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Tuesday, March 5, 2013

Income tax rules for NRIs in India

Handling finances has never been easy and doing it in two countries can sometimes be baffling for NRIs. Here we are to help you understand the how to tackle the different taxation rules and regulations in India. Many a times NRIs find themselves in a fix while filling taxes as the rules for NRIs are different from those that are valid for residents. Here we are having a look, why and in what circumstances an NRI has to file taxes in India.

Rules to file or not to file returns

When an NRI earns income outside India, he/she is not liable to pay taxes in India. You don't have to pay tax on the interest income in a non-resident external account (NRE) or foreign currency non-resident account.(FCNR). Infact you don't have to file income tax return if you don't have any taxable income in India.

However if your taxable income in India during the financial year is above the basic exemption limit of Rs 1.8 lakh you need to file the income tax returns legally.

Circumstances when NRIs are liable to file income tax returns are the following:

·     Trading Income

·     Property/Plot/House Income

·     Salary earned in India for services in overseas

·     Income from any family assets

·     In the form of Interest rates paid by NRI to government, bank

·     Fees under industrial duty

·     Extra Bonus paid by Indian company

However NRI's can save taxes by investing in pension plans, LIC and tax saving mutual funds upto certain limits.

Ways for NRIs to file taxes in India

There are basically three ways to file income tax returns in India. Either you can do-it-yourself online or through assisted services or through the traditional route of a chartered accountant.

Some of the important and practical aspects which should be handled carefully while filing returns include:

Mandatory e-filing

According to the latest notification of the Central Board of Direct Taxes (CBDT) in India, it is mandatory to file your returns electronically if you have annual gross total income (that is, income before any Chapter VI deductions like Sec 80C etc) in excess of Rs 10 lakh.

Interest liability

NRIs should know if they are liable to pay advance tax and if yes it should be paid in time. If not, they would need to calculate the interest for default and deposit the same before filing the tax return. If an individual delays filling returns or pays less advance tax, there are interest implications. The interest is generally 1 percent per month for the default amount and extends till the date of payment.


  1. These are the most basic questions for which NRIs takes advice of CAs. thanks for taking efforts to explain the whole thing in such simple yet effective manner so it would be easy to understand for people who are from non finance sector.

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  2. Thanks for taking the time to discuss this, I feel strongly that love and read more on this topic. If possible, such as gain knowledge, would you mind updating your blog with additional information? It is very useful for me. IRS Settlement Lawyer