Checklist for NRI income Tax Filing

Income tax liability and scope of taxable income for any taxpayer depends upon his residential status in the financial year in which income accrues or arises to him. Hence it becomes very important to decide the correct residential status of a taxpayer. Checklist for NRI income Tax Filing is needed before filing tax return of NRI. Taxpayer refers to any person be it individual, firm or company. Financial year in Income tax implies a period of 12 months starting from the 1st day of April of the year. Many NRI stays outside India but investments in India for which they earn income in way of Interest , Capital Gain , Rental Income , Income form Govt Bonds etc. It is import for NRI to disclose Income earned in India via filing Income tax return and pay taxes. Filing NRI Income tax return is complicated hence Its important to work as per check list for NRI income tax filing. This check list can help NRI for Income tax return filing preparation. In this article we will see about conditions for determining NRI Residential status and NRI income tax filing.

Conditions for Determination of NRI Residential status for ITR

Section 6 of Income tax act states provisions related to residential status. Broadly, it gives three categories based on residence; those are– Resident, Non-resident and Deemed resident. Taxability of income depends on a person’s residential status. According to the act, a person who is not a resident of India , is considered as non-resident of India (NRI).

Incase of an individual, a person is considered to be NRI if he stays in India for less than 180 days in preceding financial year or includes  people who left India for employment, business or any other reason for indefinite period.

For Hindu Undivided Family, condition will be -if control and management of HUF is wholly situated outside India.

Whereas incase of company , Indian company is always treated as “Resident” but foreign company is treated as non-resident if its  control and management is wholly or partially situated out of India.

Similarly, in any other persons case, if its  control and management is wholly or partially situated out of India then they will be treated as Non-resident.

Why should an NRI file ITR in India ?

1. If TDS is more than the actual tax liability of NRI, then by filing ITR refund can be claimed by NRI.
2. If there is any unabsorbed loss, NRI can carry forward it for 4 years by filing ITR
3. ITR documentation and compliance is helpful for repatriation of income
4. Shows financial stability of taxpayer
5. Helps to stop tax evasion

Disclose Details of Assets and Liabilities for NRI :

NRIs whose total income exceeds INR 50 lakhs are required to furnish cost details of their assets located in India and their concerned liabilities as mentioned in applicable ITR. Disclosure regarding address, amount, type of asset should be given for all types of assets whether movable or immovable. Disclosure of assets and liabilities in India only are required so no need to give details about assets and liabilities not located/arising outside India.If any asset is owned jointly, then such disclosure should also be given. Also, it is to be noted that only the cost of assets is to be disclosed, not fair value.

Checklist to avail DTAA Benefit for NRI Tax Filing:

To avail DTAA benefit for NRI, first it is important to know whether the concerned income is taxable in India or not. DTAA benefit for NRI can be availed only for taxable income in India. Another important point to check is whether India has valid DTAA with the country of residence of NRI. If DTAA is there and applicable for transaction then NRI now is required to give a copy of Tax Residency Certificate (TRC) issued by tax authorities and form 10F (self declaration) if required.

To avail benefit under DTAA following documents are required to submit:

1. Tax Residency Certificate (TRC)
2. Self-attested copy of Passport and Visa.
3. OCI card (if applicable)
4. Self-attested copy of PAN Card (if available)
5. Indemnity/ self declaration form

What to Disclose Income in ITR of NRI ?

NRIs have to pay tax on income earned in India. NRIs can file their return online through income tax portal using digital signature. Due date of filing NRI Income tax return is on or before 31st July following the financial year by an individual. However, in case an audit is applicable, the due date will be 30th September.

Giving correct information in Income tax return is important.

• Passive income Declaration: Passive income means earnings which are earned by rental of property, interest, or any other form in which an individual is not involved actively.It is important to disclose all bank interest, Post office interest. According to provisions, interest income on deposits is taxable unless they are exempted under section 10
• Reconciliation of 26 AS and ITR: In all cases it is necessary that figures related to TDS, advance tax, TCS,etc. reflected in ITR match with 26AS.NRI should consider the Form 26 AS for determining the figures of TDS credit, TCS or advance taxes paid that are clearly reflected in Form 26 As.
• Reconciliation of AIS and ITR : Same as in case of 26 AS, ITR and AIS details should get matched. In Some cases there is mismatch in two and income tax may ask for an explanation regarding that but if information provided is true and full then no action will be taken.
• Filing details of Passport details in ITR: This helps the department to verify the identity and nationality of NRI.Details should be true and complete. It is made compulsory to give passport details in ITR 1 and 4.
• Filing details of No of days of stay in India: It is of utmost importance to determine residential status of NRI depending upon their no of days of stay in India. This factors determine the taxability of income for NRI.
• Filing details of Exempt income: Even though no tax is levied on exempted income still as per CBDTinstructions it is compulsory to give details of exempt income (dividend, interest on NRE/FCNR account, interest on tax free securities,etc) in ITR.

Cases when it becomes compulsory to file ITR

There are some specific cases where filing of ITR becomes mandatory for NRI, those are-

• It is important to know that if NRIs long term capital gain exceeds basic exemption limit then it becomes mandatory for them to file ITR irrespective of its other heads of  income.
• When taxable Income of NRI is less than the Basic exemption limit but his Exempt Income is more than the Basic Exemption Limit then, he is required to file the ITR mandatorily irrespective of the fact that the taxable income is less than the Basic exemption.
• And all persons whose taxable income exceeds basic exemption limit are mandatorily required to file ITR in applicable ITR forms.

How can I verify my NRI ITR?

NRI can verify ITR by sending signed acknowledgement to CPC or by e-verifying within 30 days of filing of ITR.

Furnishing Aadhar number is not mandatory for NRI:

As per the CBDT , NRIs living in India are not required to mandatorily quote their Aadhar number details while filing ITR.

AMIT BHUTADA

CA Amit Bhutada Owner at A N Bhuatda & CO having +10 years of experience and expertise in the hardcore profession of Accountancy and Taxation. He has in his credit experience in the field of Income Tax, Audit,Clound Accounting, Company Law Matters, Financial Services, GST, International Taxation , Goods & Services Tax (GST), GST Audit, etc.

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