Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: list of goods taxed at 4% :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ACCOUNTING STANDARD :: cpt :: TDS :: VAT RATES :: empanelment :: VAT Audit :: TAX RATES - GOODS TAXABLE @ 4% :: ARTICLES ON INPUT TAX CREDIT IN VAT :: articles on VAT and GST in India :: ACCOUNTING STANDARDS :: Central Excise rule to resale the machines to a new company :: due date for vat payment :: form 3cd
« News Headlines »
 Here's how to calculate tax payable on your capital gains
 Income Tax calculations for the financial year 2016-17
 CPE Events 17 October - 22 October 2016
 High Court raps I-T Department for wrong tax demand
  CBDT signs 5 advance pricing pacts with Indian taxpayers
 Finance ministry warns tax officials of action against GST protest
 Big changes for small units under GST
 Parliament’s winter session to begin on November 16 to expedite GST rollout
 Income-tax (27th Amendment) Rules, 2016 - 92/2016
 Announcement - Clarifications in Respect of MEF 2016-17
 Non-taxing GST apps to make filing income tax return less painful

NRIs' obligation to file tax return in India
February, 21st 2009

Arti Seth landed a job in Australia and is looking to settle there. As she goes about wrapping up matters at India, she enquired whether there was any tax angle to settle and if she could afford to forget about filing an India tax return once she is an NRI.

For most individuals, tax compliances begin and end with filing a tax return. The India Income-Tax law requires a return to be filed by every individual whose total income during the financial year exceeds the specified threshold limit.

It is not very different for NRIs, although certain beneficial rules do exist.

It is better to begin by explaining what the term NRI means in tax parlance.

Tax concepts, NRI, residency and income taxable in India

An NRI is a citizen of India or a person of Indian origin* who is not a resident in India. Residency for tax purposes is decided based on a persons physical stay in India. There are three conditions that could trigger non residency for tax purposes. First, when an individuals stay in India is less than 60 days in a particular tax year. Second when the stay exceeds 60 days but is less than 182 days and the cumulative stay in the four years preceding the year in question is less than 365. Finally, when an individual leaves India for taking up an employment outside India and his/her stay is less than182 days in the year of departure.

A resident and ordinarily resident (ROR) persons global income is taxable in India, while a non resident (NR) is taxed on income earned or received (or deemed to be so earned or received in India).

Let us say Arti qualifies as an ROR in the year of departure, her sources of income being remuneration from employment in India as well as Australia, and interest from her savings bank account. If her total income after claiming a deduction for any tax saving investments in India exceeds Rs 180,000, she would have to file a return of her income with the revenue authorities (the income threshold is limited to Rs 150,000 in the case of non resident women).

It is quite likely that her Australian salary may also be put to tax in Australia, thereby resulting in double taxation. The Indian Income-Tax law allows Arti to take recourse under the India-Australia Double Taxation Avoidance Agreement, also called a treaty. If Arti qualifies as a treaty resident of India in the financial year 2008-09, taxes paid in Australia will be permitted as a credit (or deduction) while computing the balance tax payable in India.

That brings us back to the necessity for filing a return of income in India. Among other factors, the Indian revenue authorities place reliance on the disclosures in the return of income in assessing whether a tax payer has accurately offered his income for tax.

Why file a return of income in India

The answer being law demands it. Additionally, there are certain benefits that are possible to claim only on the basis of filing a valid return of income, such as:

Losses of a particular financial year are permitted to be carried forward for being set-off against income of future financial years only when the return of income for the year of loss has been duly filed.

If Arti is a NR in India and her Indian income is also taxable in Australia then relief under the treaty may be claimed in Australia for the taxes paid in India. Such relief may be claimed in respect of doubly taxed income, by offering the return filed in India as proof of income subject to tax in India and taxes paid thereon.

If Arti is an ROR in India and her Australian income is taxable in India, then for the purpose of claiming treaty relief in India, she would have to file a return of income in India providing the details of the doubly taxed income and the taxes paid in Australia.

Refund of excess tax deducted at source may be claimed only by filing a return of income. Delayed filing of return attracts a penal interest at the rate of 1% per month on the balance tax payable. Additionally, a penalty of Rs 5,000 may be levied if the return is not filed within one year from the end of the relevant financial year.

The return must be filed on or before 31 July succeeding the financial year by an individual (due date being September 30 if the individual is a working partner of a firm whose accounts are required to be audited). If one has missed the bus, one does not need worry, as a belated return for financial year 2007-08 may be filed after the due date (being 31 July 2008) but before 31 March 2010 (or completion of assessment whichever is earlier).

Arti will be glad to note, however, that no return needs to be filed if as an NRI, her income taxable in India comprises only of investment income or income by way of long term capital gains or both, and tax has been deducted at source from such income (by the payer).

Having said this, Arti will need to understand the procedural nuances involved in filing her return in India while she remains outside India.

Procedural aspects of filing an NRIs return

The primary exercise for Arti would be to put together a file containing details of incomes, exemptions and taxes paid. Easier said than done, as these details may need to be collated from different sources. For instance, receipts to be obtained as proof of investments in insurance policies and proof of income and tax deducted at source to be obtained from the employer for salaries, from the bank for interest on savings account and from the buyer of the family house property in respect of the capital gains arising on sale.

Forms have been prescribed for different categories of income. Arti will have to file her return in Form ITR 2. Persons earning salary, interest, pension and income form agricultural activities would have to file a return in Form ITR 1 etc. Arti may even authorize any person to sign the return on her behalf as authorized representative.

A useful development in the recent years is the facility of online/e-filing of returns which helps timely filing. However, if Arti does not have a digital signature, she will have to adopt a combination of e-filing and physical submission of the return filed online within 15 days of e-filing.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Careers

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions