For ordinary people, tax forms are often challenging. However simplified the forms are, common people find it hard to understand and fill these forms. Even though the Income Tax Department has simplified income tax returns forms, many non-resident Indians do not understand how to fill these forms.
If you are non-resident Indian (NRI), and you still do not understand how to fill a form, you can take secondary help or invoke the services of a Chartered Accountant. To understand if you are eligible for tax, you must understand if your income is taxable, and if your residential status permits this. The following are some tips to understand this aspect.
What a NRI actually mean?
As per Income Tax Act, 1961, an individual is assessed for tax in India if:
The individual is present in India for more than 182 days during a given tax year.
The individual has stayed in India for more than a year in the past four years and 60 days in the present tax year. But if the individual leaves the country to another country during these four years, then the fifth year’s tax year is extended up to 182 days.
The above-mentioned pointers are the basic qualifications for residency in India. If these pointers are not fulfilled, then the individual is classified as a NRI.
Taxable income of NRIs
- Income received or to be received.
- Income accrued or to be accrued.
- Income sourced from India.
- For NRIs taxed in their country of residence, they can benefit from the Double Taxation Avoidance Agreement. This agreement is made by India with many countries. NRIs are benefited by this agreement, since it helps them avoid being taxed by their country of residence.
Why should NRIs file income tax returns in India?
- If an NRI has taxable income, then the Income Tax laws stipulate the payment of tax as mandatory procedure. The following are the conditions under which a NRI pays income tax in India.
- Earnings realized from India, exceeding the exemption threshold.
- If India has a tax treaty in the country of residence of a NRI, the global income of the NRI is taxed. This is done to avail tax benefits under this treaty.
- NRIs are not required to file returns if their income is in the form of long term investments. Considering that TDS (Tax Deductible at Source) is effected on their investments, they need not file returns.
Income tax returns – procedures for NRIs in India
The PAN (Permanent Account Number) is mandatory for filing income tax returns. NRIs can apply for a PAN from NSDL or UTITSL websites.
The following are the forms to be selected.
- ITR 1 – For individuals having income from farming.
- ITR 2 – For individuals with partnerships in companies and don’t have any other business or profession.
- ITR 3 – For individuals with partnerships in partnership firms with no other business or profession.
- ITR 4 – For individuals with income from proprietary business.
NRIs can file their returns either physically or via electronic filing
- Upload the forms in Income Tax website.
- Digital signature can be attested. Digital signature should be obtained from Digital Signature Issuing Authority.
- For uploads with digital signature, the physical ITR – V form has to be printed from website, and submitted along with returns to Income Tax Department.
- Individual should file the ITR form along with Acknowledgement form and submit it to Income Tax Officer.
- In case of absence of the individual in the country, an authorized person can conduct such activities on behalf of the absentee.
If returns are filed after the last date, interest is charged at 1% per month. Due date is generally July 31 each year.