NRI Taxation

The income tax regulations applicable to non-resident Indians are different from that of the resident individuals. There are several queries about the NRI income tax returns that can answer here in detail.

But first, let’s understand who falls under the category of NRI. Any individual with the citizenship of India or with Indian origin, but does not reside in the country as determined by Section 6 is a Non-resident Indian.

What income of Non-Resident will be taxable in India?

A non-resident Indian is only liable to pay taxes on the money he earns within India. Any money that he/she receives in India, directly or indirectly, or if he/she does any transaction in India in the eyes of the law, then that amount will be taxable. Section 9 of the act clearly mentions the different situations under which an income is considered to be earned in India.

How can NRIs avoid Double Taxation?

Sometimes NRIs can get caught in double taxation. For example, if an NRI receives any income in India, the country has the right to tax the income as the source state. But the residential country of the NRI can also tax the income as the residence state. In this case, the person may have to pay taxes twice on the same income. To avoid this, India has DTAAs signed with various countries that clearly exempt the foreign taxes paid while filing the return of income of the NRIs in their home country.

Do NRIs have to pay Advance Tax?

If the tax liability of any NRI exceeds Rs. 10,000 in one fiscal year, then they have to pay advance taxes. If they do not pay their taxes on time, interest as mentioned under Section 234B and Section 234C is applicable.

When should an NRI file his return of income in India?

Like all the other taxpayers of the country, an NRI also must file his return of income if his income exceeds 2,50,000 in any financial year. The last date for filing the return is by 31st July of the assessment year.

From FY 2019-2020, NRIs are required to file their returns in the following cases, even if their total income is below the exemption limit:

  • If the aggregate amount deposited in the current account is Rs. 1 crore or more.
  • If the person has spent 2 lakh or more on foreign travel for self or others.
  • If their electricity bill amount is Rs. 1 lakh or more.

However, if the NRIs do not earn more than Rs. 2,50,000 and also do not fall under any of the above-mentioned cases, then they do not need to file tax returns.

If the NRI has missed the filing of ITR, can the same still be filed?

Yes, an ITR can be filed after the due date with a fine of Rs. 5,000 before 31st December, and Rs. 10,000 between 1st January to 31st March. If the NRI has an income of less than 5 lakhs, the penalty is Rs.1,000. The taxpayer should file an ITR before the end of the relevant assessment year, for example, before March 31, 2021, for FY 2019-20.

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