Step-by-step guide to file an Income Tax Return for NRI

Filing income tax returns as an NRI involves determining residential status, calculating taxable income, and comprehending the applicable tax laws and provisions. The simplified procedure will help you understand how to file an income tax return for an NRI with ease, ensuring compliance while living abroad. Adhere to specific guidelines to fulfil your fiscal responsibilities and contribute positively to India's economy.

Income tax for NRI

Non-resident Indians from any corner of the globe can file income tax returns online efficiently, as the process has been streamlined. As you learn how to file an ITR for NRI, you must be aware of the NRI income tax slab rates as per the default new tax regime, the optional old tax regime, and deadlines to ensure timely and accurate compliance.

NRIs have to forego certain exemptions and deductions and can pay tax at concessional rates under the default new tax regime under Section 115BAC.

Tax rates prescribed by the Annual Finance Act for the financial year 2023-2024 are:

• Under default new tax regime

• Under optional tax regime

It's crucial to note that surcharges and cess may also be applicable based on your income level. Additionally, the deadline for filing income tax returns for NRIs is generally the same as that for resident Indians, typically on July 31st of the assessment year, unless extended by the government.

Step-by-step guide: File income tax returns as an NRI

Here's a detailed step-by-step guide to assist you in filing income tax returns in India as an NRI:

Step 1: Determine the residential status in India: First, ascertain your residential status for the financial year to determine the extent of your tax liability in India. NRIs are typically taxed only on the income that is earned or accrued in India. The Income Tax Act defines 'Resident', 'Non-resident', and 'Resident but not ordinarily resident' – each with different tax implications. As per the FEMA guidelines, there is no penalty for not declaring your NRI status.

Step 2: Reconciliation of income and taxes with Form 26AS: This form is a consolidated tax statement that reflects all taxes deducted on your behalf and any taxes you may have already paid. It's essential to ensure that all your tax credits are accurately reflected in this form. Any discrepancy between your actual transactions and the entries in Form 26AS should be addressed before filing your returns.

Step 3: Ascertain taxable income and determine your tax liability: Calculate your total income earned in India, including salaries, interest from savings accounts, rental income, capital gains from property or shares, and other sources. Understanding the nuances of income categories and their applicable tax rates is crucial to this step.

Step 4: Claim double taxation treaty relief: If you reside in a country that has a Double Tax Avoidance Agreement (DTAA) with India, you may not have to pay tax twice on the same income. Check the provisions of the treaty to understand if you can claim relief under the DTAA and ensure proper documentation to support your claim.

Step 5: Select ITR and file details about exempt income: Choose the appropriate Income Tax Return (ITR) form based on the nature and amount of your income. NRIs usually file ITR-2 or ITR-3. Also, report any income that is exempt from tax under the Income Tax Act. Can an NRI file ITR-1? No, ITR 1 is primarily for residents who have income from salaries, one house property, other sources (interest, etc.), and have a total income of up to ₹50 lakh.

Step 6: Disclosure of bank account details: While filing your return, provide details of your NRI bank accounts. This is a mandatory disclosure under the income tax rules.

Step 7: Provide assets and liabilities details in ITR: If your total income exceeds ₹50 lakhs, you are required to disclose certain details of your assets and liabilities in your income tax return.

Step 8: ITR verification: Once you have filed your income tax return, the final step is to verify it. You can do this electronically through the e-verification process or by sending a signed copy of the ITR-V (acknowledgement) to the Income Tax Department.

Following these steps carefully, along with having all the documents required for an NRI income tax return, such as your passport, PAN card, income statements, bank statements, and investment proofs in order, can make the process of filing income tax returns in India for NRIs more straightforward and error-free.

Taxable income for NRIs

The scope of taxable income for NRIs is primarily limited to income earned or accrued in India. Here's a breakdown of the key income categories that are subject to tax for NRIs in India:

• Income from salary: Salary income is taxable in India if it is earned or received in India. This includes salaries paid for services rendered in India, even if the remuneration is paid outside the country.
• Income from house property: Any income from property located in India is taxable. This includes rental income or deemed rent from properties you own in India.
• Income from business and profession: Any income earned from a business controlled or set up in India is taxable.
• Capital gains income: Any profit or gain arising from the transfer of a capital asset situated in India is taxable. This includes gains from the sale of property in India and the sale of shares in Indian companies.
• Income from other sources: This includes interest income from deposits held in Indian banks or income from other investments in India. Notably, interest from NRE (Non-Resident External) and FCNR (Foreign Currency Non-Resident) accounts is not taxable.

Income tax exemptions and deductions for NRIs in India

Here’s a structured overview to help NRIs understand a variety of tax exemptions and deductions that significantly reduce their tax liability and offer financial benefits:

Also Read: Eligibility, types, & meaning of Non-resident Indian (NRI) Account

Conclusion

NRIs seeking a comprehensive banking solution need look no further. Axis Bank offers an array of NRI Bank Accounts tailored to the global Indian community, ensuring that managing finances across borders is both effortless and efficient. Whether you opt for an NRI Prime Savings Account, an NRE or NRO Savings Account, or specialized accounts like the Resident Foreign Currency Account, NRE Salary Account, or Mariner's Account, you're equipped with the flexibility to invest and save as per your unique needs.

With these robust features, Axis Bank stands out as a financial ally for NRIs, bridging the gap between international living and financial commitments back home.

FAQs

Q: Do I need to file my income tax return in India as an NRI?

A: Yes, if you are an NRI and your income in India exceeds the basic exemption limit of ₹2,50,000, you are required to file an income tax return in India.

Q: Can an NRI pay advance tax?

A: Yes, NRIs must pay advance tax if their tax liability on income earned in India exceeds ₹10,000 in a financial year.

Q: Is income from business taxable for NRI?

A: If the business is controlled or set up in India, its income is taxable for an NRI.

Q: When do I not need to file an income tax return?

A: You do not need to file an income tax return if your total income in India is below the taxable limit and no tax refund is to be claimed.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.