Individuals who qualify as non-residents are mandatorily required to file a tax return in India if they have any income taxable in India by 31 July 2017

The due date for filing tax returns in India, for individual taxpayers, for the financial year 2016-17 (1 April 2016 to 31 March 2017) is 31 July 2017, except for those individuals who have earned business or professional income and are subject to tax audit reporting requirement in India.

Individuals who qualify as non-residents are mandatorily required to file a tax return in India if they have any income taxable in India. However, where the Indian income is limited to dividend and interest and the requisite taxes have been withheld on the same, non-residents are not required to file their tax returns.

The Indian tax authorities have simplified the process of filing tax returns over the years by making it electronic and paperless. As a first step, an account is required to be created on the income tax website (www.incometaxindiaefiling.gov.in) by providing the permanent account number (PAN) and other details.

An important point to note here is the linking of the Aadhaar number (unique identification number) with PAN on the income tax website and quoting the same in the income tax return.

The government of India had made it mandatory for all taxpayers to link their Aadhaar numbers with their PAN by 1 July 2017. However, this requirement is not applicable to foreign nationals and non-residents i.e. an individual who has not resided in India for a period or periods amounting in all to 182 days or more in the 12 months immediately preceding the date of application for enrolment. Thus, an Indian national needs to evaluate his period of stay in India to determine requirement of mentioning Aadhaar number in the tax return.

The next step is to choose the applicable form to be filled in. There are different forms available on the income tax website applicable to individual taxpayers. Form No. ITR-1 is applicable to individual taxpayers who earn income from salary, income from one property and income from other sources, but their total income does not exceed Rs50 lakh. Form No. ITR-2 is applicable to those who earn capital gains as well and their total income exceeds Rs50 lakh. Form No. ITR-3 is applicable to businessmen and professionals.

The form can be filled up after logging into the account or by downloading an Excel/Java utility. After downloading the utility, the form can be filled in offline mode and can be uploaded subsequently on the income tax website using a personal digital signature. If an individual does not have a digital signature, the form can be verified online using the Aadhaar number or net banking facility. Alternatively, the acknowledgement generated after online submission can be printed, signed and sent to Centralised Processing Centre in Bengaluru, India.

For taxpayers who earn more than Rs50 lakh, the details of specified assets held by them are required to be declared in their income tax returns. However, non-residents and not ordinary residents are required to declare only domestic assets (i.e. assets located in India) in their return. Such assets include immovable assets, jewellery, paintings, drawings, vehicles, shares and securities and insurance policies.

Before submitting the form online, it is advisable to verify ‘Form 26AS’, which can be downloaded from the income tax website and which reports all taxes withheld on income during the year. It also has details of income tax refunds, if any, granted by the income tax department during the year.

The government of India has been encouraging all taxpayers, whether residing in India or abroad, to file their tax returns on time. In case the due date is missed, the taxpayer has an option to file a ‘belated return’. The due date for filing a belated return is before the end of the relevant assessment year. Thus, for financial year 2016-17, the assessment year is 2017-18 and, therefore, the due date to file a belated return will be 31 March 2018.

In case any mistakes or errors are discovered later on in the tax return filed by an individual, then a revised return can be filed rectifying these errors. The timeline for filing a revised return is one year from the end of the assessment year. Therefore, the due date for filing a revised return for financial year 2016-17 will be 31 March 2019.

It is pertinent to note that in case the tax returns are not filed, the tax authorities may levy penalties for concealment of income, non-filing of returns, etc. Also, if tax is payable, a delay in filing of return attracts interest on delay in deposit of such tax amount. So, it’s better to be safe now, than sorry later.

Are non-residents required to pay tax in advance to Indian tax authorities?

As per Indian tax laws, tax is required to be withheld at source on payments that are chargeable to tax in India at the time such income is credited (salary taxed on payment) to the account of the payee or at the time of payment, whichever is earlier. If the estimated tax liability is over Rs10,000, post adjusting the tax withheld, the non-resident is liable to pay/deposit advance tax as specified under the Indian Income Tax Act. In other words, advance tax is equal to estimated tax liability as reduced by tax withheld at source. Law provides for levy of interest in case of non-deposit of taxes.

How are dividends received by a non-resident from an Indian firm taxed?

Dividend income received by a non-resident from shares held in an Indian company is exempt from tax. The dividends so distributed are subject to dividend distribution tax (DDT) in the hands of the Indian company.

What are the mechanisms for receiving funds from relatives in India in hour of need?

For facilitating payment of foreign exchange by residents, the central bank has formulated the liberalized remittance scheme (LRS). Under LRS, an individual can remit up to $250,000 per fiscal for any permitted current or capital account transaction or both. As regards receipt of funds from relatives, LRS provides that a resident individual can remit funds towards maintenance of close relatives abroad, as gift to a person residing outside India, etc. Foreign exchange can be remitted for medical treatment purposes.