As per I-T department norms, non-resident Indians (NRIs), too, are subject to taxes on income, if such income is earned in India, or received or deemed to be received in India.
Thus, if NRIs have such sources of income, they are required to compute and file their ITRs.
If you happen to be a tax-eligible NRI, here's your guide to filing ITRs.
First and foremost, determine your residential status
First off, you must determine your residential status for the assessment year in question. This can be done based on the number of days spent in India, as prescribed under Section 6 of the Income Tax Act, 1961.
Rules dictate that an Indian citizen who left India for employment, or an NRI, can stay upto 181 days in India without losing their non-residential status.
Matching income and taxes with Form-26AS; evaluating taxable income
After confirming residential status, you should reconcile TDS credit or advance taxes paid with information reflected in Form 26AS to ensure there are no discrepancies.
Once done, evaluate your net taxable income. This can be done by adding up all sources of income earned in India, like bank interest, dividend, rent, royalty, etc., and subtracting all allowed deductions, as per I-T Department rules.
About determining tax liability, and Double Taxation Avoidance Agreement (DTAA)
Now, you have to determine your total taxable income based on prevailing tax slab rules. The basic exemption limit for NRIs is Rs. 2.5 lakh, before deductions or exemptions.
Additionally, in case an individual's income is taxable in India as well as their country of residence, tax relief under the Double Taxation Avoidance Agreement (DTAA) can be claimed, subject to specified rules.
About selection of ITR form; filing exempt income details
Once done, NRIs have to select the correct ITR form - ITR 2 applies to all cases except business income, which has to be filed via ITR 3.
Further, NRIs are required to report details of tax exempt incomes such as dividends, interest on NRE/FCNR deposit, long-term capital gains on listed securities, interest on tax-free bonds, eligible gifts received, and so on.
About claiming refunds, and disclosing assets
In case an NRI claims income tax refund, but does not have a bank account in India, they'll have to furnish details of their bank account(s) abroad for facilitating the refund.
Additionally, if an NRI's total income exceeds Rs. 50 lakh, they'll have to disclose details of movable and immovable assets held in India, plus corresponding liabilities, under Schedule AL in the ITR.
Lastly, verify your Income tax return
After the ITR has been uploaded, one should verify the same within 120 days of filing.
If not verified, the ITR will be considered invalid, which is equivalent to non-filing.
NRIs can verify submission of their ITR via e-verification through an Indian net banking account, or by sending a physical, signed copy of ITR-V to the I-T Department's Central Processing Centre (CPC) in Bengaluru.