July 31st is the last date for filing your Indian income tax returns. If you are a Non Resident Indian (NRI) and are trying to figure out if you need to file a tax return in India, this guide will help you.
If you are an NRI, you would have to file your income tax returns if you fulfill either of these conditions:
- Your taxable income in India during the year was above the basic exemption limit.
- You have earned short-term or long-term capital gains from sale of any investments or assets, even if the gains are less than the basic exemption limit.
What this means is that firstly, NRIs do not get the benefit of differential exemption limits on basis of age or gender that is available to Resident Indians. Secondly, for NRIs, certain short term or long term capital gains from sale of investments or assets are taxed even if the total income is below the basic exemption limit. These include short term capital gains on equity shares and equity mutual funds where tax rate is 15% and long term capital gains on securities and assets where tax rate is either 20% or 10% without indexation.
- If your taxable income consisted only of investment income (interest) and/or capital gains income and if tax has been deducted at source from such income, you do not have to file your tax returns.
- If you earned long term capital gains from the sale of equity shares or equity mutual funds, you do not have to pay any tax and therefore you do not have to include that in your tax return
You may also file a tax return if you have to claim a refund. This may happen where the tax deducted at source is more than the actual tax liability. Suppose your taxable income for the year was below Rs. 2 lakh but the bank deducted tax at source on your interest amount, you can claim a refund by filing your tax return. Another instance is when you have a capital loss that can be set-off against capital gains. Tax may have been deducted at source on the capital gains, but you can set-off (or carry forward) capital loss against the gain and lower your actual tax liability. In such cases, you would need to file a tax return.
- If you do not have any tax payable (that is all your tax has been deducted at source), you can still file your tax return without any penalties within one year after the end of the assessment year.
- If you do have tax payable, you can still file your returns within one year after the end of the assessment year but you will be charged an interest of 1% per month for every month of delay starting from 31st July 2013 till the time you file your tax returns.
- If you do not file your tax returns even within one year after the end of the assessment year, you may be charged a penalty of Rs. 5,000 for every year of delay.
As per the provisions of the Income Tax Act, you must pay advance tax in three installments during the year in case the tax payable, after adjusting TDS is likely to be Rs.10,000 or more.
There are interest implications in case of default in payment of any installments or lesser payment of advance tax. The interest is generally 1 percent per month for the default amount and extends till the date of payment. Therefore, NRIs should evaluate if they were liable to pay advance tax and whether the same was paid in time. If not, they would need to calculate the interest for default and deposit the same before filing the tax return.
There are 3 ways in which you can file your tax returns. You can do it yourself using online e-filing portals. In fact, from financial year 2012-2013 onward, the income tax department has made it mandatory to e-file returns for in case your taxable income is over Rs. 5 lakh. The income tax department provides a free method to upload your tax return online. If you are looking for a more user friendly approach, paid e-filing portals might be a good choice. Many of these paid service providers do offer special packages for NRIs.
If you are not comfortable doing the entire filing by yourself, you can choose to go to assisted preparers. You can get professional advice along with help with filing your tax return.
Lastly, you can opt for the traditional route where your regular chartered accountant with whom you have a long term relationship with files your tax return.