What NRIs need to know about filing Income Tax Returns
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Filing of income tax returns is no rocket science, thanks to e-filing options available out there. And you must already know that 31 July is the deadline to file your returns for 2012-13. But what if you are a non-resident Indian (NRI) or a person of Indian origin (PIO), does the 31 July deadline apply to you as well?
Know who’s an NRI/ PIO: But before answering that question one must know who an NRI is. “FEMA and income tax department define NRI differently. So it is important to know who’s an NRI as per the income tax rules,” says Balwant Jain, chartered accountant and CFO Apnapaisa.com. Your residential status is a very important parameter while filing returns. You could be a PIO, but if you have stayed in India for certain number of days you become a resident. Likewise you may be an NRI, but if you’ve stayed in India more than certain number of days, you become a resident.
“For the purpose of Income Tax Act a person is treated as resident in India if he satisfies any of the following conditions. In the relevant year, he has been in India for 182 days or more. This is calculated with reference to financial year i.e. 1 April to 31 March. Even if the person has not stayed in India for 182 days or more in the relevant year, he will still be resident if he has stayed here for a total of 365 days in the preceding four years and was in India for 60 days during the relevant year,” Jain says.
For a Person of Indian Origin who comes to India for a visit, the period of stay in immediately previous year has to be 185 days or more to make him a resident in India. If you are do not know your residential status, this calculator from Taxspanner.com will help you find out.
Who all should file returns: Of course your residential status does impact your taxability. NRIs have a basic exemption limit of Rs 2 lakh. In fact, if you are above 60 years, your exemption limit is Rs 2.5 lakh. If you exceed these limits, you definitely need to file income tax returns in India. The same is the case if you have any kind of rental income, or gains from property transactions or sale of assets/ investments.
“However, for NRIs, there is a 15 percent TDS (plus 3 percent cess) on short-term capital gains from shares and mutual funds if the securities transaction tax (STT) has been paid. If no STT has been paid, the TDS rate is higher at 30.9 percent. They are even subjected to a 10 percent TDS on long-term gains from shares and mutual funds,” says Sudhir Kuashik, CEO, Taxspanner.com.
Even if you have to claim any tax deducted at source (TDS) or have availed of a home loan, you will have to file your returns. Of course, there are exceptions where you need not file returns as NRIs, do check with your chartered accountant for more details.
What NRIs don’t get: Keep in mind that NRIs do not get the same kind of deductions or exemptions like the residents. “NRIs cannot adjust the taxable capital gains against the basic exemption limit. So as an NRI if you earns Rs 2 lakh capital gains, you will have to pay tax at applicable rates for the full amount even if you have no other income,” says, Kaushik. He further adds that as NRIs you don’t get deduction under a number of sections such as residents. A few sections are 80 CCG (Rajiv Gandhi Equity Saving Scheme), 80 DD (disability tax benefit), and 80 DDB (medical treatment tax benefit) to name a few.
In short, filing of returns for NRIs is not rocket science either. We recommend you get in touch with a tax consultant or an online portal which offer online income tax returns filing packaged specially designed for NRIs.
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