Procedures for Income Tax Filing for NRIs in India By Athulya - October 10, 2018 Last Updated at: Oct 27, 2020 6926 Accordingly, visiting NRIs whose total income (which is defined as taxable income) in India is up to Rs 15 lakh during the financial year will continue to remain NRIs if the stay does not exceed 181 days, as was the case earlier. The Indian parliament passed the Finance Bill 2020 on 23rd March, with some changes to the residential status of the NRIs. It has reduced the mandatory residential period of the NRIs from 182 days to 120 days. This will be applicable for NRIs with a total Indian income of Rs 15 lakhs a year. Under the Indian tax regime, Non-resident Indians (NRIs) are subjected to tax on their income, which occurs or arises in India or income that is received or deemed to be received in India. As such, there is an obligation to compute and file their tax returns in India, if applicable. Residential status in India It is necessary for the NRIs to determine their residential status every financial year. This depends on the number of days stay as prescribed under Section 6 of the Income Tax Act 1961 (IT Act). Under the Income Tax Act, an Indian citizen who leaves India for the employment purpose or an NRI who comes to India on a visit can stay up to 181 days in India, without losing his non-residential status. The day of the arrival, as well as the day of the departure, is considered as ‘stay in India’. Reconciliation of income and taxes Do reconcile the advance taxes paid or TDS credit, in the tax return, with advance tax or TDS credit, if any paid reflected in Form 26AS. Ask Legal advice on Income tax Taxable income The incomes that NRIs are liable to the tax in India include interest on the bank accounts held in India, capital or dividend gains from the shares held in India, rent from the house property, etc. Further, the income shall be deducted by the eligible deductions that are present, such as deduction under section 80C. Tax liability Tax liability will be determined on the basis of the slab rates applicable to the individuals. Basic exemption limit for all the NRIs is Rs.2.5 lakh, before deductions or exemptions. Double Taxation Treaty Benefit (DTAA) In case if the NRI’s income is taxable in India as well as in the foreign country, aid under the Double Taxation Avoidance Agreement (DTAA) can be claimed. Relief under the DTAA is provided depending on the type of income (income may be entirely exempt, or may be taxable at a lower rate). If the income is taxable even under the DTAA, NRIs need to pay tax in India and claim the credit of such taxes paid against the tax liability in their country of residence subject to some conditions. For claiming relief, Tax Residency Certificate (TRC) of the country where NRI is tax resident, is necessary. Selection of the ITR From Financial Year (FY) 2017-18, NRIs are required to file the returns in ITR 2, in all cases, other than those who are having business income. NRIs who have business income must file returns in ITR 3. ITR 1 is non-available for the non-residents. NRIs need not quote Aadhar for filing ITR. Exempt income details Report exempt income such as interest, dividends on FCNR/NRE deposit, long-term capital gains on listed securities, eligible gifts received, interest on tax-free bonds etc. even though it has no tax impact under the schedule of Exempt Income. Admission of bank account details NRIs, who are not requesting the refund, or NRIs who are requesting the refund but have a bank account in India, are not required to provide details of their foreign bank account in the return of income. However, NRIs who are requesting the income-tax refund and do not possess a bank account in India may provide details of one foreign bank account for the issuance of the refund. Providing details of assets and liabilities in ITR NRIs with the total income of above Rs.50 lakh are obligated to report the details of movable as well as immovable assets located in India and the equivalent liabilities under the schedule of assets and liabilities (Schedule AL) in the ITR. Verification of ITR After the uploading of ITR, it should be verified within 120 days. Returns which are not verified will be considered as invalid (as if the return was never filed). Choice of e-verification is available through the net banking account in India. Verification is allowed to be done physically by sending signed ITR V (acknowledgment) to the Income-tax CPC, Bengaluru. To know more: Click here You should also read: Tax Implications On NRI Buying Property In India What Are The Taxation Rules For People With Dual Citizenship?