A Non-Resident Indian (NRI) is a citizen of India or a person of Indian origin who is not a resident in India. In this article, we review the requirements governing income tax return filing by NRIs. The question of whether NRIs should file a return of income depends on whether the NRI has taxable income in India.

Residency Status of NRIs

Residency for tax purposes is decided based on a person’s physical stay in India. There are three conditions that could determine NRI residency for tax purposes:

• Firstly, when an individual’s stay in India is lesser than 60 days in a particular financial year
• Secondly, when the stay is in excess of 60 days but is lesser than 182 days and the cumulative stay in the four years preceding the year in question is lesser than 365
• Finally, when an individual departs from India for taking up employment outside India and the duration of stay is lesser than 182 days in the year of departure

Depending on the above conditions, the Income Tax authorities decide whether a particular person shall be treated as a resident of India for a particular financial year.

Should NRIs file income tax return in India?

Yes. NRIs should file an income tax return in India if they have taxable income in India. For example, an NRI having a house property in India, earning rental income would be required to file an income tax return, if the rental income exceeds the exemption amount. Tax is applicable to NRIs for the following types of income:

• Any income which accrues or arises in India
• An income which is deemed to accrue or arise in India
• Any income which is received in India
• An income which is deemed to be received in India

Further, losses of a particular financial year are allowed to be carried forward for being set-off against income of future financial years only when the return of income for the year of loss has been accordingly filed. Finally, delayed filing of return attracts a penal interest at the rate of 1% per month on the balance tax payable. In addition, a penalty of Rs 5,000 may be levied if the return is not filed within a period of one year from the end of the applicable financial year. Hence, it is necessary for NRIs to file income tax returns promptly.

When is NRI Income Tax Return not required?

An NRI is not required to file an income tax return in India while having income in India, only if the specified condition is satisfied. The specified condition is that the NRI’s total income in the financial year should consist only of investment income. Alternatively, the NRI’s income may arise from long-term capital gains which are exempt from tax. However, in either case, income tax should have been deducted from the income at source.

Due Date for NRI Return Filing

NRI Income tax return must be filed on or before 31st July following the financial year by an individual. However, the due date is considered as September 30 if the NRI is a working partner of a firm whose accounts are necessary to be audited. However, if the taxpayer has missed the due date, the taxpayer can file a belated return.

Procedure for Filing Return

NRIs can easily file their income tax return online. In addition to e-filing, they can also file through the following methods:

• Furnishing the return electronically using a digital signature (DSC)
• Transmitting the income tax data in the return electronically under electronic verification code
• Transmitting the data in the return electronically and thereafter submitting the verification of the return in Return Form ITR-V
• In case the taxpayer is using Form ITR-V, the assessee should print out a copy of the form. The copy, duly signed by the assessee, has to be sent by post to the Electronic Data Processing Centre in Bangalore.
• Furnishing the return in a paper form (manual filing of Income Tax return)
• Taxpayers should note that manual filing of Income Tax return is permitted only in the case of assessees who are more than eighty years of age.