How To File Income Tax Returns For NRI In India?

Filing the ITR will always be a very tiresome affair, especially given that many of the non-resident individuals have a source of income in India in addition to practicing their trade in other countries. NRI should therefore have a massive understanding of the tax laws as regards themselves when investing in the Indian market to meet set laws, statutes, ordinances, acts, decrees, ordinances, regulations, and policies that are applicable in NRI Taxation in India. NRI candidates are tax residents of India who file income tax returns as per the Income Tax Act of India, this article will help the candidate to know the procedure and some tips that can be beneficial to fill the income tax returns.

Understanding NRI Status

However, any individual who wants to file the income tax returns must first definitely know under which category they come – NRI or not under the Income-tax laws of India. The Indian Income Tax Act,1961 defines your residential status about tax in terms of the number of days you have been present in India in a particular financial year.

• You are known as an NRI if you have made a dwelling in India for less than 182 days in a financial year.
• However, if you have physically remained in India for a total of 182 days or more during the concerned FY, the Income Tax Law will treat you as a resident in India for that FY.

This classification is important because it depends on the residential status of an individual he or she will be charged in India.

Sources of Income Taxable in India

To begin with, you are an NRI and not all income which you would earn during your stay in the foreign land would be liabilities in Indian tax. Each income which is earned or received only in the Indian territory is only allowed to be taxed. Here’s a breakdown of the types of income that NRIs need to include in their tax returns: Let me beginning by explaining the different types of income that the NRIs has to report for filing the income tax returns:

1. Income from Salary: This means in India even if one is employed and earning his or her income in the form of wages or salary this income is taxable in India. Yet if for instance the salary is received from an Indian company for services worked some place else it maybe non-taxable.
2. Income from House Property: Income arising from house property situated in India is exigible to tax even if the rent receivable is remitted directly to a foreign bank account.
3. Income from Investments: Income obtained from interest of saving accounts, fixed deposits, and other savings in India are subjected to tax. Dividend received from Indian company are also taxable.
4. Capital Gains: The gains, which are derived from the sale of some fixed assets such as property, stocks or mutual bonds are tax compliant in India. The taxation of such gains depends on the time the investment was being held whether it was for the short term or the long term.
5. Income from Business or Profession: Any income derived from business undertaken in India as well as freelance professional practice is regarded as earned income an is liable for taxation.

Exemptions and Deductions Available to NRIs

The Indian law of taxation also restricts some reliefs and allowances to ‘NRIs’. Taking advantage of these can help reduce your overall tax liability:Using these can go a long way in minimizing the total taxes that you will be paying:

1. Section 80C: The NRIs can so take exemptions upto ₹1. Up to 50000/-under section 80 C to given investment instruments such as ELSS, ULIP and PPF if opened before becoming an NRI and payment of insurance premium among others.
2. Section 80D: Some of the forms that may be claimed under this section are; Exemption for health insurance premium paid on behalf of an individual, the spouse, and dependent children.
3. Section 80E: The interest which he pays towards the education loans that he has availed is eligible for a deduction in the total taxable income.
4. Section 80G: Also, section 80G state that one is allowed deductions for receipts of donations to certain charitable bodies.
5. Section 80TTA: In addition, NRIs are now permitted to deduct ₹10,000 for the interest that, they earned on savings account maintained in India Bank.

How to File Income Tax Returns as an NRI

Filing your ITR as an NRI involves several steps, which must be followed carefully to avoid errors and ensure compliance:To file one’s ITR as an NRI, one has to go through several procedures and once again, the process should be done correctly:

1. Determine Your Taxable Income: Each of these is then added to arrive at the total of Income Tax taxable income, by summing up all the income earned in India such as; salary, rents, interest and sale of assets, amongst others. To this you should deduct any exemptions and deductions that you will be in a position to claim.
2. Choose the Correct ITR Form: Section 208 of the income tax act apply to NRIs and In order to file their returns they have to use the right form of ITR. In general, the NRIs furnish ITR-2 or ITR-3 on the basis of the incomes which are recognised by them. ITR-2 has to be filed by Individuals having income from salary, house property and capital gains while ITR-3 has to be filed by income from business and profession.
3. Claim Double Taxation Relief: If you have global income and you have to file tax returns in both India and in some other country where you reside you can claim relief under DTAA between India and that country. This reduces instances whereby you will be liable to tax on the same income twice.
4. File Your Returns Online: NRIs are needed to submit their income tax returns only through the Internet with the help of the Income tax Department’s website for e-filing. The process is straightforward:
   • Log in to the e-filing portal.
   • Choose the relevant ITR form.
   • Fill in the required details, including your personal information, income details, and deductions.
   • Validate the information and submit the form.
   • E-verify your return using Aadhaar OTP, net banking, or other available methods.
5. Pay Any Tax Due: Each time you submit your return, there is a possibility that you will be sent a demand of more taxes to be paid. This can be done either on the online tax payment platform or through the under-listed banks.
6. Keep Documentation Ready: It is always advised not to throw the papers containing income tax return sections such as the ITR acknowledgment, form 16, 26AS, and all the related papers as it might be useful in the future. These document are very important if your return is picked up by the Income Tax Department for audit.

Common Mistakes to Avoid

Sure, doing ITR as an NRI is not that easy for a simple mistake can cost you a penalty or even make you get into a legal battle. Here are some common errors to watch out for:Here are some common errors to watch out for:

• Not Reporting All Income: Always declare all sources of income, no matter how little it would be. Some possible consequences are : penalty..
• Choosing the Wrong ITR Form: The problem of using the wrong ITR form is that your return could be turned down. It is also important to always verify the selected form.
• Missing the Deadline: Actually, the ITR can be filed for the Non-Resident Indians by July 31st of the assessment year. Late payment of the tax can lead to penalties as well as charges of accumulating interest on the unpaid tax.
• Not Claiming DTAA Benefits: If you are able to qualify for double taxation relief do so as it will help reduce your tax bill. The failure to do this comes within a danger of being associated with higher taxes amounts than are required.

Conclusion

Income tax returns as an NRI Taxation in India is very sensitive and one needs to be very much attentive and knowledgeable in the Indian tax system. Compliance to the guidelines laid down in this guide will help you to avoid hassles associated with filing of taxes. Also, it is necessary to pay attention to any modifications of tax legislation that may influence your filing. For any professional help and specific advice on taxes for NRI’s in India contact ME Maheshwari. Tax submission procedures and all related legal requirements can be confusing and our specialists will be glad to guide you through the whole process.