How to File Income Tax for NRI in a Few Simple Steps?

NRIs or Non-Resident Indians are required to pay Income Tax in India on the income that they have earned in the country. According to the Income Tax* Act, any income that accrues or arises in India is taxable as per the Indian taxation system. Therefore, if you are an NRI, you will need to understand the aspects of the NRI Income Tax to know the taxes that you need to pay.
 

In this article, we have discussed simple steps that are involved in NRI Income Tax.
 

What Are Some Sources of Taxable Income for NRIs?
 

Here are some sources of income for Income Tax for NRIs:
 

• Income from House Property
  
  For NRIs, if any income is generated from the property that is located in India, then that income is taxable according to the Income Tax Act. Here, the calculation process of taxes follows a process that is same as to that of Indian residents.
  
  Non-Residential Indians can claim the following deductions:
  
  
  • Deduction on the property tax* paid.
  • Interest deduction if a home loan has been availed.
  • The deduction is available on the principal amount of your home loan u/s 80C of the Income Tax* Act. Also, you can claim a deduction on the registration charges and stamp duty when you purchase a property.
  • NRIs are eligible to claim a 30% standard deduction.


• Income from Salary
  
  The salary earned by NRIs comes under taxable income under the following two conditions:
  
  
  • Here, the salary is received in India directly into one of the Indian bank accounts, it will be taxed according to income tax for NRI. The same condition is applicable in a situation when someone on behalf of the NRI receives an income.
  • If any NRI has earned a salary for any services that have been rendered in India, it will be taxed as income in India under IT Act.
  
  The income is taxed as per the Income tax rules for NRIs.
  
  
•  Income from Other Sources
  
  Income (interest earned on savings account and fixed deposit) which has been sourced in the country is also taxable.
  
  
• Income from Capital Gains
  
  Any income that has been generated by the transfer of capital assets that are located in India or any stocks or units of mutual funds traded on Indian stock exchange will also be taxable.
  
  

Simple Steps to File ITR for NRIs
 

1. Determine the residential status
   
   The first step is determining the residential status with respect to the given financial year. However, if you have shifted to another country recently, this might be a bit complicated for you. Your residential status has been defined under Section 6 of the Indian Income Tax* Act. If you have been staying in another country for over 182 days, you will be considered an NRI. And you will have to file Income Tax Return for an NRI.
   
   
2. Calculate your taxable income
   
   In order to understand the ITR for Non-resident Indians, it is important to understand the taxable income. The taxable income is your gross income before any tax* deductions.
   
   If your total income for the previous year exceeds ₹2.5 Lakh, then you have to file NRI Income Tax. This income could be from any source, including salary, capital gains on the sale of mutual funds or shares, rental income, etc.
   
   Also, if TDS has been deducted from your income, you can claim credit of the same against taxes payable and determine a refund (if any). For this, the reconciliation of advance tax* and TDS, as mentioned in Form 26AS, needs to be done.
   
   While filing ITR for an NRI, you are eligible for tax* deductions under certain sections of the Income Tax* Act. One of the best ways to secure your family while saving taxes is through a life insurance plan. Under Section 80C of the Indian Income Tax* Act, you can avail of tax* deductions up to ₹1.5 Lakh on the premiums that you pay for keeping your life insurance active.
   
   Once you acquire the status of an NRI, you cannot open a PPF account in India. Moreover, if your income is more than ₹50 Lakh, you are mandated to report your liabilities and assets.
   
   
3. Claim double taxation treaty benefits
   
   To understand the Income Tax Rules for NRIs, we need to understand the DTAA (Double Tax Avoidance Agreement). The DTAA enables NRIs to avoid having to pay taxes on the income, which is the same twice. According to the DTAA, an income has to either be exempted from taxes in one of the countries or taxed at a lesser rate in the home country. You can claim this credit on the tax* that you have paid twice on the same income. So, when you are filling out the Income Tax return form for NRI, this is one of the important things that you need to keep in mind.
   
   
4. Verify ITRs for NRI
   
   Once you have filed the income tax return form for NRI, it is essential that you verify the income tax return form within a period of 30 days. If this is not done, the ITRs will be considered as invalid.

Conclusion

These are the major rules that apply when it comes to Income Tax for NRIs. It is essential that you follow all the rules and regulations while filing income tax* returns in the country. While you file your income tax* return, do not forget to claim deductions such as life insurance premiums.

If you still do not have a life insurance plan, you can look at some of the top Tata AIA life insurance plans that will not only keep your family secure in your absence but will also help you to save on taxes. Moreover, you can use the life insurance plan premium calculator to understand the premium that you have to pay for the policy that you choose. 
 

L&C/Advt/2022/Oct/2582