As per the income tax act 1961, every person being a person other than company and firm should file their income tax return if total income during the previous year exceeded the amount which is not chargeable to income tax. The income tax return should be filed on of before the due date. Due date for filing of income tax return for individual and HUF is 31st July if tax audit is not applicable.
The exemption limit of tax slab is applicable on NRI. Individual covers Non-Resident Indian who earns any income from India during the previous year. Income earned during the previous year is taxable in India if it exceeded the amount not chargeable to tax i.e 2.50 lakhs. However there are scenario where filing of income tax return becomes mandatory for NRI. Now let us take you to the following situation:
When TDS is deducted by bank or other parties than it is recommended to file your income tax return. Minimum limit of exemption for Non deduction of TDS is not applicable on NRI. For Example, If NRI receives Interest on saving bank or Interest on fixed deposit the TDS threshold will not apply and bank will deduct TDS at the applicable rate.
Claiming Income tax refund
Where TDS is deducted by bank but your income is under the exemption limit then filing of return is not mandatory but NRI can claim income tax refund by filing income tax return. However it is advisable that you should be careful while filing your ITR.
Sale of Land and building
When NRI sales immovable property i.e Land and Building situated in India then buyer is liable to deduct TDS at the rate appliable to NRI as per the income tax act 1961. The effective rate on sale of immovable property on Long term capital gain is 20% plus surcharges plus health and education cess. Short term capital gain is taxable as per the slab rate of applicable to seller. NRI can set off the liability of income tax arises from sale of land and building against the TDS deducted by buyer.
It is important to note that filing ITR becomes mandatory for NRI if property is sold during the previous year.
Points to be remember by NRI before filing ITR:
- Choose correct ITR form: It is important to select correct ITR form depending upon the residential status and source of income earned during the previous year. For example Form ITR-1 is applicable to individual being a resident having total income upto Rs. 50 Lakh having income from salaries, one house property, other source and agriculture income upto Rs. 5 thousand. This form is not to be used by NRI as this form is only applicable to individual resident.
- Verification of prepaid taxes: Bank deducts TDS on Interest on saving banks, interest on fixed deposit at the applicable rate, hence it is pertinent to check Form 26AS and Taxpayer Information Summary (TIS) or the Annual Information Statement (AIS) before filing ITR so that no income is left to report in the ITR form.
- Disclosure of Assets and liabilities: Individual and HUF having annual income more than Rs. 50 lakhs is required to file Schedule AL.
- Other Disclosures:
- Submit the all Indian bank account details
- Specify details of unlisted equity shares held by Non resident at the beginning of the year, shares purchased and sold during the year and Closing equity share held by the taxpayer.
- ITR filer should disclose directorship held in Indian and foreign companies during the previous year.
- Resident and Ordinary Residents (ROR) taxpayer is required to disclose the foreign assets and liabilities held outside India under Schedule – FA of the ITR