When do NRIs Needs to Pay Income tax In India?

One of the most common doubts 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 an income tax return in India, but now questions come when do NRIs need to file an income tax return in India? When it's mandatory for NRI to file an 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 an income tax return in India.

Apart from that, NRI should also file an income tax return in the 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 an 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 an 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 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 an 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.

Summary

Now you have a basic idea of when an NRI needs to file an income tax return in India and when he is not required to file an income tax return. Let's revise them for a 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 the house located in India, royalty, etc. Though interest earned on NRE fixed deposit is not included here.


NRIs are not required to file an income tax return in India:
- if you have no income in India, then you don't need to file an 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.

That's all about when do NRIs need to file an income tax return in IndiaThat's all about when do NRIs need to file an 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.

Other NRI Income tax articles you may like

• 3 Income tax benefits of opening NRI accounts in India
• 13 ways to save income tax in India
• 10 Income tax deductions and exemptions NRIs should know
• How NRIs can file their income tax returns online
• Is NRIs overseas income taxable in India
• How much TDS is deducted on NRO account?
• Is it mandatory to file income tax returns for NRIs?
• Is it mandatory for NRIs to declare foreign bank accounts on tax returns?
• How to determine the residential tax status of NRIs?
• 10 points NRIs should know about Income tax?
• Is Aadhaar card Mandatory for filing an Income tax return for NRIs?

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