Tax Filing for NRI's

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Tax E-Filing For NRI’s

A. If NRI’s gross total income is more than Rs 2,50,000, before allowing any deductions (under section 80), you must file an income tax return in India. While resident senior citizens and super senior citizens enjoy higher exemption limits, maximum exemption limit of Rs 2,50,000 is fixed for an NRI irrespective of his or her age.

B. For estimating this gross total income, a resident has to include all the incomes earned by her anywhere in the world, while a non-resident’s gross total income for paying taxes in India only comprises income which is earned by them in India.

C. Following are the incomes a non-resident is taxable for in India-

SALARY- Income from salary will be considered to arise in India if your services are rendered in India. So even though you may be an NRI, but if your salary is paid towards services provided by you in India, it shall be taxed in India.

HOUSE PROPERTY - If the NRI owns a house property situated in India such income is taxable in India.

CAPITAL GAIN - Any capital gain on transfer of capital asset which is situated in India shall be taxable in India. Capital Gains on investments in India in shares, securities shall also be taxable in India. If you sell a house property and have a long-term capital gain, the buyer shall deduct TDS at 20%. However, you are allowed to claim capital gains exemption by investing in a house property as per Section 54 or investing in Capital Gains Bonds as per Section 54EC.

PGBP- Any income earned by an NRI from a business controlled or set up in India is taxable to the NRI

    OTHER SOURCES- Similarly income earned from deposits held in India must be included in your income.

  • If the sum total of these incomes exceeds Rs 2,50,000 the NRI must file a tax return in India.
  • Another scenario where an NRI must file a return is when the NRI is seeking a refund. This can happen when Tax Deductible at Source (TDS) has been deducted on the NRIs income but her gross total income is below the Rs 2,50,000 threshold. A refund can only be sought by e-filing your tax return.
  • Where an NRI has losses to carry forward a return must be filed by her.
  • When an NRI invests in certain Indian assets, he is taxed at 20%. If the special investment income is the only income the NI has during the financial year, and TDS has been deducted on that, then such an NRI is not required to file an income tax return.

    D. Tax exemptions for NRIs- Following income of NRIs is Tax-Free :

  • Interest on NRE/FCNR (B) account.
  • Interest on government issued savings certificates, notified bonds.
  • Dividends from shares of domestic companies.
  • Long term capital gains from listed equity shares and equity- oriented mutual funds.

E. Tax deductions for NRIs All income tax deductions normally extended to residents, except the ones mentioned below, apply for non-residents.

Deductions not Available for NRIs Applicable I-T Section
Health Insurance Premium for Senior Citizens 80D
Medical Treatment of Disabled Dependents 80DD
Medical Treatment for Specified Ailments 80DDB
RGESS- Equity Investments 80CCG
Disability 80U

    F. Deductions under section 80C- Most of the deductions under section 80 are also available to NRIs. Maximum deduction of up to Rs. 1,50,000 is allowed under section 80C from gross total income for an individual. Of the deductions under Section 80C, those allowed to NRIs are:

  • Life Insurance Premium Payment: The policy must be in the NRI’s name or in the name of their spouse or any child’s name (child may be dependent/independent, minor/majo r, or married/unmarried). The premium must be less than 10% of sum assured.
  • Children’s Tuition Fee Payment: Tuition fees paid to any school, college, university or other educational institution situated within India for the purpose of full time education of any two children (including payments for play school, pre nursery and nursery).
  • Principal Repayments on loan for purchase of house property: Deduction is allowed for repayment of loan taken for buying or constructing residential house property. Also allowed for stamp duty, registration fees and other expenses for purpose of transfer of such property to the NRI.
  • ULIPS or Unit Linked Insurance Plan: ULIPS sold with life insurance cover for deduction under Section 80C. Includes Contribution to Unit Linked Insurance Plan of LIC Mutual Fund e.g. Dhanraksha 1989 and contribution to Other Unit Linked Insurance Plan of UTI.

  • Other allowable deductions-

  • Deduction from house property income for NRIs-NRIs can claim all the deductions available to a resident from Income from House Property for a house purchased in India. Deduction towards property tax paid and interest on home loan deduction is also allowed. You can read about house property income in detail here.
  • Deduction under Section 80D-NRIs are allowed to claim deduction for premium paid for health insurance. This deduction is available up to Rs.20,000 for senior citizens and up to Rs. 15,000 in other cases for insurance of self, spouse and dependent children. Additionally, an NRI can also claim a deduction for insurance of parents(father or mother or both) up to 20,000 if their parents are senior citizen and Rs. 15,000 if the parents are not senior citizens. Therefore, an NRI will be able to claim a maximum deduction of Rs. 40,000 under this section. Beginning FY 2012-13, within the existing limit a deduction of up to Rs. 5,000 for preventive health check-ups is also available.
  • Deduction under Section 80E-Under this section, NRIs can claim a deduction of interest paid on an education loan. This loan may have been taken for higher education for the NRI, or NRI’s spouse or children or for a student for whom the NRI is a legal guardian. There is no limit on the amount which can be claimed as a deduction under this section. The deduction is available for a maximum of 8 years or till the interest is paid, whichever is earlier. Deduction is not available on the principal repayment of the loan.
  • Deduction under Section 80G-NRIs are allowed to claim deduction for donations for social causes under Section 80G.
  • Deduction under Section 80TTA -Non-resident Indians can claim deduction on income from interest on savings bank account up to a maximum of Rs. 10,000 like Resident Indians. This is allowed on deposits in savings account (not time deposits) with a bank, co-operative society or post office and is available starting FY 2012-13.

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