The short answer is No, you don't need to file the income tax returns in India if you have no income, but, rarely, you don't have income. You might not have a salary income because you are employed overseas, but you could have income as interest generated by bank fixed deposit, rental income generate by your flats in India, a royalty paid to you by your book published and sold in India, the dividend paid on your stock market investment in India. Many people think that they don't have income in India because they are working overseas but most of them have fixed deposits in India which they have made before moving to Overseas.
I also thought the same when I moved to overseas but little did I know that TDS was kept deducting on my fixed deposit and I was unknowingly paying thousands of Rupees as Income tax which I could have easily saved by just filing income tax return.
Though it's not mandatory for an NRI to file income tax in India, there are specific scenarios when NRI has to file income tax even if they don't have any salaried income or they want to get back the money which is deducted as TDS by your bank, Mutual Fund when they pay dividend, or your publisher like Amazon which deducted TDS when they pay you royalty.
Though it's not mandatory for an NRI to file income tax in India, there are specific scenarios when NRI has to file income tax even if they don't have any salaried income or they want to get back the money which is deducted as TDS by your bank, Mutual Fund when they pay dividend, or your publisher like Amazon which deducted TDS when they pay you royalty.
In this article, I'll share some essential details about Non Resident Income tax, which I think every NRI should know.
It's fundamental information, but I have seen many Non-resident doesn't know about it, especially the young breed of IT people who have just been on their first trip to the United States or Europe.
1) First thing first, you need to find your residential status for a given financial year because tax obligations and rules are different for residents and non-residents taxpayer in India. There are deductions which are only available to resident taxpayer also NRIs need to pay higher TDS than resident such as in the case of interest earned on NRO fixed deposits. Check out this post to find out your residential status for a given financial year.
2) NRIs don't need to file an income tax return in India. You should only require to file an income tax return if your total taxable income is greater than the basic exemption limit, i.e. 2.5 lacs in a given financial year without considering the deductions under section 80C and 80U. This 2.5 laces exemption limit is valid for current financial year but it can change, so you better check the current exemption limit. There are also an old and new scheme, you can choose the one which benefit you more.
3) While calculating your total taxable income for income tax purpose incomes earned from a tax-free instrument such as interest on NRE and FCNR deposits as also long-term capital gains from equity and equity MFs, if any, will not be taken into consideration.
Essential details about NRI filing Income Tax in India
Here are some of the basic but essential information related to filing income tax in India. It includes details related to when exactly you need to file income tax, exemptions available to NRI, e.g. they are exempted from filing income tax if they only have investment income and TDS is already deducted. Though I always advise to file ITR and get the refund if investments are your only income in India.1) First thing first, you need to find your residential status for a given financial year because tax obligations and rules are different for residents and non-residents taxpayer in India. There are deductions which are only available to resident taxpayer also NRIs need to pay higher TDS than resident such as in the case of interest earned on NRO fixed deposits. Check out this post to find out your residential status for a given financial year.
2) NRIs don't need to file an income tax return in India. You should only require to file an income tax return if your total taxable income is greater than the basic exemption limit, i.e. 2.5 lacs in a given financial year without considering the deductions under section 80C and 80U. This 2.5 laces exemption limit is valid for current financial year but it can change, so you better check the current exemption limit. There are also an old and new scheme, you can choose the one which benefit you more.
3) While calculating your total taxable income for income tax purpose incomes earned from a tax-free instrument such as interest on NRE and FCNR deposits as also long-term capital gains from equity and equity MFs, if any, will not be taken into consideration.
This is the most common doubt among NRIs who have invested a good amount of money on NRE fixed deposits. So if you only have income in terms of interest earned on NRE fixed deposit, then you don't need to file income tax returns in India because interest earned on NRE fixed deposit is not taxable in India.
4) NRIs don't need to file an income tax return if your taxable income consisted only of investment income, e.g. interest on NRO fixed deposit and/or short or long term capital gains income and if tax has been deducted at source from such income, but remember you cannot claim the TDS back. Many times you can save that tax by filing an income tax return and making some tax-saving investment, e.g. buying equity-linked mutual funds.
5) An NRI must file the income tax return in India when he wants to get a tax refund against the TDS, or he wants to carry forward losses so that they can be adjusted later. Not filing my tax return was the biggest mistake I did and I only realized after losing a lot of money on TDS. If you have a fixed deposit which is not NRE fixed deposit then you should file your Income Tax return in India and get back your hard earned money which is deducted as TDS.
4) NRIs don't need to file an income tax return if your taxable income consisted only of investment income, e.g. interest on NRO fixed deposit and/or short or long term capital gains income and if tax has been deducted at source from such income, but remember you cannot claim the TDS back. Many times you can save that tax by filing an income tax return and making some tax-saving investment, e.g. buying equity-linked mutual funds.
5) An NRI must file the income tax return in India when he wants to get a tax refund against the TDS, or he wants to carry forward losses so that they can be adjusted later. Not filing my tax return was the biggest mistake I did and I only realized after losing a lot of money on TDS. If you have a fixed deposit which is not NRE fixed deposit then you should file your Income Tax return in India and get back your hard earned money which is deducted as TDS.
The thing is that you cannot late file your return if you just want refund after one year so make sure you do it on time. See this post to learn more about when does NRI need to file income tax in India.
6) The financial year in India runs from 1st April to 31st March. So, the financial year 2023-24 means the period between 1st April 2023 to 31st March 2024. So, if your income during this period is more than 2.5 lacs before any deduction under section 80C and 80U, then you need to file income tax returns.
7) When do you have to file the return if required to pay income tax? You need to file the returns before the last day of filing, 31st July of every year, e.g. 31st July 2024 for the financial year 2023-24. That's why it's important to know the last date for filing income tax returns in India. Otherwise, you need to pay the penalty. .
The last date to file income returns for any financial year is 31st July next year, e.g. for the current financial year the last day of income tax return filing would be is July 31st this year. However, If you do not have any income tax payable, i.e. all your taxes have already been deducted at source from bank or broker then you can still file the income tax return by 31st March next year without any penalties.
On the other hand, If you do have some tax payable depending upon final calculation than also you can still file your income tax returns by 31st March next year, but you need to pay the penalty. You will be charged an interest of 1% per month for every month of delay starting from 31st July this year till the time you file your tax returns.
6) The financial year in India runs from 1st April to 31st March. So, the financial year 2023-24 means the period between 1st April 2023 to 31st March 2024. So, if your income during this period is more than 2.5 lacs before any deduction under section 80C and 80U, then you need to file income tax returns.
7) When do you have to file the return if required to pay income tax? You need to file the returns before the last day of filing, 31st July of every year, e.g. 31st July 2024 for the financial year 2023-24. That's why it's important to know the last date for filing income tax returns in India. Otherwise, you need to pay the penalty. .
The last date to file income returns for any financial year is 31st July next year, e.g. for the current financial year the last day of income tax return filing would be is July 31st this year. However, If you do not have any income tax payable, i.e. all your taxes have already been deducted at source from bank or broker then you can still file the income tax return by 31st March next year without any penalties.
On the other hand, If you do have some tax payable depending upon final calculation than also you can still file your income tax returns by 31st March next year, but you need to pay the penalty. You will be charged an interest of 1% per month for every month of delay starting from 31st July this year till the time you file your tax returns.
Though you can also file your tax with late fee until 31st December and that is the absolute last date if you want to claim refund
8) You should take advantage of tax deductions and exemptions applicable to NRIs, e.g. you can reduce almost 1.5 lakh from your taxable income by taking advantage of deductions available under section 80C. Here are some of the tax deductions allowed for NRIs under section 80C:
i) Life Insurance Premium Payment
If you have a LIC policy or life insurance policy from any other insurer, e.g. Max Life, ICICI Lombard or Bharti Axa then you can claim the premium paid against section 80, provided you meet the following conditions :
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/major, or married/unmarried)
The premium must be less than 10% of the sum assured.
ii) Investment in ELSS, e.g. Birla Sun Life tax-saving fund, ICICI Prudential tax saving funds
iii) Premium paid against ULIPs
You can also claim tax deductions up to 1.5 lacs against the premium paid for ULIPs or Unit Linked Insurance Plans.
iv) Premium paid against the health insurance for family members, including parents. NRI can buy health insurance for his family, e.g. spouse, children, and parents and claim money under section 80D, see here to learn more about the tax benefit of buying health insurance in India.
9) Take advantage of DTAA (Double Tax Avoidance Agreement)
If you are an NRI and end up paying tax on same income on two countries i.e foreign country where you are currently staying and earning and India due to your residential status for tax purpose turns out to be resident for a given financial year than you can take advantage of DTAA to claim refund on already paid tax on any of the two country. This mostly happens with IT professionals who are on short visits to foreign countries like UK and USA.
DTAA stands for Double Tax Avoidance Agreement is an agreement between two countries to avoid taxation of the same income in both the countries. If India and the foreign country you are currently staying have DTAA signed between them and If you have earned an income which is taxable in a foreign country and has to be offered to tax in India then you should take help of CAs to take benefit of DTAA.
That's all about when does NRIs need to file an income tax return in India and what they should know about filing income tax and deductions and exemptions applicable to NRIs. You need not file an income tax return if you don't have any income, but you have to if you have any income outside investment income, e.g. rentals.
8) You should take advantage of tax deductions and exemptions applicable to NRIs, e.g. you can reduce almost 1.5 lakh from your taxable income by taking advantage of deductions available under section 80C. Here are some of the tax deductions allowed for NRIs under section 80C:
i) Life Insurance Premium Payment
If you have a LIC policy or life insurance policy from any other insurer, e.g. Max Life, ICICI Lombard or Bharti Axa then you can claim the premium paid against section 80, provided you meet the following conditions :
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/major, or married/unmarried)
The premium must be less than 10% of the sum assured.
ii) Investment in ELSS, e.g. Birla Sun Life tax-saving fund, ICICI Prudential tax saving funds
iii) Premium paid against ULIPs
You can also claim tax deductions up to 1.5 lacs against the premium paid for ULIPs or Unit Linked Insurance Plans.
iv) Premium paid against the health insurance for family members, including parents. NRI can buy health insurance for his family, e.g. spouse, children, and parents and claim money under section 80D, see here to learn more about the tax benefit of buying health insurance in India.
9) Take advantage of DTAA (Double Tax Avoidance Agreement)
If you are an NRI and end up paying tax on same income on two countries i.e foreign country where you are currently staying and earning and India due to your residential status for tax purpose turns out to be resident for a given financial year than you can take advantage of DTAA to claim refund on already paid tax on any of the two country. This mostly happens with IT professionals who are on short visits to foreign countries like UK and USA.
DTAA stands for Double Tax Avoidance Agreement is an agreement between two countries to avoid taxation of the same income in both the countries. If India and the foreign country you are currently staying have DTAA signed between them and If you have earned an income which is taxable in a foreign country and has to be offered to tax in India then you should take help of CAs to take benefit of DTAA.
That's all about when does NRIs need to file an income tax return in India and what they should know about filing income tax and deductions and exemptions applicable to NRIs. You need not file an income tax return if you don't have any income, but you have to if you have any income outside investment income, e.g. rentals.
You should also file income tax returns if you want to claim the money back which is deducted as part of TDS or you want to carry forward the losses you made on your Equity investment to be adjusted next year.
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 tax residential 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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