Income tax filing in India is different for resident Indians and Indians living abroad. Non-resident Indians (NRI) can be classified in different ways. How you e-file your tax returns would depend on your residential status of that particular financial year.
You will have to file your income tax returns as a resident Indian if:
- You’ve stayed in India for at least 182 days in the applicable financial year
- You’ve stayed in India for at least 60 days in the applicable financial year and for at least 365 days in the 4 years before the financial year
- For the second condition, the period of 60 days is increased to 182 days if you’re an Indian citizen working abroad, member of a crew of an Indian ship or a Person of Indian Origin (PIO) visiting India
You’re an NRI if you don’t satisfy any of these mentioned conditions. And if that’s the case, here is how you need to file income tax returns in India.
For NRIs, only the income that is earned in India is taxable in India. This could include income from:
- Salary received in India
- Remuneration received on service provided in India
- House property located in India
- Interest from fixed deposits or savings bank account in India
These incomes are taxable in India. However, the basic tax exemption limit of Rs 2.5 lakh applies to NRIs as well. NRIs don’t have to pay income tax if their taxable income in India is less than Rs 2.5 lakh.
That said, it makes good sense for NRIs to file tax returns in the following cases:
- If you have short-term or long-term capital gains from investments or assets in India, even when the gains are less than Rs 2.5 lakh (but not if the gains are your only income in India and TDS has been deducted on it)
- If you want to get a tax refund
- If you want to carry forward losses to be adjusted later
So you understand when and why you need to file income tax returns in India, but before you do so, you should also be aware of the tax-saving deductions that you can claim. Under Section 80, you can claim deductions on the life insurance premium paid in India and the ULIP or ELSS investments made in India. Health insurance premiums paid for parents are also allowed to claim. NRIs can further claim deductions on house property towards the property tax paid or interest on home loan.
There is also something called the Double Tax Avoidance Agreement (DTAA) that NRIs can take advantage of to not pay taxes on the same income in their country of residence as well as in India. The DTAA has two methods–exemption and tax credit. Under the first, NRIs are taxed in only one country and exempted in the other. And under the second, tax relief can be claimed in the country of residence.
These are the basic things that an NRI needs to keep in mind about filing income tax returns in India. Remember: the deadline for NRIs to file tax returns in India for FY2015-16 is the same as it is for Indians–31st July 2016.
This article was published in The Hindu Business Line on 24 July 2016.