ITR for NRI: Your Complete Guide to Filing Income Tax

If you are an NRI you have to file Income Tax Returns (ITR) in India only if their total income earned in India surpasses the basic exemption limit. However, any income earned in their residing country is not taxable in India. Here’s a step-by-step guide on how to file an ITR for NRIs

Step 1: Confirm if you have NRI Status

Are you an NRI? The Income Tax Act of 1961 provides clear guidelines for determining your status. You are considered a resident if:

1. you are in India for 182 days or more during a financial year OR 
2. If you have spent at least 60 days in the current year and a total of 365 days in the preceding four years. 

Step 2: Align Your Income & Taxes with Form 26AS

Make sure your income and taxes match with Form 26AS. The form 26AS is a tax report for you in India. It shows how much money you've earned and how much tax has already been taken out of that income.

This form is linked to your PAN (Personal Account Number), and it helps you check that you're paying the right amount of tax. You can see the Tax Deducted at Source (TDS) associated with your PAN. It's crucial to ensure that your reported income and deductions align with this form to avoid any discrepancies.

Step 3: Calculate Taxable Income and Assess Tax Liability

Your taxable income as an NRI may include various types of earnings such as capital gains from shares or property in India, rent, and interest from Indian bank accounts. Make sure that you claim deductions that are applicable to you to minimize your taxable income. Your tax liability will be based on the prevailing income tax slab rates.

Step 4: Utilize Double Taxation Treaty Relief

If your income is taxable in both India and another country, you might be eligible for relief under the Double Taxation Avoidance Agreement (DTAA). This agreement helps to ensure you're not taxed twice on the same income. Check the different types of incomes covered under the DTAA and follow the given guidelines to claim this relief.

Step 5: Choose the Appropriate ITR and Detail Exempt Income

NRIs are required to file returns using ITR, except when reporting business income, for which ITR 3 is used. Be sure to accurately report any exempt income such as Long-Term Capital Gains (LTCG) on listed securities, interest on certain deposits and bonds, and dividends.

Step 6: Report Your Bank Account Details

For NRIs claiming a tax refund without an Indian bank account, disclosure of one foreign bank account is mandatory. However, if you have an Indian bank account or are not claiming a refund, this step is not necessary.

Step 7: Detail Your Assets and Liabilities 

If your total income exceeds Rs 50 lakh, you are required to provide detailed information about your assets and liabilities in India. This step ensures comprehensive reporting and assists in accurate tax assessment.

Step 8: Complete Your ITR Verification

After filing your Income Tax Returns, remember to verify them within 120 days. Unverified returns are treated as invalid, potentially leading to legal complications. Verification can be done electronically through net banking or physically by sending a signed ITR-V form to the Income-tax Centralized Processing Center in Bengaluru.

Taxable Income for NRIs: What You Need to Know

Understanding the tax implications for Non-Resident Indians (NRIs) in India is essential for effective financial planning and compliance with Indian tax laws. Below is a guide to taxable income for NRIs.

1. Income from Salary

A. Salary Received in India

Tax Liability: Yes

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

Tax Rate: According to the applicable income tax slab.

B. Salary Earned in India

Tax Liability: Yes

Conditions: Salary earned for services rendered in India.

Tax Rate: According to the applicable income tax slab.

2. Income from House Property

Income generated from a property in India is subject to the prevalent tax rates. 

• All capital gains obtained through renting, selling, or leasing a property are taxable. 
• NRIs can avail of a 30% deduction on home loans taken in India and can claim deductions for principal repayment, registration fees, and stamp duty under Section 80C. 
• If a property is rented out to a tenant by an NRI, the tenant is entitled to deduct 30% tax and must complete Form 15CA.

3. Income from Other Sources

Tax Liability on Interest:

• Taxable: Interest on fixed deposits and savings accounts in Indian banks, and interest on NRO accounts.
• Non-taxable: Interest on NRE and FCNR accounts.

4. Income from Capital Gains

Both short and long-term capital gains and income from securities held by NRIs in India are subject to tax. Any gains from shares and capital gains on asset transfers in India are also taxable.

• 20% on Long-term capital gains.
• 30% on Short-term capital gains.

5. Investments

NRIs can enjoy certain tax benefits on their investment income in India. 

• When an NRI invests in specific assets in the country, they are subject to a 20% tax rate.
• However, if Tax Deducted at Source (TDS) has been subtracted from the investment income, they are not required to file tax returns. 
• Investments in securities issued by the central government, shares in Indian companies, and deposits with publicly listed companies are among the options that qualify for these tax benefits.

Here is a table showing NRI income sources which will be taxed and which aren’t

Nature of Income	Taxed	Not Taxed
Income which arises in India	✓
Income which is deemed to accrue or arise in India	✓
Income which is received in India	✓
Income which is deemed to be received in India	✓
Income accruing outside India from a business controlled from India or from a profession set up in India		✓
Income other than above (i.e., income which has no relation with India)		✓

Deductions for NRIs on Income Tax in India

Available Deductions for NRIs

• Section 80C: NRIs are entitled to claim deductions under Section 80C for specific investments and expenses. These include tuition fees for children, Unit Linked Insurance Plans (ULIPs), premiums for life insurance policies, and principal amount repaid on housing loans under Equity Linked Savings Scheme (ELSS).
• Section 80D: Premiums paid for health insurance policies qualify for deductions under Section 80D.
• Section 80G: NRIs can claim deductions for donations made to charitable organizations under Section 80G.
• House Property: Income arising from house property situated in India, property tax payments, and interest on home loans are eligible for deductions for NRIs.
• Section 80E: NRIs can avail deductions on the interest earned from student loans under Section 80E.
• Section 80TTA: Interest income on savings accounts is deductible up to Rs. 10,000 under Section 80TTA.

Deductions Not Available to NRIs

• Section 80CCG: NRIs are not eligible for deductions under Section 80CCG, which pertains to investments under the Rajiv Gandhi Equity Savings Scheme (RGESS).
• Sections 80U, 80DD, and 80DDB: Deductions under these sections, which are available for differently-abled individuals, do not apply to NRIs.
• Other Investments: Certain investment vehicles including the Senior Citizen Savings Scheme, National Savings Certificates (NSCs), 5-Year Post Office Deposit Scheme, and Public Provident Fund (PPF) are also not available for deductions to NRIs.

How NoBroker Legal Services Simplifies NRI Tax Filings?

NoBroker Legal Services will hel you simplify the filing process of  ITR for NRI by offering comprehensive tax-related assistance. Our seasoned team adeptly clarifies tax obligations, ensuring accurate and timely return filings. The variety of services provided includes efficient tax planning, meticulous tax preparation, seamless electronic tax filing, and steadfast tax compliance support. 

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