDB and 80U. Also, you are not allowed to invest in Public Provident Funds, NSCs, post office 5-year deposit scheme or Senior citizen savings scheme as an NRI.

As far as exemptions are concerned, you can claim them on long-term capital gains earned on the sale of any house property or even other assets as per Section 54, 54EC or 54F.

4. Advance tax for NRIs –

The NRI tax law for advance tax payment is the same as the provision for resident Indians. That means, if your expected income in India after claiming credit for TDS exceeds Rs.10,000 for a financial year, you become liable to pay advance tax.

Failure of the same will also attract interest penalty on your NRI tax liability under section 234B and section 234C.

5. NRI tax e-filing –

There are two ways to file your income tax returns. As an NRI living outside India, the traditional way of filing the ITR is not feasible as it involves physically going to the Income Tax Department office.

However, the newer method that is e-filing requires you to file your return on the IT Departments website using the internet and is, therefore, more popular and convenient.

More importantly, NRI tax e-filing involves the same process as that for resident Indians. The process begins with registering yourself on the Income Tax Department’s online tax filing site and providing your PAN (Permanent Account Number) followed by choosing your desired way of e-filing (either by downloading the form, filling it offline and uploading it later or opting for the quick e-file option and filling it online itself).

The next step involves choosing the requisite ITR form based on your head of income, filling it in and finally submitting it.

The last step is a verification of ITR V. This can be done electronically by mailing a signed copy of the ITR V to the processing centre in Bengaluru within 120 days of filing your return.

A common question that arises when thinking of NRI tax e-filing is the requirement of the Aadhar card. Firstly, to get a clear picture on this subject, you must understand that the Aadhar card is a unique identification issued to resident Indians and is based on the biometric and demographic data of the citizens of India.

So, only a resident Indian is entitled to sign up for the Aadhar card in India. That brings us again to the question of whether an Aadhar card is required for NRI tax e-filing, and the answer is no.

While it is mandatory for resident Indians to quote their Aadhar number during income tax return filing either electronically or manually, the Indian government has exempted NRIs from the requirement of quoting Aadhar.

That means if you are an Indian living abroad in the UAE, USA, or any other country, an Aadhar card is not required for you to file your income tax returns back home.

However, if you do possess an Aadhar card, there is no harm if you mention the number while filing your income tax return.

To learn more TDS for NRIs, click here.

The above information is for general purposes. We recommend speaking with a certified tax advisor.

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This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.