Saturday, June 24, 2017

Simple Guide to file your income tax returns Online in India

It's that time of the year again when every India taxpayer (including those who lives abroad) start to worry about filling your income tax in India. Like previous year, 31st July is the last date to file your income tax return in India. Everyone who earns an income in India is subject to income tax, including Indians living abroad or NRIs. Your income could be salary, pension or could be from a savings account that’s quietly accumulating a 4% interest. NRIs, who doesn't have any salary income in India may have to pay income tax if they are earning rental income from their house, flat, or any commercial property.

One more source of income which is taxable in India for NRIs is Income from Capital Gains i.e. income from the sale of a capital asset such as mutual funds, shares, house property, agricultural land. Apart from that income from other sources e.g. income from savings bank account interest, fixed deposits, and winning a lottery is also taxable in India. Most of the NRIs come under this category.

Income tax also depends on your age. These are separate tax brackets for people under 60 years and people those who are 60 years and older and those who are above 80 years.

Btw, you don't have to pay any income tax if you are making 2.5 lakhs per annum. You don't even need to file income tax return but it's good to file income tax return to get any refund on TDS deducted on your NRO fixed deposit.

Here is an easy guide to filing your income tax return, online or offline:

Income Tax Slabs and Tax Rates

For calculating total income tax, people's incomes are grouped into blocks called tax brackets or tax slabs, each tax bracket has a different tax rate which is decided every year on annual budget. If you missed on key income tax changes on budget 2017, here is a quick note of income tax slabs for both Resident Indian and NRIs for the financial year 2016-2017.

In India, there are four tax brackets each with an increasing tax rate, the first one is income up to 2.5 lakhs, which is also known as the exempted income limit for income tax. If you earn less than that, you don't need to pay tax and even don't need to file income tax return.

Simple Guide to file your income tax returns Online in India

The second tax bracket is income up to 5 lakhs, and the third one is income between 5 lakhs and 10 lakhs. The last tax bracket for income tax is for those who earn more than 10 lakhs per year e.g. senior software engineers, project managers etc.

How income tax is calculated?

People often misunderstand that if they earn let’s say Rs.10 lakhs, they will be paying a 30% tax on Rs.10 lakhs i.e Rs.3,00,000. That’s incorrect. A person earning 10 lakhs in the progressive tax system, will pay Rs.1,12,500. You may have to pay even lower tax if you have done some tax saving e.g. you have bought tax saving fixed deposit or invested some money in Equity Linked Saving Scheme (ELSS), or invested money on National Pension Scheme (NPS).

There are so many ways to save income tax in India including home loans. You can find some of the most common and popular ways to save income tax in my earlier post 13 ways to save tax under section 80 C.

One more thing you need to keep in mind is that Income tax also depends on your age. These are separate tax brackets for people under 60 years and people those who are 60 years and older and those who are above 80 years. The income tax rates shown above are for taxpayers which are less than 60 years old.

The last thing NRI should keep in mind while filling income tax return in India is to first find their residential status, they could be NRI, RNOR, ROR, or simply resident India. There are different tax rules for NRIs, RNOR, and Resident Indian so you must find the residential status before e-filling your income tax. You can use this flowchart to find whether you are an NRI, RNOR or Resident Indian for this financial year.

How to file Income Tax Returns Online in India

Here is my simple guide to file income tax returns in India. NRIs can also use this guide to filing their income tax return. Before you file you must collect all the important documents e.g. Form 16 or your salary slip or bank statements and all tax saving receipts so that you can correctly calculate your taxable income.  Once you have all that just follow these steps.

1.Selection of tax form
The selection of the tax form depends on your source of income. The ITR-1, ITR-2A, and ITR-2 are for salaried individuals, ITR-5 and ITR-6 are for companies.

2. Form 16
This is one of the most important forms f or income tax which you get from your employer. If you have changed jobs over the last year, then you will have more than one Form 16. This form has all the information required to prepare your tax return. It has two parts, Part A and Part B.

3. Other documents
Other than Form 16, you should also have your bank statements, interest certificates, and your housing loan certificate (in the case of housing loan). Also, download Form 26AS from the e-Filing website. Form 26AS shows the income for which taxes are deducted at source, it is an annual tax credit statement.

4. Filing your return
After completing the tax return forms, it has to be uploaded on the e-filing website. E-Filing of a tax return is compulsory for individuals with income above Rs 5,00,000. Once the return is successfully uploaded, an auto-generated acknowledgment is sent to you. This needs to be verified, either by signing and submitting the acknowledgment or by submitting it online. Once this is completed, the process of filing your return is complete.

Web sites to Assists you to file Income Tax Online In India

The e-filling of income tax has really made the cumbersome process hassle free for Indians living abroad. Not only that, there many websites that are offering assistance on filing income tax online e.g. H & R Block, ClearTax, Taxsmile etc. Even brokers like ICICI Direct is also providing services to file income tax return online, albeit with a partnership with H & R Block. They provide two options:

Online Assisted Services(OA)
In this option, a dedicated tax expert will assist in filing your tax as per your requirements (e.g. capital gains, international tax issue, multiple properties, etc). An income tax expert is assigned to you and shall prepare the return & e-file the same after your review and approval. All you need to do is, enter your personal details and upload documents.

Do it Yourself (DIY) 
Self-file your returns by entering your income & investment details through our intuitive cloud hosted application. All you need to do is follow the 3 steps by entering your income and investment details for submission and clicking on file your tax returns online

That's all about how to file your income tax return online in India. If you think it's too much a task for you then you should avail the services of several online startups which help to file income tax return for you e.g. clear tax and taxsmile in as low as Rs 499. Just submit your Form 16 and they will do rest for you. Their representative will also call you to understand about any other income and tax-saving details. This is really a hassle free way for NRIs to file income tax return in India. 


  1. Instructive article. A former NRI in RNOR status here, receive UN pension and interest from FCNR deposit. How can I enter the two while filing return. Can see a section "Exempt income". Do I list them out individually, any need to mention a section?

    1. Hello @Anonymous, yes you can mention there, Global income of RNOR is not taxed, only income earned in India is taxed, so you should be ok.