5 Things NRIs need to know when filing Income Tax Returns in India

The income that NRI earn abroad is not taxable in India. Nevertheless, some NRIs also have an earning in their aborigine country, India in the form of interest from deposits, property rent, etc. This income has a basic limit of exemption, which is Rs2 lakhs. If the NRI earnings from such native sources cross the fixed limit of two lakh, then they should file their tax return.

In addition to the income sources mentioned above, if these NRIs carry out transactions in shares, mutual funds and/or similar securities, the monetary gains from the same are also tax accountable, for which they are supposed to file returns. The due date for this, only in case of NRIs, is July 31.

However, there are certain things that NRIs filing returns must take into consideration. By considering the following practical scenarios, one can ease out his/her tax-return filing process in India.

When should an NRI file for the return?

There are three major criteria for filing the return. These include if their income from the country exceeds the maximum limit permissible as basic exemption, or it can be filed to claim a return if the deducted tax is more than what was payable. To settle the claims for the amount set off as capital losses, one should file his returns.

What all documents do you need as a non-resident Indian?

The documents that one should submit include their passport of the residence country. This shows the total number of days spent outside India for them to qualify as a non-resident Indian. Apart from this, they should provide their de-mat account statements, and the TDS certificates they received from other parties. The statements for de-mat accounts are required for the knowledge of their bank accounts and transactions held in India.

What are the exemptions and the deductions for which you are eligible?

There are certain exemptions in India by which an individual can reduce his/her taxable income. These include certain investments, payment of the principal amount of the housing loan, etc. These exemptions are applicable to NRIs as well. Therefore, for those exemptions that are applicable, the NRIs can claim the same under the Income Tax, such as Section 80C.

There are certain deductions that are specifically not applicable to NRIs. Firstly, NRIs do not benefit from differential exemption limits, based on age and gender, and applicable to resident Indians. Secondly, an NRI’s short-term or long-term capital gains from their investment sale in India, is also not included under tax exemption.

What should you do to claim a refund?

To expect a refund from your filed tax return, you should ensure to put the exact bank details, which includes your account number and the branch MICR code. In case of an online filing of returns, the processing of your refund happens electronically. Therefore, precise bank account details are always helpful.

What are the alternatives available to file returns?

The NRIs can file their return online via the Income Tax Department’s e-filing portal. Alternative to this, they may also use other ways to do the same. This includes taking the help of tax advisors, or by using other private and paid e-filing portals for getting their purpose served.

Some more points to remember :

A point to remember is that an NRI, whose total income during the concerned financial year comprises only of investment earnings and/or long-term capital gains, should not necessarily file the returns. Apart from this, if the tax deduction has already taken place at the income source, then too the non-resident Indian may not file the tax return.

With the help of above-mentioned tips, NRIs can simplify the whole process of filing their tax returns in their motherland, India. To have a tax plan and investment plan completely in alignment with your financial goals, you should have a well thought out financial plan.

The author is Ramalingam.K an MBA (Finance) and certified financial planner. He is the Director & Chief Financial Planner of holistic investment planners(www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He Can be reached at  ramalingam@holisticinvestment.in

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When should NRIs file India tax returns?

July 31st was the last date for filing Indian income tax returns for the financial year 2012-2013. If you are a Non Resident Indian (NRI) and are trying to figure out if you need to file a tax return in India, this guide will help you in financial year 2013-2014.

Should you file returns in India?

At present if you are an NRI, and if you fulfill either of these conditions you will have to file your income tax returns for 2013-2014

- Your taxable income in India during the year 2013-2014 was above the basic exemption limit of Rs 2 lakh OR

- You have earned short-term or long-term capital gains from sale of any investments or assets, even if the gains are less than the basic exemption limit.

"What this means is that firstly, NRIs do not get the benefit of differential exemption limits on basis of age or gender that is available to Resident Indians. Secondly, for NRIs, certain short term or long term capital gains from sale of investments or assets are taxed even if the total income is below the basic exemption limit. These include short term capital gains on equity shares and equity mutual funds where tax rate is 15% and long term capital gains on securities and assets where tax rate is either 20% or 10% without indexation," explains Vaibhav Sankla, Director, H&R Block India.

Are there any exceptions?

Yes, there are two exceptions:

- If your taxable income consisted only of investment income (interest) and/or capital gains income and if tax has been deducted at source from such income, you do not have to file your tax returns.

- If you earned long term capital gains from the sale of equity shares or equity mutual funds, you do not have to pay any tax and therefore you do not have to include that in your tax return

Tip: You may also file a tax return if you have to claim a refund. This may happen where the tax deducted at source is more than the actual tax liability. Suppose your taxable income for the year was below Rs 2 lakh but the bank deducted tax at source on your interest amount, you can claim a refund by filing your tax return. Another instance is when you have a capital loss that can be set-off against capital gains. Tax may have been deducted at source on the capital gains, but you can set-off (or carry forward) capital loss against the gain and lower your actual tax liability. In such cases, you would need to file a tax return.

What is the last date for filing India tax returns?

The last date to file returns for the financial year 2013-2014 was July 31st 2013. However, remember the following:
- If you do not have any tax payable (that is all your tax has been deducted at source), you can still file your tax return by 31st March 2014 without any penalties

- If you do have tax payable, you can still file your returns by 31st March 2014 but you will be charged an interest of 1% per month for every month of delay starting from 31st July 2013 till the time you file your tax returns

- If you do not file your tax returns even by the 31st of March 2014, you may be charged a penalty of Rs 5,000 for every year of delay.

Should you have paid advance tax?

As per the provisions of the Income Tax Act, you must pay advance tax in three installments during the year in case the tax payable, after adjusting TDS is likely to be Rs 10,000 or more. "There are interest implications in case of default in payment of any installments or lesser payment of advance tax. The interest is generally 1 percent per month for the default amount and extends till the date of payment. Therefore, NRIs should evaluate if they were liable to pay advance tax and whether the same was paid in time. If not, they would need to calculate the interest for default and deposit the same before filing the tax return," explains Vineet Agarwal, Director, KPMG India.

What is the best way to file your returns?

There are 3 ways in which you can file your tax returns. You can do it yourself using online e-filing portals. In fact, from financial year 2012-2013 onward, the income tax department has made it mandatory to e-file returns for in case your taxable income is over Rs 5 lakh. The income tax department provides a free method to upload your tax return online. If you are looking for a more user friendly approach, paid e-filing portals might be a good choice. Many of these paid service providers do offer special packages for NRIs.

If you are not comfortable doing the entire filing by yourself, you can choose to go to assisted preparers. You can get professional advice along with help with filing your tax return.

Lastly, you can opt for the traditional route where your regular chartered accountant with whom you have a long term relationship with files your tax return.

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