As the deadline for filing of tax returns of both residents and non-resident Indians (NRIs) (July 31) nears, the ever-changing tax systems in the country could cause worry to the NRIs. Here are a few pointers which will help the NRIs to be acquainted with the tax system of the country.
Who can claim NRI status
Income Tax Act defines a Resident Indian on the basis of the number of days he stays in the country.
• He/She has stayed in India for more than 182 days in the financial year (from 1st April to 31st March)
• He/she stayed in India for 60 days or more in the year
• He/she has stayed in India for 365 days or more in the four years preceding the financial year.
So if you do not come under any of the the above category, you are eligible for the status of Non-resident Indian (NRI) for income tax purposes.
If you are an Indian citizen working on a site abroad or on a ship or a Person of Indian Origin (PIO) who come on visits to India, the number of days in the year can be increased from 60 days to 182.
Taxable incomes for NRIs
Income earned by way of salary or a service rendered in India, income from the assets you still own in India and interests from fixed or saving account in India are taxable.
Should NRIs file tax return?
If they want tax refund or have short or long term capital gains from assets or capital in India or want to carry forward losses to be adjusted in later years' income, they should file a return.
If Tax Deducted at Source (TDS) has been deducted from interest on fixed deposits and bank savings, and if the total amount earned is less than the standard deduction of Rs 2.5 lakh, you may file return for refund.
Why filing return is advisable
It is always wise to file tax return as many NRIs wish to settle down in India later. Those who regularly file tax return have less trouble in explaining their income to the tax man in future.
Can NRIs claim tax exemption?
Basic tax exemption of Rs 2.5 lakhs on earnings is applicable to NRIs as well. As per Double Tax Avoidance Agreement (DTAA), NRIs can avoid double tax on the income earned in their country of residence and India. So NRIs are taxed in only one country and that means income earned in India is only taxable here.
Are NRIs eligible for 80C?
Under section 80C of the Income Tax Ac, a deduction of Rs 1,50,000 can be claimed from your total income. This include premiums paid in India on life Insurance, medical insurance paid for parents and investments in schemes like ULIP, ELSS in India. NRIs can also claim deductions on payments on home loans and property tax.