Income tax made easy: NRIs’ complete guide to income tax filing

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Meet Srishti, an Indian citizen currently residing and working in the USA. Recently, she checked her Form 26AS online and discovered a TDS entry of INR 20,000, deducted at 30% of the interest earned in her NRO account in India. Now, the big question arises: Does Srishti need to pay tax in India? And is it mandatory for her to file an income tax return? Let’s take a look into the world of income tax filing for NRIs to find the answers.

Understanding when NRIs should file income tax returns in India

NRIs should file income tax returns in India if they have earned income within the country during the financial year. An NRI’s income taxes in India will depend upon his/her residential status for the year as per the Indian Income Tax Act, 1961 tax rule. If your status is ‘resident,’ your global income is taxable in India. For NRIs like Shristi, only the income earned or accrued in India is taxable in India.

Salary received in India or salary for service provided in India, income from a house property situated in India, capital gains on transfer of asset situated in India, income from fixed deposits or interest on a savings bank account are all examples of income earned or accrued in India, and these incomes are taxable for an NRI. Conversely, income earned outside India is not taxable in India. Additionally, interest earned on an Non-Resident External (NRE) Account and Foreign Currency Non-Resident (FCNR) account is tax-free, whereas interest on Non Resident Ordinary (NRO) accounts is taxable in the hands of an NRI.

Exploring tax-saving options for NRIs in India

NRIs have several avenues to save on taxes in India, with one promising option being ITR filings that often play a pivotal role in facilitating the repatriation of funds and property sale transactions in India for NRIs. By adhering to the practice of filing ITR, NRIs ensure compliance with tax regulations and streamline financial dealings in the country. They can also explore other tax-saving instruments such as the Public Provident Fund (PPF), National Pension System (NPS), Equity Linked Saving Scheme (ELSS), or opt for tax-saving insurance policies.

Source: The Economic Times

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