How to file tax income tax if you’re an NRI| North Loop Official Blog
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13 Oct 2020

How to file tax income tax if you’re an NRI

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Who qualifies as an NRI?

A NRINon-Resident Indian is an Indian Citizen (of Indian origin, birth or descent) living outside India for the purpose of conducting business, education/vocation or for the purpose of employment. An individual will also be regarded as an NRI if he stays in India for less than 182 days duringthe previous financial year.Sec 6 of the Income Tax Act 1961 can be used to determine the residential status of an individual

What is income tax?

Income tax is a percentage of income earned that an individual is liable to pay to the government. Income earned from conducting business as well as employment is taxable when the annual income surpasses the government-mandated threshold limit. Income tax is levied on individuals as well as on corporations and the tax collected is later on utilized on public welfare and development such as roads, infrastructure, schools, hospitals, etc. Income tax can vary depending on the annual income earned and most countries follow a tax slab system wherein different percentages of tax are levied on different annual income brackets.In the case of NRIs, any income earned or accrued in India is taxable if it exceeds the exemption threshold.

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How to file tax income tax if you’re an NRI-

  • The first step would be for an individual to ascertain his/her residential status, with respect to the current financial year. Any individual staying outside India for 182 days at a stretch in the previous financial year will be considered as an NRI. The purpose of staying outside India can be due to education/vocation, conducting business, or for employment.

  • Once an individual is regarded as an NRI, any income earned or accrued in India will be taxable in India. Income received can be in the form of salaries received in India, income from house property in India, capital gains earned from the sale of assets such as securities in India, income earned from interest on deposits in India, etc.An individual is required to pay income tax if the gross income exceeds Rs. 2.5 Lakhs. NRIs can claim benefits as well as refunds if TDS is deducted on their income, which would require one to reconcile TDS credit and advance tax in line with Form 26AS. Deductions of up to R. 1.5 Lakhs can be claimed under sec 80c of the Income Tax Act.

  • Double Taxation Avoidance Agreement (DTAA) is a treaty between 2 or more countries that ensure that an NRI doesn’t pay tax on the same income twice. In case income tax has been paid in the home country, the NRI can get a tax credit in the country of his/her residence.

  • Once the above has been taken care of, an NRI is required to file IT returns within the next 120 days, failing which the returns are deemed invalid.

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