2. One of the most common doubt among
every new NRIs mind is whether they
need to file income tax returns in India
or not. As I told earlier that it's not
mandatory to file income tax return in
India, but now questions comes when
do NRIs need to file income tax return in
India? when it's mandatory for NRI to
file income tax return in India. I'll try to
answer these questions in this article.
First thing first, NRI needs to pay tax on
any income earned in India Similar to
resident taxpayers, the basic tax
exemption limit for NRIs are also
2,50,000 for the year 2015-16. It means
an NRI needs to file income tax returns
when their total income earned or
accrued in India is more than 2.5 lakh
(before any deductions e.g. investments
made under section 80C). So if any
NRIs income earned from rentals,
capital gains and interest on NRO fixed
deposits are more than 2.5 lakh than he
needs to file income tax return in India.
3. Apart from that NRI Banking should also file income tax return in
following cases:
•If he wants to get a tax refund for TDS deducted on NRO fixed
deposits
•If NRI has short term or long term capital gains from any investments
or assets, even when gains are less than 2.5 lakh INR. If NRI wants to
carry forward losses so they can be adjusted later.
•By the way, there is also a special case for NRIs on which he doesn't
need to file income tax return if income from short term or long term
capital gains is the only income and TDS has been deducted from it.
So, if you are only earning interest on fixed deposits and you are happy
with the TDS deducted, you are exempted from filing income tax return
in India.
4. Does overseas income of NRI
taxable in India?
If you know, tax liability depends upon your status on a given financial
year, you could still be a resident in the year you move abroad and in
that case, your global income will be taxable in India. For NRIs, global
income is not a taxable but any income earned in India is taxable In
India. See here to learn more about your tax liability if you are earning
overseas.
5. Does interest earned on NRE and FCNR fixed deposit are taxable in
India?
No, As I said earlier, interest earned on NRE fixed deposit is tax-free in
India, so is the interest earned on FCNR fixed deposits. As much I know
they are also not part of your taxable income in India e.g. you could
earn 5 lakhs INR in NRE fixed deposit but you don't need to file income
tax return. That's why no TDS is deducted on NRE fixed deposit
irrespective of how much interest you earn.
Same is true for FCNR term deposit as well, which is maintained in
foreign currency as opposed to INR. No TDS and no income tax on
interest earned there as well.
6. Summary
Now you have a basic idea of when an NRI needs to file income tax
return in India and when he is not required to file income tax return.
Let's revise them for quick review:
NRIs needs to file income tax returns in India when
- His total income earned in India is more than 2.5 lakh before any
deductions e.g 80C deductions. Income must be earned or accrued
from India e.g. interest on NRO deposits, rental income on a house
located in India, royalty etc. Though interest earned on NRE fixed
deposit is not included here.
7. NRIs are not required to file
income tax return in India:
if you have no income in India then you don't need to file
income tax return.
- If only income earned is via short term or long term capital
gains and TDS is already deducted.
- Only earning interest on NRE and FCNR fixed deposit.
8. That's all about when do NRIs need to file income tax return in
IndiaThat's all about when do NRIs need to file income tax return in
India. As I said, it's not mandatory but you need to know when you have
to. This is why it's also best to invest for NRI to open NRE account and
use that while sending money to India as that didn't add into their taxable
income.
