Non-Resident Indians (NRIs) play a crucial role in the global economy, often maintaining financial connections with their home country. As an NRI, it is important to understand your tax obligations and comply with the Income Tax Act of India. Filing an Income Tax Return (ITR) is a vital aspect of fulfilling your tax responsibilities. This article aims to provide a comprehensive guide to ITR for NRI, covering key aspects such as eligibility, types of income, filing requirements, and important considerations.
Eligibility for Filing ITR for NRI
As an ITR for NRI, your tax liability in India depends on your residential status. NRIs are typically subject to tax on income earned or received in India. However, the following criteria determine whether you need to file an ITR for NRI:
- If your total income exceeds the basic exemption limit of Rs. 2.5 lakh in a financial year.
- If you have earned income from capital gains or transactions in specified assets, regardless of the income threshold.
- If you wish to claim a refund for excess tax deducted at source (TDS).
Determine Residential Status of NRI
A Non-Resident Individual (NRI) refers to an individual who is not considered a resident of India for tax purposes. The determination of an individual’s residential status is crucial in establishing whether they are classified as a non-resident or not. According to Section 6 of the Income Tax Act, 1961, the following conditions are used to ascertain an individual’s residency:
- Resident in India: An individual will be considered a resident in India for a particular financial year if they meet either of the following criteria: a) They stay in India for a period of 182 days or more during that financial year, or b) They stay in India for a period of 60 days or more during that financial year and have been in India for 365 days or more during the four years immediately preceding that financial year.
- Non-Resident: If an individual does not fulfill both the aforementioned conditions, they will be regarded as a non-resident for that particular financial year.
However, certain exceptions exist for Indian citizens and persons of Indian origin who visit India:
- For these individuals, the 60-day period mentioned in condition 2 above is extended to 182 days.
- The same concession applies to Indian citizens who leave India during a financial year as crew members or for employment purposes outside of India.
The Finance Act of 2020 introduced amendments that came into effect from the Assessment Year 2021-22:
- The 60-day period mentioned in condition 2 above is replaced with 120 days if an Indian citizen or person of Indian origin has a Total Income, excluding income from foreign sources, exceeding ₹15 lakh during the financial year.
Additionally, the Finance Act of 2020 introduced a new provision, Section 6(1A), applicable from the Assessment Year 2021-22:
- It states that an Indian citizen earning a Total Income exceeding ₹15 lakh (excluding income from foreign sources) will be deemed a resident in India if they are not liable to pay tax in any other country.
ITR Forms for NRI
- ITR-2 – Suitable for Non-Resident Individuals ITR-2 is the appropriate tax return form for individuals (both residents and non-residents) and Hindu Undivided Families (HUFs) who do not have income under the head “Profits and Gains of Business or Profession.” If you fall into this category, you are not eligible to file ITR-1.
- ITR-3 – Suitable for Non-Resident Individuals ITR-3 is the applicable tax return form for individuals (both residents and non-residents) and Hindu Undivided Families (HUFs) who have income under the head “Profits and Gains of Business or Profession.” If you have such income, you are not eligible to file ITR-1, ITR-2, or ITR-4.
Income Tax Slab Applicable on NRI
Tax Slabs for Assessment Year 2023-24
Non-Resident Individuals have the option to choose between the old tax regime and the new tax regime, which offers lower rates of taxation under Section 115BAC of the Income Tax Act.
Taxpayers who opt for the concessional rates in the new tax regime will not be eligible for certain exemptions and deductions available in the existing tax regime, such as deductions under Section 80C, 80D, 80TTB, and HRA.
Here are the tax slabs for both the old tax regime and the new tax regime under Section 115BAC:
|Tax Regime||Income Tax Slab||Income Tax Rate|
|Old Tax Regime||Up to ₹2,50,000||Nil|
|₹2,50,001 – ₹5,00,000||5% above ₹2,50,000|
|₹5,00,001 – ₹10,00,000||₹12,500 + 20% above ₹5,00,000|
|Above ₹10,00,000||₹1,12,500 + 30% above ₹10,00,000|
|New Tax Regime||Up to ₹2,50,000||Nil|
|(u/s 115BAC)||₹2,50,001 – ₹5,00,000||5% above ₹2,50,000|
|₹5,00,001 – ₹7,50,000||₹12,500 + 10% above ₹5,00,000|
|₹7,50,001 – ₹10,00,000||₹37,500 + 15% above ₹7,50,000|
|₹10,00,001 – ₹12,50,000||₹75,000 + 20% above ₹10,00,000|
|₹12,50,001 – ₹15,00,000||₹1,25,000 + 25% above ₹12,50,000|
|Above ₹15,00,000||₹1,87,500 + 30% above ₹15,00,000|
Note: The rates of surcharge and Health & Education cess are the same under both the tax regimes.
Other Income Tax Forms Applicable on NRI
- Form 12BB – Particulars of claims by an employee for deduction of tax (u/s192) Provided by: Employee to Employer(s) Details provided in the form: Evidence or particulars of HRA, LTC, Deduction of Interest on Borrowed Capital, Tax-saving Claims/Deductions for calculating Tax to be Deducted at Source (TDS).
- Form 16 – Details of Tax Deducted at Source on Salary (Certificate u/s 203 of the Income Tax Act, 1961) Provided by Employer to Employee for ITR for NRI Details provided in the form Salary paid, Deductions/Exemptions, and Tax Deducted at Source for computing tax payable/refundable.
- Form 16A – Certificate u/s 203 of the Income Tax Act, 1961 for TDS on Income other than Salary Provided by Deductor to Deductee Details provided in the form Form 16A is a Tax Deducted at Source (TDS) Certificate issued quarterly, capturing the amount of TDS, Nature of Payments, and the TDS deposited with the Income Tax Department for ITR for NRI.
- Form 26AS: Provided by Income Tax Department (Available on e-Filing Portal) Details provided in the form: Tax Deducted/Collected at Source.
- AIS – Annual Information Statement Provided by Income Tax Department (Accessible on the Income Tax e-Filing portal) Details provided in the form: Tax Deducted/Collected at Source, SFT Information, Payment of taxes, Demand/Refund, Other information (such as Pending/Completed proceedings, GST information, Information received from foreign governments, etc.) for ITR for NRI.
- Form 10E – Form for furnishing particulars of Income for claiming relief U/S 89(1) when salary is paid in arrears or advance Provided by: Employee to the Income Tax Department Details provided in the form: Arrears/Advance Salary, Gratuity, Compensation on Termination, Commutation of Pension for ITR for NRI.
- Form 3CB-3CD Submitted by: Taxpayer who is required to get their accounts audited by an Accountant u/s 44AB. Report of Audit of Accounts and Statement of Particulars required to be furnished u/s 44AB of the Income Tax Act, 1961 for ITR for NRI.
- Form 3CEB: Submitted by Taxpayer who is required to obtain a report from an Accountant u/s 92E for entering into an international transaction or specified domestic transaction. Report from an Accountant, relating to international transaction(s) and specified domestic transaction(s) for ITR for NRI.
- Form 3CE Submitted by: Taxpayer who is required to obtain a report from an Accountant u/s 44DA for the receipt of specified incomes from specified persons. Report from an Accountant, relating to the receipt of income by way of royalty or fees for technical services from the Government or an Indian concern for ITR for NRI.
Note: The mentioned forms are to be submitted as per the specified timelines and requirements outlined in the respective sections of the Income Tax Act, 1961.