All You Need To Know About Tax Filing For NRIs

Non-Resident Indians or NRIs are those individuals who are born in India but are living abroad. Such individuals typically hold Indian passports and may have assets and sources of income in India. NRIs have to fulfil certain specific criteria to be called NRIs and be exempted from paying taxes here. Not all NRIs are eligible to pay taxes in India; not all of them are exempted either. Here’s a detailed guide on how NRIs should file taxes and some essential things to remember.

How can an NRI file income tax in India?

Indian tax laws mandate that NRIs must pay taxes on income accrued in India or investments in India. For instance, one may have real estate investments in India (property owned or rented that generates income) or investments in the Indian share market. Such income is deemed taxable in India and NRIs have to file tax returns for to same. If you are an NRI, here’s how you can file your taxes:

1. Determine your residential status:

   As an NRI, you first need to determine your residential status for a specific financial year. Defining the same can be a bit complicated if you have moved abroad or moved back to India recently. A person who is not a resident of India is considered to be a non-resident of India (NRI). You are a resident if your stay in India for a given financial year is 182 days or more or 60 days or more and 365 days or more in the 4 immediately preceding previous years. In case you do not satisfy either of the above conditions, you will be considered an NRI. If you have, you are regarded as an NRI and can file your taxes as one

2. Calculate the income accrued in India as well as your taxable income:

   NRIs can avoid double taxation (meaning: getting taxed on the same income twice in the country of residence and India) by seeking relief from the Double Taxation Avoidance Agreement or DTAA between the two countries. Under DTAA, there are two methods to claim tax relief – exemption method and tax credit method. By exemption method, NRIs are taxed in only one country and exempted in another. In tax credit method, where the income is taxed in both countries, tax relief can be claimed in the country of residence.

3. Claim DTAA treaty benefits:

   NRIs can avoid double taxation (meaning: getting taxed on the same income twice in the country of residence and India) by seeking relief from the Double Taxation Avoidance Agreement or DTAA between the two countries. Under DTAA, there are two methods to claim tax relief – exemption method and tax credit method. By exemption method, NRIs are taxed in only one country and exempted in another. In tax credit method, where the income is taxed in both countries, tax relief can be claimed in the country of residence.

4. File your returns:

   After calculating your taxable income and claiming DTAA benefits, you can now file your returns. NRIs can easily file their returns online by visiting the website at https://www.incometaxindia.gov.in/. Here you can find all the tax laws for NRIs as well as a step-wise assistant, documents you have to submit, etc.

   Important things NRIs should remember about filing taxes in India

• NRIs must file their taxes by 31st July of each year
• You need to pay advance tax if your tax liability in a financial year exceeds ₹10,000.
• Under Section 234B and 234C, you are eligible to pay interest if you don’t pay advance tax
• As an NRI, you can claim 80C deductions for investments such as payment of life insurance premiums, tuition fee payments made for spouse or children, repayment of the principal home loan amount, ULIP investments and ELSS investments.
• You can also avail tax deductions under Section 80D, 80E, 80G and 80TTA. Speak to your tax consultant about the same