Skip to main content

NRI Corner – Part I - Filing income tax returns

Have you filed your income tax return in India before July 31?
If anyone has earned an income of over Rs.100,000 in the last Indian financial year, he/she must file his tax return and pay whatever tax due at a uniform rate of 20 percent.

Indian income tax regulations have many special provisions for NRIs. If NRIs have to file their returns, they would be well advised to engage the services of a qualified accountant who knows the complex laws and regulations.

NRIs can also authorise the accountant to file his return on his behalf to make life simple. It is worth paying the professional fees as the accountants know the procedures and can also claim tax refund on his behalf, if needed, and deal with any tax matters that arise. The accountant can also appeal against any ruling by income tax department, if required.

In addition to an accountant, NRIs can appoint an 'agent' to deal with these matters. The persons who qualify as an 'agent' is listed in the income tax rules. Since these persons are not qualified accountants, it is advisable to obtain the services of a professional.

All NRIs do not know that their income tax liability does not depend on their nationality but on their residential status. If anyone spends less than 182 days in India during the financial year, he/she is a non-resident. This means that any income he earns outside India is not taxed in India. The return is for income received in India in the previous year.

Basically, he should know what makes up an NRI's 'income' as there are a great many exceptions for NRIs.

Any income from a business, property, an asset, fees for technical or professional services, direct services rendered in India, royalties, salaries paid by the Indian government to Indians for services provided outside India and dividends paid by an Indian company abroad are all taxable.

Some Interest payments are also included and listed. Any pension, no matter where paid, is taxable if the pensioner provided his services in India. Basically, an NRI's income consists of his salaries, income from his property, profits from his business(es), profession, capital gains and other listed 'sources'.

NRIs engaged in business in India with Indian partners come under 'a business connection'. This term covers different business activities such as a branch office, a local subsidiary to sell imported products, an agent for buying or selling, building a factory for exports and a financial association between a resident and a non-resident company.

NRIs do not have to pay tax on interest income on bonds or premium on redemption of bonds or securities, interest on Non Resident External Bank Accounts in foreign currencies, and Non Resident Non-Repatriable Rupee Deposit Accounts and interest on Savings Certificates issued before June 1, 2002. Many other forms of interest paid for different types of deposits are also listed for exemption.

The income tax return form involves self-assessment of taxable income. Thus the due tax must be paid before filing the return and a copy of the receipt must be enclosed with the return. The income tax forms are available free of cost at the major offices in the metros or through some commercial enterprises authorized to sell them for a small fee.

An NRI can also get an advance ruling about his income tax liability by filing an application with a fee of Rs.2,500. The ruling is then binding on both the NRI and the IT department. The applicant must be a Non-Resident in the previous year preceding the financial year in which the application is filed.

Income tax returns for NRIs are generally accepted on their face value and without scrutiny. The vast majority of NRI cases - over 95 percent - are accepted normally without calling for an examination of the books of accounts or supporting documents. Thus a NRI must be very careful in filling his tax return to avoid any tax evasion and avoidance.

While tax evasion is illegal, tax avoidance is not. Typically, it involves failing to report income, or improperly claiming deductions that are not allowed. Courts have ruled that taxpayers can plan their affairs to pay the minimum amount of tax possible and the taxpayer may use any legal means to do so. This can only be done with the maximum and correct amount of information about income tax laws and regulations and thus it is worth paying your accountant or tax lawyer for their professional services.

All complex income tax regulations cannot be presented in a single article but only the general guidelines. Considering all these better to engage a professional 'This way, it's much simpler!'

Popular posts from this blog

Rs 14,000 Crore worth of tax free bonds coming soon from NHAI , PFC

  NHAI, PFC file prospectuses, coupon rate not yet decided MORE debt investment options have opened up for investors with AAA rated tax-free bonds worth over Rs 14,000 crore lined up. The National Highway Authority of India ( NHAI ) and Power Finance Corporation ( PFC ) are offering Rs 10,000 crore and Rs 4,033.13 crore worth of tax-free bonds, respectively, as per prospectuses filed with the Securities and Exchange Board of India (Sebi). Of a Rs 5,000 crore issue by PFC, Rs 966.87 crore has already been raised through private placement on September 28 and November 1. Tax-free bonds give investors tax-free return on any amount invested. In another kind of bonds, the long-term infrastructure bonds, investments up to Rs 20,000 are tax exempt, that is this cap amount can be deducted from the taxable income. Accordingly, the NHAI prospectus has clarified that only the amount of interest from -and not the actual investment on -its new bonds will be tax-free. "NHAI's publ...

Change in Fund Manager for some of HSBC Mutual Fund Schemes

Buy Gold Mutual Funds Invest Mutual Funds Online Download Mutual Fund Application Forms Call 0 94 8300 8300 (India) However, this facility is only available to Unit holders who have been assigned a folio number by the AMC.   HSBC Mutual Fund has announced that the below mentioned schemes shall be managed by the new fund managers as stated in the table. The effective date will be July 02, 2012.   Amaresh Mishra 's will be Vice President and Assistant Fund Manager. Having done a Post graduate diploma in Business Management and Bachelor of Chemical Engineering, he has over seven years of experience in Equities and Sales.   Mr. Piyush Harlalka's designation shall be Vice President- Fixed Income. Qualified as a C.A., C.S. and holding M.B.A.( Finance degree), he has over six years of experience in Fund management and ...

How EEE and EET Tax affect Retirement Investments

  An important factor while choosing a financial product is its taxation , and for retirement savings, this is even more important as the sums involved are usually life-long savings. Here's a look at the current tax treatment of three major long-term retirement planning products, which are - Employees' Provident Fund (EPF), Public Provident Fund (PPF) and National Pension System (NPS). EPF The tax treatment is EEE, which means your money is exempt from taxes at the time of investment, accumulation and withdrawal. At the time of investment, the tax deduction is under the limit of section 80C of the Income-tax Act , which is currently Rs 1.5 lakh. Partial withdrawals are also tax-free if made after 5 years of continuous service. If withdrawals are made before 5 years of service, 10% tax will be deducted at source. Exceptions have also been provided for transfer of amount and conditions wherein the subscriber is unemployed for more than 2 months or the loss of job was beyond th...

Personal Finance: You can insure your wedding

But luck may not always be on your side. With the frequency of such attacks, as also other risks and unforeseen accidents growing, a wedding insurance is something you may want to look at if a marriage is being planned in the family. Event insurance plans like this is still in its nascent stages due to low awareness. And given the sacred nature of the ritual, nobody wants to discuss or think negative. But as wedding spends and risks grow, it makes sense to cover the potential monetary loss. The policy in those countries even covers the loss of the wedding ring, the wedding gown not reaching on time and even the expenses/loss due to late or non-appearance of the photographer which may mean staging the event once again for the photograph. In India, most insurance companies — including ICICI Lombard General Insurance, Oriental Insurance, Bajaj Allianz and National Insurance — offer wedding insurance. The policy is tailor made to individual requirements and needs. The sum insur...

DSP BlackRock MidCap Fund

Best SIP Funds Online   HOW HAS DSP BlackRock Small & Mid Cap Fund PERFORMED? With a 10-year return of 14.61%, the fund has outperformed both the category average (12.34%) and the benchmark (10%) by a good margin. Should you invest in DSP BlackRock Small & Mid Cap Fund? This fund invests predominantly in mid-cap stocks but takes a sizeable exposure in small-caps as well. The focus is on nascent companies with high growth potential. The fund manager places emphasis on quality and avoids inferior businesses even if these look tempting from a valuation perspective. Over the past year, the fund portfolio has grown, having added to some of the underperforming sectors like chemicals and healthcare. Its portfolio churn has come down significantly. The heavily diversified portfolio is run completely agnostic of its benchmark index— most bets are from outside the index—which can at times lead to bouts of underperformance as seen in the recent years....
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now