Tax filing season has already begun and the due date to file your ITR for FY 2018-19 is set at July 31, 2019. As taxpayers are getting their financial documents ready to file their ITR, NRIs also wonder whether or not they have to file taxes in India. For NRI population, unlike the regular resident Indians, rules and regulations differ to an extent and further there are some legalities and clauses that become tricky to comprehend.
So, here is a quick ready reckoner for NRIs to review before filing their tax returns in India. To begin with we'll first understand various possible tax implications on NRIs. Notably, NRIs are liable to pay taxes in relation to income generated in India be it from investments or some receipts. Here are provided some such examples:
1. Rental income from property let out in India
2. Salary earned in India
3. Capital gains accruing from some investments here
4. Interest earnings on NRO accounts, deposits, bonds etc.
Further there are two aspects of how NRIs are taxed- Say if an NRI works in India then the salary or payment he receives will be liable for taxation in India. And in a case when the NRI works in some foreign nation but receives payment in India, the amount received will be added to the total taxable income of the person in India.
Here below are given few important points that will help NRIs file their returns in India:
Determine your tax-residency status:
For individuals who have been living outside of India for fairly long time, there is not much of a confusion to ascertain tax residency status. But for those who have recently moved outside of India or have come back after a long stay abroad, you need to ponder first over the tax residency status i.e. whether you qualify as a resident or non-resident Indian taxpayer.
And herein non-resident individuals as per Indian taxation system are those who have resided in the country for not more than 182 days in the last fiscal year i.e. 2018-19 or you should be in the country for less than 60 days in a year or 365 days over a span of last 4 years. When computing this figure, do remember that for the total days you have stayed in India, the arrival and departure dates are also included.
Gross total income over Rs. 2.5 lakh:
If your total income before any tax deductions are made is over Rs. 2.5 lakh then you are liable to pay taxes in India. Further in a case, when an NRI wants to claim benefit as part of a tax treaty then he or she irrespective of the amount of gross total income needs to file tax in India mandatorily.
NRIs filing taxes in India for FY 2018-19 need to account for only that income that is accrued or earned in India that includes interest income on deposits etc.
Advantage of Double Taxation Avoidance Agreement or DTAA:
India has signed DTAA with as many as 90 nations and as part of which NRIs become eligible for getting tax credits for taxes paid in India. And these credits can be claimed by NRIs when they file taxes in their country of residence.
Documents required to be produced by NRIs for filing taxes in India
1. Tax residency certificate issued by your home country
2. Self-declaration as per the prescribed format is to be given to the company deducting TDS.
Few points to note for NRIs filing taxes in India:
1. Deadline to file taxes for FY 2018-19 is July 31
2. Do a check for DTAA advantage as whether or not you are eligible for it as it helps a great deal when filing taxes in your country of residence.
3. For receiving a tax refund, only NRO rupee accounts need to be quoted while filing tax returns in India as other accounts such as NRE or FCNR accounts are not eligible for receiving tax refunds.
4. Also, in some of the countries, NRIs need to provide for their income realized in India while filing their tax returns in the home country. This is to be done even if they have filed taxes in India.
5. In a case when you are eligible for a tax refund against TDS deducted on some of your Indian investments, you need to mandatorily file taxes irrespective of your gross income for claiming the amount.
6. Also, if your tax liability is over Rs. 10,000 in a financial year and you have not deposited advance tax then you will have to shell out interest under section 234B and section 234C.
And, if you still find any technical thing coming your way, making it difficult to file taxes in India as an NRI, you can always get in touch with a tax planning firm or taxation expert to help you file your taxes.