When do NRIs have to File Tax Returns in India?

Non-resident Indians, commonly referred to as NRIs, must pay their taxes and timely file tax returns if they have any asset or source of income in India. The returns must be filed in full compliance with the provisions applicable on Indians residing in foreign countries. NRIs must pay the mandatory taxes if their income received in India exceeds INR 2.5 lakhs. Such individuals might have to file for returns depending upon various aspects like nature of income, period of stay, etc.

Residential Status for Income Tax Purposes

The residential status for tax purposes does not require you to have a certain citizenship. The individuals that need to pay taxes are identified based on their physical stay in India. As per Section 6, Income Tax Act, 1961 the following terms determine an NRI’s residency for tax purposes in India:

• When someone stays in India for more than 182 days in a certain financial year, they must pay their taxes and file tax returns.
• When someone stays in India for less than 182 days but more than 60 days and have a cumulative stay in the preceding four years of more than 365 days, they shall be considered as a resident for tax purposes.

Exception: If an individual is an Indian citizen with an income from Indian sources that exceeds INR 15 lakhs and are not liable to pay taxes in any other country, they shall be deemed as a resident as per the tax laws.

This makes it imperative to learn about your residential status as per the Income Tax Act, 1961 before filing their tax returns.

When Should NRIs File Income Tax Returns (ITR) in India?

Once an NRI is clear about their residential status as per the above-mentioned norms, they should file an income tax return in India if they have any source of taxable income in the country. However, there are a few exceptions that must be kept in mind.

Income through Salary

If any individual earns salary more than INR 2.5 lakhs from any Indian entity, they shall be liable to file income tax return under Section 139 (1).

Income under House Property

If any individual earns any rental income from a property in India and such income along with other sources like salary and investments sums up to be more than INR 2.5 lakhs, they shall be liable to file income tax returns as per Section 139 (1).

Income from Other Sources

If any individual earns income through investments or any other source not mentioned above and is more than INR 2.5 lakhs, they are liable to file income tax returns as per Section 139 (1).

Exceptions

• Dividends under Section 115A

If the total income of any NRI consists of only dividends or dividend income along with the income mentioned in (B) and (C) below and TDS has been deducted from such income, it may not be necessary to file a return of their income

• Interest Income under Section 115A

If the total income of any NRI consists only of income from investment or interest along with the income mentioned in (A) and (C) above and TDS has been deducted from such income, it may not be necessary to file a return of their income.

• Royalty or Fees for Technical Services under Section 115A

If the total income of any NRI consists only of Royalty or fees for technical services or royalty along with the income mentioned in (A) and (B) above and TDS has been deducted from such income, it may not be necessary to file a return for their income.

• Investment Income under Section 115E

If the total income of any NRI consists only of investment income or income by way of long-term capital gains or both and TDS has been deducted from such income, it may not be necessary to file a return for their income.

Due Date for Filing ITR for NRIs

Under Section 139, NRIs must file their income tax returns on or before 31 July of the year following the year in which the individual has generated income in India. So, if an NRI had earned any interest on 24 October 2022, they must file returns on or before 31 July 2023.

Procedure to File Income Tax Return for NRIs

• NRIs must obtain a valid Permanent Account Number (PAN) by making an application in Form-49A.

Documents Required with Form-49A Identity Proof (Copy of Passport) Address Proof (Copy of passport, copy of bank account statement in country of residence or copy of Non Resident External (NRE) bank account statement)

• After obtaining a valid PAN, NRIs must register themselves on the e-filing portal (www.incometax.gov.in) using the credentials used for PAN.
• Returns can be prepared online on the portal itself. After completing registration on the portal, you have to login and go to the Income Tax Return tab under the e-File option.
• After adding all the details of income and deductions, ITR may be filed or submitted on the portal itself.
• Once filed, the ITR must be verified.

ITR can be verified through the following ways: e-Verify: An OTP shall be shared on the mobile number linked with the Aadhar Card or the mobile number linked with the bank account. Speed Post: After filing the ITR, an acknowledgement in the ‘Form-ITR V’ can be downloaded, signed by the NRI and sent to the Central Processing Unit of the Income Tax Department through Speed Post.

Conclusion

It is imperative for all taxpayers, both residents of India and NRIs, to file their income tax returns to avoid any potential penalties or interest that is imposed by the government. Furthermore, considering how extensive the process is for NRIs, they must be utmost cautious when filing ITRs and make sure to file them before the due date.