Am I Required to File My Income Tax Return in India?

You are an NRI making your living abroad but that does not absolve you of your obligations to file tax returns in India. July 31st is the last date for NRIs to file their Income Tax return in India. You need to be aware of it to avoid unnecessary last minute rush.

How to determine Tax Residency status?

You need to be well-aware of your residency status for tax purposes. You need to find out whether you are:

• Resident or
• Non-resident Indian (NRI)

You are considered an Indian resident for a financial year if you are in the country for 6 months (182 days to be more precise) or more in a financial year and as such you need to be careful about tax implication on salary earned outside India.

Or

An individual is in India for more than two months (60 days) in a financial year or lived for a whole year (365 days) or more during the last four years preceding immediately the current year

To be doubly sure if you are a resident or non-resident, you need to carefully check your passport and note the immigration stamps dates. Please note that the day you arrive and the day you leave are both included in calculation for stay in India.

What income of an NRI is taxable in India?

If you are citizen of India, your global income is taxable in India. If your status is ‘NRI,’ your income which you earn in India is taxable as per the country’s tax law.

Any income of an NRI that originates in India or is received in India is taxable here. Income that you receive or for that matter someone else receives on your behalf as salary in India is taxable. Therefore, if you are an NRI and your salary is directly transferred to an Indian account, you will be required to pay taxes as per the existing Indian tax laws. This income is taxed at the slab rate you belong to.

Some examples of income that will be taxed are as following:

• Salary income, (Earned in India)
• Rental income from property owned in India,
• Income from sale of securities and assets held in India.
• Income received from a house property in the country
• Interest and income earned from fixed deposits
• Interest earned from saving bank account(s) in India.
• Capital gains accrued on account of sale of assets in the country

Interest income from an NRO account (but not from an NRE and a FCNR account), deposits and debentures is taxable in India.

When filing becomes mandatory for NRIs?

If you are an NRI, you are required by law to file your returns under following circumstances.

The sum total of your taxable income from all sources (before claiming any deduction) exceeds the basic exemption limit of INR Rs.2, 50,000.

Budget 2016 has stipulated that gain on sale of securities held for more than 12 months and sold on a stock exchange, which is non-taxable, need to be included in calculation of total taxable income. This is applicable from 2016-17.