Saturday, March 19, 2016

When do NRIs need to Pay Income tax In India?

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.

Apart from that NRI 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.



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.




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.

Whe NRI don't need to file income tax in India


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.


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.

When does NRI needs to file income tax in India

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.


5 comments:

  1. When do NRI need to pay income tax in India? I understand that it's not mandatory for an NRI to pay tax in India, but let's say he has some income inform of dividends from Stocks and rental income from flats, then do they need to pay income tax?

    ReplyDelete
  2. Its not mandatory for NRI to file income tax return in India until his income through rentals and fixed deposit interest is more than basic exemption limit of 2.5 lakh for year 2015-16, but its good to file because you can claim your money back, which was deducted as TDS e.g. from interest earned in NRO fixed deposit.
    Source : Is it Mandatory for NRI to File Income Tax Return in India?

    ReplyDelete
  3. For the FY 2015-16,I,ve stayed in India till 15th Oct 2015 and then left for an employment opportunity abroad. Is my global income earned between 16th OCT'15 and 31st March 2015 taxable in India??
    Kindly suggest.

    ReplyDelete
    Replies
    1. @Satyansh, since you stayed only 167 days on overseas on financial year (days between 16th oct to 31st march), you will not be considered NRI for income tax purpose, hence your global income between 16th Oct 15 and 31st March 2015 is taxable in India. If you have paid the tax overseas you can claim the rebate via DTAA though.

      Delete
  4. Hello,

    I'm a NRI, I stay in Germany. I have a NRO acount in INDIA.
    Can my father/Friend deposit 9 lac in this account(This is a loan repayment amount). For this do i need pay Income tax, so i need to submit tax returns in India. when it is exempted .

    Please clarify.

    Thanks Srikanth

    ReplyDelete

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