Filing income tax return is a one-time job in a year that every person should do. Every year we all are required to furnish information of income from all sources and taxes paid on that income to the income tax department. Either we hire income tax consultant or we file it by ourselves. Income tax is determined and paid on the basis of residential status. A person can be i) Resident or ii) Non-resident during the year. However, residential status of individual can be a) resident and ordinary resident b) resident and non-ordinary resident. As per the Section 2(30), non-resident means a person who is not a resident.
The residential status is to be determined every year by all taxpayers because income tax act has different rates, exemptions, and deductions for resident and non-resident. In case of resident taxpayer all income would be taxable in India, irrespective of the fact that income is earned or has accrued to taxpayer outside India. However, in case of non-resident all income which accrues or arises outside India would not be taxable in India.
Tax incidence in case of Non-residents:
| Nature of income | Taxability in the hands of Non-resident |
| Income which accrues or arises in India | Taxable in India |
| Income which is deemed to accrue or arise in India | Taxable in India |
| Income which is received in India | Taxable in India |
| Income which is deemed to be received in India | Taxable in India |
| Income accruing outside India from a business controlled from India or from a profession set up in India | Not taxable in India |
| Income other than above (i.e.,income which has no relation with India) | Not taxable in India |
Now the point comes that how NRI should file income tax return?
Few steps have been covered in this article in simplified way so that NRI can easily understand that how income tax act works. Theses steps are as follow:
Step 1: Determine residential status:
As stated earlier determination of residential status is first and foremost element. Residential status is determined on the basis of your number of days stay in India. The residential status is calculated under section 6 of income tax act. The number of days you reside in India is important. An individual is a non-resident if he satisfies none of the conditions specified under section 6(1) of the income tax act.
Step 2- Calculate Total Income:
Income tax has five head of income under which incomes are taxable. These heads are, Income from Salary, Income form House property, Income from capital gain, Income for Business and profession and Income from other sources. NRI should determine his income and evaluate under which head the income will be taxable.
Step 3- Calculate income tax:
For NRI, basic slab benefit is available, i.e No income tax is to be levied on an income upto 2.5 lakh. The slab of income is given below:
| Net Income Range | Income tax rates | Health and education cess | Surcharge |
| Up to 2,50,000 | Nil | Nil | Nil |
| 2,50,000 to 5,00,000 | 5% of (total income – Rs. 2,50,000) | 4% of Income tax | Nil |
| 5,00,000 to 10,00,000 | 12500+ 20% of (total income – Rs. 5,00,000) | 4% of Income tax | Nil |
| 10,00,000 to 50,00,000 | 1,12,500+ 30% of (total income – Rs. 10,00,000) | 4% of Income tax | Nil |
| 50,00,000 to 1,00,00,000 | 13,12,500 + 30% of (total income – Rs. 50,00,000) | 4% of Income tax | 10% of income tax |
| 1,00,00,000 to 2,00,00,000 | 28,12,500 + 30% of (total income – Rs. 1,00,00,000) | 4% of Income tax | 15% of income tax |
| 2,00,00,000 to 5,00,00,000 | 58,12,500 + 30% of (total income – Rs. 1,00,00,000) | 4% of Income tax | 25% of income tax |
| Above 5,00,00,000 | 1,48,12,500 + 30% of (total income – Rs. 1,00,00,000) | 4% of Income tax | 37% of income tax |
Step 4- Select the right income tax form:
Choosing the right income tax form is important because incorrect form filing can make your income tax return invalid. NRI can file income tax return using Form ITR 2 and ITR 3. Form ITR-2 is applicable for person not having income from profits and gains form business and profits. Form ITR-3 is applicable for NRI having income from business or profession.
Step 5- File Income tax return:
Go to the Income Tax e-Filing portal https://www.incometax.gov.in/iec/foportal and file your income tax return. After uploading the ITR, select the one of the following method to e-verify the return:
- EVC generated through bank ATM or Generate EVC option under My Account
- Aadhaar OTP
- Pre-validated Bank Account
- Pre-validated Demat Account
For any information/query/concerns related to income tax provisions, please feel free to contact us at mail@nbaoffice.com
