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

Mutual Fund Review: Taurus Tax Shield

    Taurus Tax Shield has seen a turnaround in performance since 2007, but still remains a volatile offering… The fund has seen a turnaround in its performance since 2007 and has delivered impressively during market rallies since then. The portfolio is also more diversified. It contained its downfall to an average level in 2008 but is still one of the most volatile offerings in this category. Bold investors can look at this fund.   Strategy The fund manager invests across the market capitalisation and sectors. The selection of stocks is made on the basis of long-term business prospects and value creation. Fund Insight Launched in March 1996, the fund was a laggard with just two annual outperformances. Concentrated stock bets and high exposure to mid and small caps led to it being hit harder during market downturns. The number of stocks in the portfolio never exceeded 20 and it was not rare to see the top 5 holdings account for around 60 per cent of the portfolio. After b...

AXIS Long Term Equity Fund - The Best Tax Saver Fund for 2016

  AXIS Long Term Equity Fund - Invest Online   History:   The open ended mutual fund was launched on December 21 in the year 2009. It is benchmarked against BSE 200 and managed by the fund manager JINESH GOPANI. Initially the scheme was called as Axis tax saver fund but later it was renamed as Axis long term equity fund with effect from September 2, 2011. Nature of investment: As far as asset allocation is concerned, 97.52% of the stocks are equity and 0.02% is debt based. The primary focus of the fund is to invest in diversified equity stocks that have higher growth potential. Total asset size of the fund is in the tune of 4,996 CRORE as of June 30, 2015. Performance: The performance of the fund for one year, 3 years and 5 years are 23.6%, 29.9% and 19.1 respectively which are far greater than 6.4%, 14% and 5.6% benchmark figures. It has also preformed fairly well against SBI magnum Tax Gain (G) and HDFC tax saver (G). The growth comparison is enumerated below;                        ...

IDFC Classic Equity Fund

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   IDFC Classic Equity Fund IDFC Classic Equity is a large-cap equity fund which currently has assets under management worth Rs. 158.52 crore. It was launched in August 2005. The fund is benchmarked against the BSE-200 Index. Performance YTD 1-Year 3-Year 5-Year Since Inception IDFC Classic Equity 0.93 26.61 6.30 1.01 11.65 BSE 200 1.52 17.31 6.00 1.99 12.98 All figures in % as on January 31, 2013; Returns above one-year in CAGR terms ...

Health insurance guide - Part I

Insurance, by definition, is morbid. What if I die suddenly? What if my home caught fire? What if I had to undergo expensive medical treatment? What if something that I thought happened only to others befell me? Insurers, who work with large samples, calculate the probability of such an event and, hence, the possibility of them having to pay out a sum of money to mitigate, to the extent possible, the effects of that disaster. However, the possibility of you undergoing some kind of expensive medical treatment during your lifetime is far more likely than you dying suddenly or your house burning down. Given that costs at private healthcare facilities, where you are most likely to land up, is high, and, doubling every four years 10 months or so, the rest of your money life could easily go out of whack if you had to incur such expenses. Just 12 per cent of India's population is covered with some sort of health insurance. Pared to the bone, for a comparatively small price, health insu...

10 year NSC launched, all set to give 8.7 per cent

Invest in Mutual Funds Online Download Mutual Fund Application Forms THE government introduced a 10-year National Savings Certificate ( NSC ), which will earn an interest rate of 8.7 per cent per annum. The notification for the launch of the new savings instrument, 10-year National Savings Certificate (IX-Issue), 2011, has been issued, an official statement said. The scheme will come into effect from December 1, it added. Investments in NSC will earn interest at the rate of 8.7 per cent compounded semi-annually, it said, adding that on an investment of Rs 100, the depositor will get Rs 234.35 on maturity of the NSC. There is no upper limit for investment in the certificate, it added. The new scheme will give better returns along with tax benefit to savers. At present, the maturity period of NSC is six years and it qualifies for tax relief for investment up to Rs 1,00,000 under Section 80C. The decision to raise the maturity period of NSC has been taken on the b...
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