In India, Income Tax Return (ITR) filing for FY 2018-19 (i.e. Assessment Year 2019-20) is due (by July 31, 2019 for non-audit assessees). Hence, there are various aspects, which NRIs, Expats should be aware of. Here are certain points, which NRIs/PIOs (including Returned NRIs as well Migrated Abroad NRIs) and Expats must consider at the time preparation of their Income Tax Return:
Residential Status is key factor in determination of taxability of income in India. A person, who is an Ordinary Resident (OR), has to offer global income in the Indian ITR. However, in case of Not Ordinary Resident (NOR) and Non-Resident (NR), foreign income is not taxable in India and only Indian Income shall be offered for tax in India ITR. Also, NR and NOR need not to show their foreign Income in India ITR.
Receipt of Foreign Income in India
If NR or NOR receive their foreign source income directly in Indian Bank Account; the same shall be liable to tax in India.
Double Taxation of Income – Income arising in one country and person is resident of other country
This is a general situation, which arises for Foreign Residing NRIs and Expatriates Residing in India. E.g. if an NRI is residing abroad since long, and have some income in India (interest income, capital gain on mutual funds/shares sale, rental income etc). Similarly, an Expat residing in India since long and earning certain income (interest, dividend, rental etc) abroad. In these situations, NRI/Expat can seek the benefit of Double Tax Avoidance Agreement (DTAA) between respective two countries. As per DTAA, there can be special lesser rate of taxability in one country (i.e. Source Country) or taxes paid in one country (Source Country) can be claimed as Foreign Tax Credit in the other country (Resident Country). Here, utmost care need to be taken while making the calculations as well submitting the information in the ITR Form. In this case, information and document wrt foreign tax credit should be arranged as the ITR form specifically require various details wrt foreign tax payment (i.e. Tax Id No, Tax Payment Details, Country Code, Income On which Tax Paidetc).
Double Taxation of Income – A Person Being the Resident of Two Countries
In certain cases, a person may be resident in two countries e.g. if in the relevant fiscal year - An Indian citizen has migrated abroad for employment/business purposes (becoming NRI), An NRI has returned back to India (Returning NRI), A foreign citizen has come to India for business or employment (Expatriate). In this kind of situation, again, if there is a DTAA between two countries then as per Tie Breaker clause of the DTAA (generally article 4 of DTAA e.g. in Indo-US DTAA), it can be determined that in which country the person will be considered as Resident. And thereafter, accordingly tax treatment shall be given as mentioned in earlier para.
Permanent Account Number (PAN)
Though PAN is mandatory for various other purposes also, however, PAN is pre-requisite for the purposes of filing of ITR. Without PAN an ITR cannot be filed.
Foreign Assets and Bank Accounts
Ordinary Residents need to provide information about foreign bank accounts and assets in their ITR. Even if the OR is just signatory in the bank account outside India, the information needs to be submitted in ITR Form. In ITR Form, the information has been sought in detail. Hence, full information and document wrt foreign asset should be timely arranged by OR. This may be applicable to all NRIs who have returned back to India in recent years as well Expatriates working in India since last 2-3 years.
Details of Exempted Income and Reporting of Same in ITR Form
In the general kind of incomes, which NRIs earn in India, lots of incomes are exempt under the Income Tax Act Provisions e.g. Interest Income From NRE A/c, Interest Income From FCNR (B) A/c, Dividend Income From Mutual Funds/Shares, Long Term Capital Gain Income From Shares/Mutual Funds etc. Though these incomes are not subject matter of taxation, however, their reporting in the ITR Form is mandatory and important. Non-reporting of same may lead to some notice from IT Deptt later on.
Details of Deduction and Reporting of same in ITR Form
There are various deductions, which can be claimed from the Gross Total Income. Some of these deductions are, deduction u/s 80C (Insurance policy, ELSS, NSC etc), deduction u/s 80CCD (Pension Scheme), deduction u/s 80D (health insurance related), Donation u/s 80G, Saving Bank Interest Income u/s 80TTA etc. NRI, Expats should cautiously keep a documentation ready in relation to these deduction to make a correct claim in the ITR.
Payment of Taxes
Taxes due on the taxable income submitted in the ITR Form can be paid by means of TDS (i.e. Tax Deducted at Source by the Payer of income e.g. Banks in case of Interest Income etc), Advance Tax (i.e. Taxes paid by the person on various advance tax due dates). In addition to these, if there is any further balance tax payable, the same can be paid as Self-Assessment Tax before submitting the ITR, and the details of same shall be duly filled in the ITR Form.
Why To File ITR If Income is Less Than Taxable Limit
Filing of ITR is mandatory if total taxable income exceed the basic exemption slab (i.e. Rs 2.50 Lacs in case of individuals). However, if the total taxable income is within the exemption slab then ITR filing is not mandatory (section 139 of the Income Tax Act). Here is the need of understanding the importance of ITR Filing. Some of the important point for filing of ITR are: (a) Claiming refund of TDS (b) Keep a track record of ITR (c) To use it as a legal authentic govt document for the purposes of usage at various places e.g. VISA purposes (d) To report financial transactions undertaken during relevant FY (e) To report exempt income (f) To carry forward the losses (g) To avoid income tax notice for non-filing of ITR (h) To keep a transparency with the Income Tax Department about assets/residential status/income.
Correct Bank Account Details (Should Be NRO Bank A/c for NRIs)
In general,most of the incomes of NRIs are either exempt from tax or attract highest rate of TDS. Hence, most of NRIs ITR reflects a tax refund claim. Here, the important point is that to claim that refund back, there is a requirement of filling of Bank Account details in the ITR Form. Caution need to be taken care that Bank details are correctly filled up, and it should never be NRE A/c but should be NRO A/c in case of NRIs.
Income Tax Return Form
ITR forms have been specified according to the scope of income. Hence, scope of income as well ITR form need to be chosen correctly.
Compulsory E-filing of ITR
ITR can be filed electronically (online) only. In this case, ITR shall be prepared in the ITR Preparing Software and then .xml file (generated from software) shall be uploaded in the Income Tax Website (www.incometaxindiaefiling.gov.in).
Submission of ITR Filing Acknowledgement (ITR V) with Income Tax Deptt
On filing of online ITR, the acknowledgement (ITR V) is generated online. This acknowledgement (ITR V) needs to be submitted to Central Processing Center (CPC) Bangalore. Very important thing to be noted in this regard is that time period for submission of this ITR V is 120 days from the date of online filing of ITR, else the ITR submitted shall be considered null and void. Alternatively, e-verification can also be done.
Record of All Documents Wrt Income and Deduction shown in ITR
Once the ITR is submitted, it is very important to keep a record of all the documents, as the same would be of crucial importance in any future income tax proceedings as well for other purposes.
Above article will clarify various doubts of NRIs, Expatriates and Other ITR Filers in relation to Income Tax Return Filing In India such as:
- What are the steps that NRIs/Expatriates/Others should know/take in relation to filing of ITR in India?
- What are the important points and tips for NRIs/Expats ITR in India?
- Important Things to be considered in relation to filing of ITR in India by NRI/Expats?
- Steps for preparation of NRI/Expats ITR in India?
- Points for consideration in relation to NRIs/Expats ITR?
- Filing of ITR in India - What are the things/tips/points, which NRI/Expat should keep in mind?
- I am an NRI, looking for a CA or Tax Consultant for NRI ITR in Delhi in India?
- Whether to File an Income Tax Return in India or not?
- Whehter filinig of ITR in India is beneficial/compulsory?
- I am an NRI/Expatriate. What all I need to Know about an ITR Filing in India?