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Residents with Foreign Income Tax Return Filing

Are you an Indian resident with foreign income? Your global income is taxable in India. You must report all your foreign assets in your Income Tax Return.

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How does income tax return filing online work for you?

This form contains the information of the income tax paid by an assessee, filing of which helps
in easy acquiring of loans, visa application and also helps avoid penalties.

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Residents with Foreign Income Tax Return Filing

We all know that Indian Economy is based on taxes collected from the people of India. NRI Taxation under the Indian Income Tax Act, 1961 refers to those earning outside their nation of origin. The income tax laws and incentives granted to them vary significantly from those available to Indian residents.

India's income tax laws are enacted by the Government, which maintains a tax on the taxable income of all persons, firms, HUFs, corporations, Limited Liability Partnership, associations of persons, local authorities, and every other artificial legal entities who are liable. Taxpayers must understand the ITR legal laws and obey certain laws each financial year when filing their Income Tax Returns (ITRs).

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Benefits of tax treaties

When a person is a tax resident of one country but has a source of income from another nation, then there may be complexities. Tax treaties allow for the same profits not to be paid twice. Tax treaties generally state that the nation from which the income is produced has the right to tax it.

Double taxation can be prevented in two ways – either the non-tax residence country prohibits the income received in the foreign country, or the tax residence country provides a foreign tax credit for the taxes paid in another country. India has signed tax treaties with hundreds of countries, including the United States, the United Kingdom, Canada, Australia, and Germany, which are popular destinations for Indians.

For example, if an expatriate is a citizen of the U.S., he/she must pay tax on the basis of global income in the U.S. (this will include revenue source tax on India).

However, he/she will get a foreign tax credit for taxes paid in India and claim tax-deferred at source against fixed deposits in a bank in India. This would decrease the outgoing tax of the USA

Checklist eligibility for filing Income Tax Returns (ITR)?

According to the Income Tax Act, income tax only needs to be paid by the individuals or businesses who/which fall under the following income brackets.

  • Individuals below the age of 60 and have a total income exceeding Rs 2.5 lakh for a financial year.
  • Senior citizens (aged 60-79), who have a total income exceeding Rs. 3 lakh, as well as super senior citizens (aged 80 and above) where the cap is Rs. 5 lakhs. One should also remember that the total sum of income should be measured in the deductions specified under Sections 80C to 80U and also other exemptions under Section 10 before taking it into account.
  • All licensed businesses that earn income, irrespective of whether or not they have made any profit over the year.
  • Everyone who requires a refund on the tax deducted / income tax where they have paid the excess.
  • Individuals with properties or companies having financial interests situated outside India.
  • International companies enjoying the advantages of the Treaty on transactions done in India.
  • NRIs in India who earn more than Rs. 2.5 lakh in a single financial year.
  • The tax rules while earning abroad

    Indians who are on deputation overseas or have settled overseas either by obtaining a permanent residency such as a green card in the US or by gaining a foreign country's citizenship, are required to be aware of their tax liability in India.

    Recently gathered information on income tax returns (ITR) from non-residents of foreign bank accounts created uncertainty about whether India was taking possible measures to tax global income.

    The Central Board of Direct Taxes (CBDT) eventually explained that sharing this information was optional. It is to be noted that in those cases where individuals did not have a bank account in India, a refund scheme was encouraged.

    How to determine tax based on residential status?

    An Indian living abroad is typically referred to as an Indian Non-Resident (NRI). The relation is to the term 'tax resident' or 'non-resident' under the tax laws of India. The home country makes no estimate of the taxability.

    For example, a UK citizen who works at a UK parent company's subsidiary in Mumbai may be a tax resident of India. An Indian who migrated to Australia on March 20 might be an NRI in, but he/she is likely to be a tax-resident of India for the fiscal year 2016-17.

    As provided for in the Income Tax (I-T) Act, the number of staying days in India decides an individual's tax residential status in India. In addition, this status decides which income can be taxed in India and what is not taxable. So knowing which category you fall into is crucial.

    Eligibility for Foreign Income Tax Return filing:

  • Indian residents working on-site, at client locations outside India
  • Indian residents who own a bank account or any other asset abroad
  • Foreign nationals who work in India, who earn a salary in India or have Indian assets *Indian Residents earning income from foreign entities
  • Documents Required

  • Form 26AS Tax Credit Statement
  • Details of income earned outside India
  • Form 16 from your company
  • Details of any Income earned in India
  • Bank statement if the interest received is above Rs. 10,000/
  • FAQs on Residents with Foreign Income Tax Return Filing

    How do I determine my residential status?

    Your Income Tax residential status is dependent on the number of days you spend in India. If you are a foreign national residing in India, you may be considered an Indian citizen for tax purposes, and likewise, if you are an Indian living abroad, you may be considered an Indian non-resident (NRI). Usually, you'll be considered a citizen if you're in India for 182 days or more in a fiscal year.

    During a financial year, if you work abroad and generate revenue, taxes on this income will be excluded outside India. If you are a resident Indian according to the income tax rules, the income you receive anywhere in the world is taxable for you in India.

    What is Income Tax Return?

    An Income Tax Return (ITR) is a form used by the Department of Income Tax to file details about your salary and tax. A taxpayer's tax liability is measured according to his or her earnings. A person or company must file tax returns before a specified date. If a taxpayer fails to meet the deadline, he or she will be allowed to pay a fine.

    Is filing an income tax return mandatory?

    As per the tax laws laid down in India, if your income is higher than the minimum exemption mark, then it is compulsory to file your income tax returns. For taxpayers the income tax rate is pre-decided. A delay in filing returns would not only draw late filing penalties but also negatively impact the travel chances of getting a loan or visa.

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