The most common doubts that can be served along with the morning breakfast to an NRI would be around filing Income Tax Returns. Many NRIs from all around the world repeatedly ask our taxation experts whether they need to file their ITRs in India or not! Is it mandatory? Differences between various ITR Forms for NRIs? How can they manage double taxation on the same income source and whatnot? In this article, let’s answer these basic doubts along with understanding the aspects of NRI Income Tax e-filing and its benefits. Yes! That’s right. Not only filing your returns in India as an NRI is easy and convenient but beneficial for you as well. The Union Budget of 2021-22 has eased the processes further with certain relaxations for NRIs. Let’s glance through the top 10 benefits of filing ITR for an NRI:
What NRIs must Know: If you have any source of income in India and the income surpasses the basic exemption limit of Rs.2,50,000, then it becomes mandatory to file your Income Tax Returns in India.
NRI Income Tax: ITR e-filing Benefits for NRI
Income Tax for NRI has certain elements such as NRI Income Tax slab rates, income tax return form for NRI, TDS deductions and liable refunds, exemptions etc. that form the base of Income Tax e-filing for an NRI in India. The fundamentals of NRI Income Tax must be clear before setting out for the actual process of filing the ITR. In this section, we will focus more on the benefits of filing Income Tax Returns as an NRI. However, if you have any doubts regarding the basics of Income Tax for NRI in India (ITR form for NRI, Process of filing, etc.) then you can connect with our tax expert directly on WhatsApp using the button at the end of the article.
Top 10 Tax e-Filing Benefits for NRI
Here is the list of the Top 10 Tax filing benefits for NRIs. In no particular order, we have tried to address the issues that can be resolved with filing an ITR on time in India. Browse through the top benefits and in case of any query/doubt, directly Ask our Expert. Let’s begin:
- Tax-Deducted at Source (TDS) Refund: One of the most essential aspects of filing an ITR as an NRI is for availing the liable refunds on the tax deducted at source. An NRI has various bank accounts in India (NRE, NRO & FCNR). Amongst these, the interest earned on the NRO Account is taxed at 30% along with surcharge and cess. This tax is deducted on the format of TDS and is refundable as per the tax slab of the NRI. Again, NRIs invest in multiple asset classes in India and for each of these investments, TDS for NRI is a major instrument. There are liable refunds at many ends and filing an ITR is the only way to avail such refunds.
- Claiming Foreign Tax Credit: NRIs are often stuck amidst the crevices of double taxation. There is a treaty called the Double Tax Avoidance Agreement (DTAA) that is signed between two countries enabling residents to avoid paying double taxes on the same source of income. India has signed DTAA with 85+ counties including the USA, UK and UAE. Now, filing an ITR is the only way you can use this DTAA to either get a tax exemption in one of the countries or get the credit for the tax paid in India in your resident country.
- Repatriation: The transfer of money from your NRI Bank Accounts to your overseas bank accounts is called repatriation. Now, both NRE and FCNR are completely and freely repatriable for an NRI as these accounts hold your foreign income. But for repatriation from the NRO Account (the account that holds your income generated in India) you need to furnish the forms 15CA and 15CB. The process needs the involvement of a Chartered Accountant (CA) and if you have your ITR filed, the entire process of repatriation becomes smooth and convenient.
- Sanction of Loans: As an NRI, specifically for Retirement Planning, there can be a need for a Personal Loan or Home Loan in India. The basic documentation requirements for such endeavors involve the Income Tax Return. The ITR is an essential document for the banks/firms to validate your Residential Status and financial transactions and go ahead with the sanctioning of loans.
- Claiming Deductions under 80C: There are deductions available up to Rs.1.5 Lakhs under the section 80C of the IT Act. The section involves around 20-25 different asset classes (premium paid for life insurance, investments in ELSS and ULIPs, term deposits, pension schemes, etc.) where deductions can be availed but all these deductions aren’t applicable for an NRI. But there are some classes where deductions can be claimed as an NRI and filing an ITR is the only way to do that.
- Avoid Notice from the Income Tax Department: Not filing an ITR when you need to can lead to situations where you might receive a notice from the IT Department. These notices can be easily traced to you because of the form 26AS for NRIs. Your TDS records make it easy for the IT Department to assess whether you have filed your returns or not. Filing an ITR as an NRI enables you to avoid notices/scrutiny from the IT department along with creating a good track record with no enquiries or penalties (late fine, non-filing etc.) under your name.
- Carry forward of losses: As an NRI, if you have incurred a loss in any category (it may be in your business or a loss after selling of property, mutual funds etc.) then you can carry it forward to the next year under the provisions of the IT Act to set it off against profits in the future. But, if you fail to file your ITR before the due date then you won’t be able to carry forward the losses of the year. Many NRIs think that if they are incurring a loss, then filing an ITR isn’t important which takes away the chance to redeem the loss next year as non-filing results in the lapse of loss.
- Reporting of Residential Status and Financial Transactions: The Residential Status of an NRI for tax purpose is defined under the Income Tax Act, 1961. Therefore, the ITR serves as a proof of residential status and your financial transactions for a particular financial year. It is on the basis of the ITR, that your status is verified so that you can enjoy the benefits of your residential status.
- Deductions under other sections: Apart from section 80C, there are other sections where deductions can be claimed by an NRI. Sections like 80D, 80G, 80E, and 80U are some of them. Also, NRIs are allowed to claim tax exemption under section 54, section 54EC and section 54F on long-term capital gains. For claiming such deductions filing an ITR is necessary.
- Valid legal document for various purposes: An ITR can be used as an income or address proof in India. Apart from that it has multiple uses which include sanctioning of loans, VISA processing, etc. It serves a great aid while repatriating funds abroad and is one of the most important documents you should possess if you are having a source of income in India above the basic exemption limit of Rs. 2,50,000.
Quick Tip: Income Tax e-filing in India is a very easy, transparent and convenient process that can be done from anywhere in the world. You can get end-to-end assistance with filing of your ITR through taxation experts available at SBNRI. Follow the next segment to know more.
File your ITR globally and avail other services as an NRI: Ask SBNRI Expert
At SBNRI, we understand that filing an ITR and availing other services related to Taxation, Banking, Investments, Real Estate, Home-Healthcare or any other services related to India can be time consuming and exhausting with multiple access points. You might need to contact a separate person for each of your needs under the above mentioned categories.
What if you can avail all of these services under one canopy? Well, that’s what we do! Get access to various services around NRI Banking, Investments, Taxation, Real Estate and much more with a plethora of specially catered and customizable subscription plans tailored to your needs and requirements. Click on the button below to connect directly with our expert on WhatsApp. Also visit our blog and Youtube Channel for more details.
Income Tax e-filing: FAQs
Yes. NRIs can claim deductions under 80C. However, deductions under all classes aren’t available for NRIs. They need to check their eligibility for claiming deductions.
Yes. An NRI has to pay tax on income generated in India. However income generated abroad is not taxed in India for an NRI.
Maturity amount received by an NRI under most of the LIC Saving Plans is 100% exempt from tax, only maturity from the single premium plans are taxable.
Yes. An NRI can claim the refund in Tax Deducted at Source (TDS) by filing an ITR in India.