Do NRI Need to File Tax in India? Understanding Your Tax Obligations

Managing finances in India can be a challenging task for Non-Resident Indians (NRIs), especially when it comes to taxation. Understanding your tax obligations is vital to staying compliant and avoiding penalties. So, Do NRI Need to File Tax in India? The answer depends on your income sources and the total amount earned in India.

Who Qualifies as an NRI?

According to the Income Tax Act, 1961, an individual is classified as an NRI if:

1. They stay outside India for 182 days or more in a financial year.
2. They meet other specific criteria, such as spending less than 60 days in India and 365 days cumulatively over the last four years.

Your residential status determines your tax liability in India, as only income earned or accrued in India is taxable for NRIs.

When Do NRIs Need to File Tax Returns in India?

NRIs must file tax returns in India under the following circumstances:

• Income Exceeds the Exemption Limit:
  • Under the Old Tax Regime, NRIs must file an ITR if their income exceeds ₹2.5 lakhs.
  • Under the New Tax Regime, introduced in 2020, this limit increases to ₹3 lakhs for NRIs who opt for it.
• Income Sources in India:
  Income earned in India, including the following, is taxable:
  • Salary received in India.
  • Rental income from property in India.
  • Capital gains from asset sales, such as real estate or stocks.
  • Interest on fixed deposits and savings accounts in India.
  • Pension income.

Even if your income falls below the taxable limit, filing an ITR can be beneficial to claim refunds on TDS or carry forward capital losses.

Key Tax Provisions for NRIs

1. Income Tax Act, 1961: The governing framework for NRI taxation.
2. Section 9: Defines income deemed to accrue or arise in India.
3. Section 195: Specifies TDS rules for payments made to NRIs.

Why Do NRI Tax Filing Issues Arise?

Several factors contribute to the complexity of tax filing for NRIs:

• Lack of Awareness: Many NRIs are unaware of their obligations under Indian tax laws.
• Complex Regulations: Double taxation treaties and exemptions require expert knowledge.
• Inadequate Documentation: Missing or incorrect records can lead to errors.

Steps NRIs Should Take for Compliance

1. Understand Tax Treaties: Familiarise yourself with Double Taxation Avoidance Agreements (DTAA) to prevent paying taxes on the same income in both countries.
2. Seek Professional Help: Engage with a tax expert to guide you through the process.
3. Maintain Records: Keep detailed records of your income, investments, and tax payments in India.
4. File Returns on Time: Avoid penalties by adhering to deadlines.

Recent Judgment Supporting NRI Tax Compliance

In Geeta Kancha v. Income Tax Officer (2021), the Income Tax Appellate Tribunal (ITAT) reinforced that NRIs with taxable income in India must file returns. The judgment highlights the importance of compliance and timely filing to avoid penalties and complications.

Benefits of Timely Filing

Timely filing of taxes offers multiple advantages:

• Claim refunds on excess TDS.
• Maintain a clean financial history in India.
• Avoid legal complications and penalties.

Why Choose LawCrust for NRI Tax Filing Assistance?

LawCrust Legal consulting, a leading legal consulting firm in India, specialises in NRI tax services LawCrust Global Consulting Ltd. We help you navigate tax filing with expertise and efficiency. Whether it’s preparing ITRs, claiming deductions, or resolving disputes, LawCrust is your trusted partner. Offer premium legal services, including NRI Legal Services, Litigation Finance, Mergers & Acquisitions, Hybrid Consulting Services, Startup Solutions, Litigation Management, and Legal Protect. specialises in offering comprehensive legal solutions across India and internationally. Their expertise includes:

Services Offered by LawCrust:

• Tax filing and compliance.
• Advice on DTAA provisions.
• Property and investment management.
• Legal representation in disputes.

Contact Us

Call Now: +91 8097842911
Email: bo@lawcrust.com

Let LawCrust handle your NRI taxation needs with professionalism and precision