Income Tax Rules for NRIs

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If you are an NRI, your taxability depends on NRI status for a particular year.

 

Checkout the 5 income tax rules that you must know:

1. You must pay tax on all incomes that arise or accrues within or is received in India. Therefore, your Indian salary, interests earned from FD's and savings accounts, rental earnings, capital gains on all assets sold within India, are taxable income. If your earnings are more than the basic exemption limit for the particular year, you must file a return in India. Again, if you intend to claim a tax refund, or carry forward your losses to future years, you must file a return.

 

2. If you return permanently to your country after being abroad for few years, your earnings overseas do not become taxable immediately. If you have lived out of the country for nine years or more, you remain an RNOR (Resident but Not Ordinarily Resident) for the next two years. It is the transitional status between being an NRI and turning into a permanent resident of India. This is the phase when your earnings outside India are not taxed within India. However, if the earnings come from a profession or business that you control from India, it becomes taxable income. As soon as you become a permanent resident of the country, both your Indian and Global income become taxable within India.

3. If you return to India and turn ordinary resident of the country for a particular year, you must disclose all foreign income and assets in your tax returns. There are rigid regulations under the Undisclosed Foreign Income and Assets Bill, 2015, for evading foreign income in your tax returns. All undisclosed foreign income and assets are taxed at 30%. You cannot claim for deductions, offsetting against losses or allowances for such income. Again, such earnings and assets will never be subject to regular domestic income tax laws. A penalty of INR 1,000,000 will be levied under the following scenarios:

• Not furnishing tax return with the time specified under the income tax laws
• Not furnishing information or offering inaccurate information while filing returns

Based on the severity of the offence, the bill also has stringent penalties of upto 300% tax deduction or amounting to 10 years or more of imprisonment.

4. In Indian Budget 2016, it was declared that NRI's without a PAN would not be deducted at a higher rate. However, you will still have to provide alternative documents to avail this benefit. There was no change in this rule in the 2017 budget.

 

5. You cannot open a PPF account. However, you had an existing PPF account before leaving the country; you can still operate the account until the time of its maturity. Once the PPF matures, you must remit the proceeds in your country of residence. However, you will not be able to avail the option of extension beyond the 15 years lock-in period. In case you leave the account unattended after maturity, it will be considered "extended without contribution".

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e-filing of Income Tax Returns is necessary for Tax Payers

Filing your tax return is one way of having a legitimate proof of your income. It also helps you establish a good record with the I-T Department.

Paying your income tax and filing tax returns provides on time is a must for all individuals. Doing so makes it less likely for you to fall foul of the Income Tax Department which might issue notices to you.

Being tax complaint has other benefits too. If you are looking for housing, vehicle, education loans, etc. it is important that you provide your income tax return receipts that you have filed for the loan to be processed. If you haven't filed your returns, banks will not provide any loan if the return stays to be NIL for three years

Here are few other scenarios where filing ITR becomes necessary for tax payers:

=>Filing returns are also important for VISA processing.

=>Immediate registration of immovable properties is possible if you have filed your tax returns on time.

=>Unless you file your return regularly, banks may not issue a credit card to you.

=>Filing your tax return is one way of having a legitimate proof of your income, and it helps you establish a good record with the I-T Department.

Chandak said that in case you fail to file your income tax returns, you will have to deal with certain consequences like business loss and capital loss (short term or long term), which are to be carried forward but you will not be eligible for it. Therefore, if you fall into a certain section of income and you are eligible to pay taxes, make sure that you file your tax returns as well because paying your taxes isn't enough. Keep your return receipts safely so that you can avail several benefits that come with filing tax returns.

Here are some of the benefits of e-filing your income tax returns:

Faster Processing of Tax return and Refunds

E-filed returns gets processed at a faster speed than physically filed returns. More importantly, refunds, if any, are processed faster than paper-filed returns.

Better accuracy

Paper-filings can be prone to errors but E-filing software comes with built-in validations which minimizes errors considerably.

Convenience

E-filing facility is available 24/7 and you can file your return anytime, anywhere at your convenience.

Confidentiality

In case of paper filings details of your income can fall in the wrong hands at your chartered accountant's office or in the Income Tax Department's office. But under e-filing your data is not accessible to anyone either by design or by chance so it provides better security than paper filings.

Easy access to past records

E-filing applications store data in a secure manner and allow you to access your past returns and other forms on the go. You can access this data anytime and from anywhere.

Ease of use

E-filing is user friendly and the detailed instructions make it easy even for individuals not very conversant with the internet.

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Long Term Capital Gains Tax

 

Long-term capital gains tax

Long-term capital gains tax is nil for all equity mutual funds schemes

 

Long-term capital gains tax is 10% for all equity mutual funds schemes. The investor has to hold his equity investments for more than 12 months to qualify for long-term capital gains tax. If investments are sold before a year, short-term capital gains are taxed at 15 per cent.

 

You have to fill ITR-2 form to file Income Tax returns and show your long-term capital gains.

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FILE RETURNS IF INCOME EXCEEDS BASIC LIMIT

 

Do you have to file your tax return? Taxpayers hold many misconceptions about this.

Some think if their income is not taxable, they needn't file their return. Others believe that if tax has been deducted at source, their tax compliance is taken care of. The rules say that an individual has to file his tax return if the gross taxable income is above the basic exemption limit. This limit is `2.5 lakh for general tax payers, `3 lakh for senior citizens (above 60) and `5 lakh for very senior citizens (above 80). Remember, the gross income is computed after taking into account exemptions such as house rent, conveyance and other allowances, but before the deductions.

As the table shows, Taxpayer A does not have any tax liability because deductions will reduce his tax to zero. But he still has to file his tax return because his gross total income is above `2.5 lakh. Similarly, the very senior citizen is not obliged to file his return because his income is below the `5 lakh exemption limit. But he will need to file his return if he wants to claim refund of the TDS on his fixed deposits and bonds.

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FILE Income Tax BEFORE DEADLINE AND VERIFY RETURN

If you have followed all the commandments, here is one last rule you cannot afford to ignore. File the return before the 31 July deadline. Till last year, there was no penalty for filing delayed returns. One could even file returns of the previous two years without a hitch if all his taxes were paid. But the rules have now been changed.

Earlier, belated return could be filed at any time before the expiry of one year from the end of the relevant assessment year. So, the returns for the financial year 2014-15 (assessment year 2015-16) could be filed till 31 March 2017. However, now, belated returns may be filed before the end of the relevant assessment year. This reduces the time window by a year.

A new section 234F inserted in the Income Tax Act has fixed a penalty for delay in filing. It is applicable from the assessment year 2018-19. For now, the penalty is `5,000 if the return is not filed the return before the end of the relevant assessment year

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Do Not delay Filing Income Tax Returns

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The tax returns season is underway. You must take all steps to ensure your return filing is error-free. For this it is important to file your returns punctually by the Aug 31 deadline and to keep yourself updated about any changes in the tax filing norms.

If you wait till the last minute to file your returns, you may commit mistakes in a hurry and will have to file a revised return by March 31, 2019. From assessment year 2018-19, if you file your income tax return (ITR) after the due date, you may have to pay a penalty up to Rs 5,000 if you file by December 31 and Rs 10,000 thereafter. For those whose income is under Rs 5 lakh, the penalty is Rs 1,000.

There are several such developments in recent times. To be on the right side of the norms, it is important to file your returns on time. Take a look at some important changes to ensure an error-free filing well within the July 31 deadline.

Change in tax-related rules

Income tax slab rates have changed for AY19. For individuals whose taxable income is between Rs 2.5 lakh and Rs 5 lakh, a rate of 5 percent would be applied. The tax slab of 20 percent remains the same for individuals earning Rs. 5 lakh to Rs 10 lakh, and 30 percent for income above Rs 10 lakh.

If you own more than one home, then till AY18 the entire interest paid on the home loan was allowed as deduction under Section 24B, but now it has been restricted to Rs 2 lakh in a financial year. Earlier, the complete loss from house property was allowed to be set-off without a ceiling, but it is now restricted to Rs 2 lakh in a financial year and the remaining loss can get carried forward for the next 8 years.

Earlier, the holding period to claim long-term capital gain tax on immovable property was 3 years, but from AY19 the holding period has been reduced to 2 years.

The base year to calculate the indexation for ascertaining LTCG was 1981 earlier, It is 2001 from this assessment year.

Earlier, there was no surcharge on an individual's income, but from this year a 10 percent surcharge will be applicable if the total income exceeds Rs 50 lakh up to Rs 1 crore. If the income exceeds Rs 1 crore, a surcharge of 15 percent will be applicable.

Section 87A earlier provided a rebate up to Rs 5,000, but the same has been slashed to Rs 2,500.

Changes in ITR form

Sahaj or ITR-1 form will now require additional details related to salary break-up. It would need details of perquisites, allowances, et al. It would also require detail of income from the property including rental income, tax given to local authority, etc.

In the new ITR form, you have to mention the details of exemption from capital gain separately. For each section such as Sec 54, 54 B, 54 EC, 54 GB, etc you have to mention the details in the relevant column.

ITR 4 has also changed, as it would now need additional details such as secured/unsecured loan details, fixed assets, capital account, etc.

GST details required while filing ITR

Starting this year, you have to specify the exact turnover details mentioned while filing Goods & Services Tax. This can be cross-checked by the Income Tax Department. You also need to mention the GST detail in ITR.

To make your tax filing process an error-free exercise, it is important you keep your documents handy, do your calculations beforehand and file before the July 31 deadline.

Depending on your mode of filing returns - either through a private tax filing portal or through the government one, you should be aware of the form you need to fill. In case it is done through a private portal, the correct form will be chosen for you. If you file via the government website, you will have to manually choose it.

Since the I-T Department has introduced 7 new forms this year, it is wise to have some time in hand to pick the correct form and avoid mistakes.

While filing your returns, you would also require time to verify your tax deducted at source details in Form 26AS. Any mismatch should be brought to the notice of your employer. Again you need time to make rectifications, therefore plan ahead to avoid last-minute rush which can cause errors.

Things to keep in mind
- Keep all important documents handy while filing returns to save time and to keep errors away
- Claim all tax benefits and deductions properly -even the ones you forgot to mention in your tax declaration

- Take note of important details like interest earned from recurring deposits and fixed deposits, which are fully taxable at the applicable slab rates. Interest earned up to Rs 10,000 from savings bank account is exempt under Section 80TTA.

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Filing Income Tax Returns challenges

 

Even though tax season generally coincides with monsoon, unlike the latter, the former is not a season that taxpayers look forward to. This is because filing income tax returns is a taxing process. No pun intended.

Taxation by itself is complex. For the layman, it gets even more so when they have to file their income tax returns. The ITR forms are complicated, there are several fields that need to be filled in and nomenclature that needs to be understood. One mistake in any of the fields and the entire returns can go awry.

But there are some basic challenges that taxpayers face that can lead to mistakes. Here are 7 of them:

Entering the correct details manually

The ITR forms carry a number of rows and columns that need to be filled out at the time of filing one's income tax returns. The details have to be entered in a particular format, which if not done properly can lead to errors in the returns. For example, dates have to be entered in the DD/MM/YYYY format only. If the date is entered in any other format, the returns would be incorrect.

Correct computation of income

Taxpayers need to compute their income accurately, including income other than salary. This additional incomes can be from sources like savings account interest, fixed deposit interest, rental income from house property, income from short-term capital gains, etc. These incomes have to be included and entered in the relevant fields in the ITR forms.

Mismatch in details of TDS

Often, details of tax deducted at source end up being incorrect because TDS is deducted not only from salary but from other incomes as well. If the details entered in the ITR forms do not match with the government's data, the filed returns would be incorrect. Taxpayers can look at their tax credit statement (Form 26AS) to verify the TDS deducted from different sources.

Forgetting login password

Since income tax filing is something that a taxpayer has to do only once a year, people tend to forget the password for their accounts. In such cases, they have to reset their passwords to be able to e-file their tax returns. Even then, to reset their password they have to answer a secret question and answer, which is also something that people tend to forget.

Different Form 16s because of changed jobs

Whenever a taxpayer changes jobs, they end up with different Form 16s from each employer at the time of filing their tax returns. Filing returns with multiple Form 16s can be tricky and taxpayers are often not sure about how to do it.

HRA not being given by employer

If an individual doesn't submit the rent receipts with the company HR, he or she won't be able to get house rent allowance. Often, taxpayers are not aware that they need to have their landlord's PAN to avail the HRA benefit. Furthermore, calculating the applicable amount of HRA is also tricky.

Calculating how much deductions can be claimed

Taxpayers are allowed to claim deductions of up to Rs 1.5 lakh in a financial year by way of certain investments and expenses. But how much can be claimed from what source is a tricky thing to figure out. Often, taxpayers are also not aware of some expenses that are eligible deductions.

These are the 7 common challenges that taxpayers face while filing their income tax returns. Most of them are easy to face once the taxpayer has adequate know how about income tax returns and how to file them.

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