There is a general belief that NRIs do not have to pay any income tax in India and most NRIs neglect tax as something not affecting them.
In reality NRIs have tax exemption only for income generated from abroad. Even if you are an NRI, you are liable to pay income tax on whatever income you earn from India – for example, rent from property, profit from sale of assets or dividend from shares.
However, this is applicable only if your income in India crosses the basic exemption limit of Rs 2 lakh per year.
Who is an NRI ?
To determine if you are eligible for tax exemptions, you need to find out your residential status based on number days spent in India.
The Income tax department classifies an individual to be a non-resident when:
- You reside outside India for a period of 182 days or more during the relevant previous year [OR]
- You are not present in India for 60 days or more during the previous year and again for a combined total of 365 days or more during the previous 4 years prior to the previous year
What income is taxable ?
- Property rent : If you have rented out a property situated in India, you have to pay tax in India on the rent that it earns.
- Sales of assets : Capital gains on sale of assets located in India, is taxable.
- Shares and Mutual Funds : Capital gains in securities like shares and mutual funds.
- Bank Account Interest : Interest from bank accounts except NRE account. Even NRO accounts are taxable.
- Salary from India : Though you may be an NRI, if you worked in India for a part of financial year 2014-15 and earned salary, this salary will be included in your taxable income in India. If you are working for a foreign company and your services is rendered in India, you are liable to pay income tax.
In short, you have to sum up all the incomes which either originate in India or are received here. The tax slabs applicable to NRIs are the same as residents and can claim deductions if you are above 60.
The due date for filing returns by NRIs is 31 July. (Note : For 2015, the deadline has been extended to 31 August 2015).
The documents to be submitted include the passport to show the number of days spent outside India to qualify as an NRI. Besides this, the NRIs need to provide the statements for the demat accounts, for the transactions and bank accounts held in India, as well as the TDS certificates received from other parties.
The NRIs can file their tax returns online on the Income Tax Department e-filing portal. Alternatively, they can use other private, paid e-filing portals to do so, or even take the help of tax advisers.
Points to note
It is not necessary for an NRI to file tax returns if the total income during the relevant financial year consists only of investment income or long-term capital gains, or both, and the tax has been deducted at source from such income.