Income tax return filing for NRI

What is ITR ?

ITR stands for Income Tax Return. It is a form for submitting data on income from multiple sources and paying taxes to the Income Tax Department. It contains the complete details of incomes and tax saving investments made by an individual during a financial year. In this article we will discuss how to file an Income Tax Return (ITR filing) for an NRI in India.

Types of ITR forms

There are 7 types of forms initiated by the Tax Department for filing ITR for individuals, organisations, company etc.

• ITR 1
• ITR 2
• ITR 3
• ITR 4
• ITR 5
• ITR 6
• ITR 7

Process to file ITR for NRIs

Step 1 – Determining the right of Residence in India

It is important for the NRI to determine the right of residence every financial year. This is based on the number of days of stay under Section 6 of the Income Tax Act 1961 (IT Act). According to income tax laws, Indian citizens leaving India, or NRIs visiting India, can stay in India for up to 181 days without losing their non-resident status. Your stay in India is considered the date of arrival and departure.

Step 2- Conciliation of Income and Taxes with Form 26AS

Compare the TDS offset paid on your tax return or input tax paid on your tax return against the TDS offset / input tax shown on Form 26AS.

Know more: Amendments in Form 26AS

Step 3- Determination of the Taxable Income

Income tax levied by NRI in India includes interest on bank accounts in India, dividends or capital gains on shares in India, and residential property rentals. In addition, available deductions, such as the Section 80C deduction, reduce the income.

Step 4- Determination of the Tax Liability

Tax liabilities are determined by the tax rate applicable to the individual. The exemption limit for all NRIs is Rs 2.5 lakh, pending reduction or approval.

Step 5- Compensation of rights under double taxation treaties

If NRI income is taxed both in India and abroad, exemptions may apply under the Double Taxation Treaty (DTAA). DTAA discounts are based on the type of income (income may be fully tax exempt or taxed at a lower rate). If income is taxed under the DTAA, NRIs must pay taxes in India and, under certain conditions, must claim a deduction for taxes paid on tax liabilities in the country of residence. To apply for tax exemption, you will need a Tax Payment Certificate (KKR) from the NRI’s country of residence for tax purposes.

Step 6- Choosing tight ITR form for NRI

From financial year 2017-18, NRIs are supposed to file return in ITR2 in all cases, except for business income. NRIs with business income are suppose to file return in ITR 3. That means ITR 1 is not available anymore for non-residents.

Step 7- Filing of Non Liable Income details

Statement of non liable income like dividends,interest on NRE/FCNR deposit,long-term capital gains on listed securities,interest on tax-free bonds,permitted gifts received,etc. although there’s no impact according to schedule of Exempt Income.

Step 8- Revelation of the Bank Account Details

NRIs who have not applied for a refund or NRIs who have applied for a refund but have a bank account in India are not required to provide offshore bank account details when returning income. However, NRIs filing income tax returns who do not have a bank account in India can provide foreign bank account details for compensation.

Step 9- Inclusion of detailed information of Assets and Liabilities in the ITRs

NRIs with total earning exceeding Rs 50 lakhs are required to report personal property and real estate information and related liabilities in India under the ITR Property and Liability Plan (AL List).

Step 10- Validation of ITR for NRI

After uploading the ITR, it must be confirmed within 120 days. If the returns are not checked they are considered as invalid. Confirmation can be either done online or manually be sending authorised ITR to Income Tax, CPC, Bengaluru.

Hence, Non Resident Indian ( NRI)  are accountable to pay tax in India on the incomes that is received and considered  in India during the past year.Earnings earned abroad by NRI is not taxed in India and  shall be taxed abroad. The obligation to deliver ITR shall get to your feet every place the compute returns (earned in India) exceeds upper limit quantity not on expenses to blame (Rs 2.5 lakh) Hence, furnishing of ITR in accept of appeal income, existence below chargeable limit, is not required.