How NRIs can fill forms
for Income Tax returns?
Even the simplified returns are difficult to understand for ordinary
people who dose not have tax knowledge. Actually we heard many time
that submission of Income tax return has been simplified but most
of the NRIs still do not know how to submit income tax return.
If you do not know how to fill it or even you have some knowledge,
still you have to take the help of some one for free or you must
contact a C.A and pay for his services.
Tax filing tips for Non Resident Indians
New Delhi, May 20, 2008
By Dinesh Agarwal
Filing of tax returns in India by a Non Resident Individual depends
on the taxability of income earned by the individual which in turn
depends on his/her residential status (as per tax laws). Here are
some tips for you.
Who is a Non resident in India?
As per the provisions of the Income Tax Act, 1961 (Act), an individual
is considered to be a tax resident of India if he is:
a) Physically present in India for 182 days or more in that tax
b) Physically present in India for 60 days in that tax year and
365 days or more in the preceding four tax years. However, if an
Indian citizen leaves India during the previous year for the purpose
of employment outside India or as a member of the crew of and Indian
ship, the period of ’60 days’ is extended to ‘182
The above two conditions are termed as the basic conditions of
residency. If neither of these two basic conditions are satisfied,
the individual is classified as a NRI.
Which income of NRIs is taxable in India?
Income received or deemed to be received or income accruing or
arising or deemed to accrue or arise in India by NRIs are India
sourced income and hence, are taxable in India. More often, NRI
is also taxed in the country where he is a resident. This situation
of “double taxation” (ie taxed in India as well as in
the country of which the NRI is a resident) can be avoided by appropriate
planning considering the provisions of the relevant Double Taxation
Avoidance Agreement ( or Tax Treaty) entered by India with the relevant
country and availing the benefits of the same, if any.
Why NRIs are required to file Income Tax returns in India?
If an individual has a tax obligation in India, the domestic tax
laws of India requires filing of a Return of Income. A NRI may be
required to file the Income Tax return in India under the following
a) Earning from India sourced income exceed the maximum amount
chargeable to tax thus resulting in tax obligation,
b) Taxes have been withheld in excess of income offered to tax
thus resulting in a refund situation.
c) To enable the NRI to claim treaty benefits in the country of
his residence ie the country in which his global income is consolidated
d) To become tax compliant as per India tax laws.
However, it will not be necessary for a NRI to file a Return of
Income in India if his total income consist only of investment income
or income by way of long term capital gains or both and if the tax
deductible at source under the provisions of the Act has been deducted
from such income.
Filing of Return of Income by NRI in India – Procedures
a) The first step to filing the Return would be making an application
for allotment of Permanent Account Number (“PAN’) in
a prescribed Form No. 49A. Earlier the application for PAN was required
to be made only in physical form but now PAN can be applied online
through website from anywhere in the world. The PAN is to be quoted
in all correspondences relating to Income Tax including Return of
b) Appropriate form of Return of Income applicable for the NRI
based on the source of income needs to be selected out of the following
as may be applicable:
ITR 1 – For Individuals having Income from Salary/ Pension/
family pension & Interest or income from agricultural activities
ITR 2 – For Individuals not having Income from Business or
Profession or on account of being a partner in a partnership firm
ITR 3 – For individuals who are partners in a partnership
firm and does not carry out any other business or profession
ITR 4 – For individuals having income from a proprietary
business or profession
c) Presently there are two options available to the NRIs to file
their return of income viz. Electronic filing or Physical filing.
Under Electronic filing, the NRI will have to get the tax return
uploaded on the Income Tax website with a Digital Signature (NB:
Digital signature is required to be separately obtained from specified
Digital Signature Issuing Authorities). However if the file is uploaded
without a digital signature, the individual will have to print Form
ITR-V and submit the same with the Return physically. In such cases,
the process of filing return will be completed only on physical
filing of ITR-V.
Under Physical filing, the individual will have to file the respective
ITR form along with the Acknowledgment form with the Income Tax
Officer. The return needs to be signed and verified by the individual
personally or where he is absent from India, by the individual himself
or by some person duly authorized by him in this behalf in which
case the person signing the return should hold a valid power of
attorney from the individual which shall be attached to the return.
Consequence of not filing Return of Income by NRI
If individuals file their returns after the last date of filing
Return of Income, they will be charged interest at the rate of 1%
per month of delay. Further, if such a return is filed after one
year from the end of the tax year concerned, apart from the interest,
they will also be liable for a penalty of Rs 5,000. The due date
of filing the return of income by a NRI is July 31. However, if
the NRI is a working partner of a firm whose accounts are required
to be audited, then the due date is September 30.
Some Practical issues faced by a NRI in preparation and
filing of Return of Income in India :
a) Examining Treaty Benefit – The tax years of countries
are usually different (See table below).
Country Tax Year
India April 1 to March 31
United Kingdom April 6 to April 5
Australia July 1 to June 30
Germany, Switzerland, Denmark January 1 to December 31
The residential status needs to be examined very carefully
to ascertain whether treaty benefit would be available to the NRI.
Peculiar situations could arise for an individual as he could be
a resident of both countries or a non resident of both countries
as per the tax treaty (this is possible in case of highly mobile
employees) for a particular period of the tax year. Where an individual
is a resident of both countries, the residential status for the
purposes of the tax treaty is determined by applying the ‘tie
breaker’ test in the tax treaty. This is essential, since
the country of residence relieves the burden of double taxation
by giving either the credit for taxes paid in the source country
or the country in which the individual is not a resident sparing
the income that has suffered tax in the country in which he is a
resident. On the other hand, where a NRI is considered to be a non
resident of both countries, he is not entitled to the tax treaty
benefits and thus would be governed by the respective domestic tax
laws of those countries relating to residence and taxability.
b) Ascertaining Jurisdiction – If the NRI is outside India,
for him to ascertain the right jurisdiction where his return is
required to be filed poses a big challenge. In most of the cities,
dedicated international jurisdiction is available for filing of
the Return of Income by NRIs. However, this may get smoothened with
gaining popularity of online filing through websites.
c) Address – A local address is required to be entered in
the Return of Income. This poses a problem since the NRIs who visit
India for a short period find it difficult to find a local address
to be given in the Return of Income. To overcome this problem, generally
address of the local office in which the NRI works is mentioned
in the Return of Income.
d) Bank details – It is mandatory to provide Bank Account
details in the returns in case of refunds. NRIs who are visiting
India for a short period do not intend to open a Bank Account in
India but are forced to open Bank account in India for tax compliance
e) Physical filing of Return of Income – If the return is
intended to be filed physically and the NRI is outside India, verification
and signing of the Return of Income poses a problem as, in such
circumstances, return needs to be signed and verified by the individual
himself or by some person duly authorized by him in this behalf
in which case the person signing the return should hold a valid
power of attorney from the individual which shall be attached to
f) Online Filing of Return of Income – The online filing
of Return of Income requires ‘Digital Signature’ which
to obtain requires adherence to a separate procedure.
The author is Associate Director – Global Tax Advisory
Services, Ernst & Young. Copyright © 2008 Times Internet
Limited. All rights reserved. For reprint rights: Times Syndication