Are you an NRI planning to file your ITR for 2024? Here's a complete guide

Over 73 per cent of non-resident Indians (NRIs) are proactively looking to file their income tax returns (ITR) for the financial year 2023-24 by July, with 19 per cent already filed and 8 per cent not intending to file, according to a recent survey by SBNRI, an NRI-focused fintech platform.

What do the survey results show by country?

In the United States, 22 per cent of NRIs plan to file by July, with 4 per cent having already filed and 3 per cent not intending to file.

In the United Kingdom, 31 per cent plan to file by the deadline, 5 per cent have already filed, and 4 per cent do not plan to file.

 

In the United Arab Emirates, 14 per cent plan to file by July, 2 per cent have already filed, and 6 per cent do not plan to file.

In Canada, 8 per cent intend to file by the deadline, 4 per cent have already filed, and 4 per cent do not plan to file.

For NRIs in other countries, 25 per cent plan to file by July, 5 per cent have already filed, and 2 per cent do not plan to file.

Is filing ITR mandatory for NRIs?

NRIs need to file an ITR if they meet any of the following conditions:

* Their total income during a financial year exceeds the basic exemption limit of Rs 2.5 lakh.

* They have earned income from India, such as salary, property, investments, or business.

* They wish to claim a refund for excess tax deducted at source (TDS).

What income is taxable for NRIs?

"An NRI’s income taxes in India depend on their residential status," explains Manikandan S, a tax expert at ClearTax.

* If your status is ‘resident,’ your global income is taxable in India.

* If your status is ‘NRI,’ only your income earned or accrued in India is taxable in India.

Examples of taxable income in India for NRIs include:

* Salary received in India or salary for service provided in India.

* Income from property situated in India.

* Capital gains on the transfer of assets situated in India.

* Income from fixed deposits or interest on a savings bank account in India.

Let's understand Srishti's situation

Srishti lives and works in the USA. She found a TDS entry of Rs 20,000 deducted at 30 per cent on interest earned by her in her Non-Resident Ordinary (NRO) account. She has no other income in India. Does she need to pay any tax in India or file an ITR?

Since Srishti has spent less than 182 days in India in the financial year 2023-24, she qualifies as an NRI for tax purposes. Therefore, only her income earned or accrued in India is taxable.

"For Srishti, only her income earned or accrued in India is taxable in India. Her income in the USA is not taxable in India since she is an NRI," says Manikandan S.

Since her total income in India is less than Rs 2.5 lakh, she does not have to pay any tax but must file an ITR to claim a refund for the TDS deducted.

How can NRIs file ITR?

Like resident Indians, NRIs can choose between the old tax regime and the new tax regime. Sudhir Kaushik, co-founder & CEO of Taxspanner, advises:

"Opting in or out of regimes should be done carefully. If the income earned in India is business income, the option to change the regime is provided only once."

Steps to file ITR:

1. Determine your residential status for the financial year.

2. Gather necessary documents like bank statements, Form 16, Form 26AS, TDS certificates, and details of investments.

3. Visit the Income Tax e-Filing Portal and register using your PAN.

4. Choose the correct ITR form based on your income sources in India:

ITR-2 for income from salary, pension, or other sources except business or profession.

ITR-3 for income from business or profession.

5. Fill in personal information, income details, deductions, and tax payments.

6. Verify and calculate your tax liability.

7. Submit the ITR form and e-verify using methods like Aadhaar OTP, net banking, or sending a signed physical copy to CPC Bangalore.

What obstacles do NRIs face when filing ITR?

Common challenges include:

* Difficulty accessing Form 26AS and AIS from outside India.

* Issues with Aadhaar OTP due to the absence of an Indian mobile number.

* Incompatibility of some banks with the income tax portal for e-verification.

* Limited access to net banking in some nationalised banks.

* The time-consuming process of sending a signed copy of ITR V to CPC.

"If an NRI is preparing the ITR themselves, these challenges can complicate the process," says Kaushik.