Submitting the Income Tax Declaration: A Savvy Approach for Non-Resident Indians
For the financial year 2024-2025, NRIs must file their Income Tax Return (ITR) in India by September 15, 2025, as this date has been extended from the usual July 31 deadline.
Who must file?
- NRIs whose total income taxable in India exceeds Rs. 2,50,000 (basic exemption limit).
- NRIs with income subject to special tax rates, such as capital gains on equity or mutual funds, even if below the exemption limit.
- NRIs who have incurred losses they want to set off or carry forward.
- NRIs who want to claim a refund of TDS deducted on interest or other incomes.
- NRIs with significant financial transactions or assets reported to the income tax department, or those spending more than Rs. 2 lakh on foreign travel in a year.
- NRIs with business turnover or professional receipts exceeding prescribed limits.
Which ITR form?
NRIs generally use ITR-2 to report income such as salary, rental income, capital gains, dividends, and interest income.
Documents needed for filing include:
- PAN card (mandatory)
- Passport (to establish residential status)
- Bank account statements of NRO (mandatory) and optionally NRE/FCNR accounts
- Proof of income like Form 16 for salary, rent agreements, capital gains data, TDS certificates, investment and deduction proofs under Sections 80C, 80D, home loan interest, etc.
Income taxable for NRIs in India:
Only income earned or received in India is taxable. Foreign income is not taxed if not brought into India. Interest earned on NRO accounts is taxable and subject to TDS; interest on NRE accounts is tax-exempt.
Benefits of filing ITR for NRIs:
- Claim tax refunds for excess TDS deducted on income such as interest or capital gains.
- Carry forward and set off losses from capital gains or business income.
- Maintain compliance to avoid penalties and legal complications.
- Establish a financial track record that can help in credit or loan approvals.
- Fulfill requirements when large transactions such as foreign travel expenses over Rs. 2 lakh or deposited sums beyond thresholds occur.
Penalties:
Delayed filing beyond September 15, 2025, can attract penalties ranging from Rs. 1,000 to Rs. 5,000 under Section 234F.
In summary, NRIs earning taxable income in India in the FY 2024-2025 must file ITR by September 15, 2025, preferably using ITR-2, with comprehensive documentation of Indian income and taxes paid. Filing is beneficial for claiming refunds, loss adjustments, and maintaining compliance with Indian tax law.
Filing an ITR may be required or financially beneficial for NRIs if they have rental income from property in India, interest on NRO accounts, capital gains from selling Indian assets, are due a refund for TDS, want to carry forward investment losses, own unlisted shares or are a director in an Indian company.
Filing an Indian tax return is not just about compliance but also a smart financial move for NRIs, particularly for those investing in India, managing property, or preparing for the future. Long-term capital gains (property/shares held for over 2-3 years) are taxable at the rate of 10-20 percent, while short-term capital gains from resources held less than two years are taxable at 15-30 percent.
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