NRI ITR filing for assessment year 2024-25: Income Tax Return Filing For NRI

Filing income tax returns for NRIs has become crucial for the assessment year 2024-25, considering the previous year’s trend of income tax notices for scrutiny. It’s essential for NRIs to ensure hassle-free living by avoiding such notices and claiming income tax refunds. The process for filing income tax returns for AY 2024-25 has commenced, urging NRIs to gather necessary documents and information for seamless ITR filing. This article discuss into the specifics applicable to NRIs for ITR filing, including form filing, tax slab, surcharges, non-residential status calculation, tax planning schemes, investments in India, and more. Let’s go into the details.

Residential status for NRIs

A Non-Resident Individual is defined as an individual who doesn’t meet the criteria for residency in India according to tax laws. Determining this status involves examining the individual’s residency under Section 6 of the Income Tax Act, 1961, outlined as follows:

An individual will be considered a Resident in India for a given previous year if they meet either of the following conditions:

1. They stay in India for 182 days or more during the previous year.
2. They stay in India for 60 days or more during the previous year and for 365 days or more during the four years immediately preceding the previous year.

If an individual doesn’t meet either of these conditions, they are treated as a Non-Resident for that previous year.

However, for an Indian citizen or a person of Indian origin visiting India during the year, the 60-day period mentioned in (2) above is extended to 182 days. A similar extension is granted to Indian citizens who leave India during a previous year for employment outside India or as a crew member.

Effective from the Assessment Year 2021-22, the Finance Act, 2020 has amended this exception. It stipulates that if an Indian citizen or a person of Indian origin, whose Total Income (excluding income from Foreign Sources), exceeds ₹15 lakh during the previous year, the 60-day period mentioned in (2) above is reduced to 120 days.

Additionally, the Finance Act, 2020 introduced a new provision, Section 6(1A), applicable from the Assessment Year 2021-22. It states that an Indian citizen with a Total Income exceeding ₹15 lakh (excluding income from foreign sources) shall be deemed a Resident in India if they are not liable to pay tax in any country.

Tax returns and forms applicable for Non-Resident Individuals for the Assessment Year 2024-2025

ITR Forms for NRIs:

1. ITR-2 – Suitable for Non-Resident Individuals:

ITR-2 is designed for use by individuals (whether Resident or Non-Resident) and Hindu Undivided Families (HUF) who do not earn income under the head “Profits and Gains of Business or Profession.” Individuals who are ineligible for filing ITR-1 fall under this category.

2. ITR-3 – Suitable for Non-Resident Individuals

ITR-3 is meant for individuals (whether Resident or Non-Resident) and Hindu Undivided Families (HUF) who earn income under the head “Profits and Gains of Business or Profession.” Individuals ineligible for filing ITR-1, ITR-2, or ITR-4 are required to use this form.

Other Forms for NRIs:

1. Form 12BB – Employee’s Tax Deduction Claims (under Section 192) Provided by: Employee to Employer(s) Details: HRA, LTC, Interest on Borrowed Capital, Tax-saving Deductions for TDS calculation.
2. Form 16 – TDS Details on Salary (Certificate under Section 203) Provided by:

Employer Details: Salary, Deductions/Exemptions, TDS for tax computation.

3. Form 16A – TDS Certificate for Non-Salary Income (under Section 203) Provided by: Deductor to Deductee Details: TDS amount, Nature of Payments, TDS deposited with the IT Department.
4. Form 26AS – Tax Deducted/Collected at Source Provided by Income Tax Department:  Details Available on the e-Filing Portal, contains TDS/TCS details.
5. AIS (Annual Information Statement) Provided by Income Tax Department

Details of Accessed through e-Filing Portal, includes TDS/TCS, tax payments, demands/refunds, other information.

6. Form 10E – Relief Claim Form for Arrears/Advance Salary (under Section 89(1))

Provided by: Employee to IT Department Details: Arrears/Advance Salary, Gratuity, Compensation, Commutation of Pension.

7. Form 3CB-3CD – Audit Report under Section 44AB Submitted by:

Taxpayer Details: Audit Report and Statement of Particulars under Section 44AB.

8. Form 3CEB – Report for International/Specified Domestic Transactions (under Section 92E)

Submitted by: Taxpayer Details: Report from Accountant regarding international/specified domestic transactions.

9. Form 3CE – Report for Specified Incomes (under Section 44DA) Submitted by:

Taxpayer Details: Report from Accountant regarding specified incomes like royalty or fees for technical services.

Tax Slab for NRIs for Ay 2024-25

The Finance Act of 2023 has introduced amendments to Section 115BAC, effective from the Assessment Year 2024-25, making the new tax regime the default option for individuals, HUFs, AOPs (excluding co-operative societies), BOIs, or Artificial Juridical Persons. However, eligible taxpayers retain the choice to opt out of the new tax regime and elect to be taxed under the old tax regime, which refers to the previous system of income tax calculation and slabs allowing for various deductions and exemptions.

For “non-business cases,” taxpayers can exercise their choice of regime annually by directly indicating it in the Income Tax Return (ITR) to be filed on or before the due date specified under section 139(1).

In the case of eligible taxpayers earning income from business and profession who wish to opt out of the new tax regime, they must submit Form-10-IEA by the due date under section 139(1) for filing the income tax return. Additionally, withdrawal of such option, i.e., opting out of the old tax regime, must also be done by submitting Form No. 10-IEA.

However, for eligible taxpayers with income from business and profession, the option to switch to the old tax regime and withdraw that option in any subsequent Assessment Year is available only once in a lifetime.

Tax rates for individuals resident or NRIs below 60 years of age during any part of the previous year:

Tax rates for individuals resident or NRIs, aged 60 years or more but less than 80 years during any part of the previous year:

Tax rates for Individual (resident or NRIs) 80 years of age or more anytime during the previous year are as under:

The surcharge rates applicable to NRIs for Assessment Year 2024-25:

Investments, payments, or income eligible for tax benefits to NRIs:

Section 24(b) – Deduction from Income from House Property: Under this section, deductions are available for interest paid on housing loans and housing improvement loans. For self-occupied properties, the maximum deduction limit for interest paid on housing loans is ₹2,00,000. However, this deduction is not applicable for individuals opting for the New Tax Regime.

Interest on loan under section 24(b) is allowable as follows:

These deductions provide relief to taxpayers by reducing their taxable income, particularly for investments made in housing loans and property improvements.

Tax deductions to NRIs:

Taxpayers opting for the new tax regime under Section 115 BAC will not have access to most deductions specified, with the exception of deductions under Sections 80CCD (2) and 80JJAA, which remain available under the new tax regime:

1. Section 80C, 80CCC, 80CCD (1):
   • Deductions for payments made towards:
     • Life Insurance Premium
     • Equity Linked Tax Saving Scheme (ELSS)
     • Unit Linked Insurance Plan (ULIP)
     • Tuition Fees
     • Housing Loan Principal
     • Other various items
2. Section 80D:
   • Deduction for payments made towards Health Insurance Premium and Preventive Health check-up for self/spouse/dependent children and parents.
3. Section 80E:
   • Deduction for interest payments made on loan for higher education of self or relative.
4. Section 80EE, 80EEA:
   • Deductions for interest payments made on loan taken for Acquisition of Residential House Property, with specific conditions and timeframes.
5. Section 80G:
   • Deduction for donations made to certain funds, charitable institutions, etc.
6. Section 80GG:
   • Deduction for rent paid for a house, applicable only for individuals for whom House Rent Allowance (HRA) is not part of salary.
7. Section 80GGA:
   • Deduction for donations made for Scientific Research or Rural Development.
8. Section 80GGC:
   • Deduction for donations made to Political party or Electoral Trust.
9. Section 80TTA:
   • Deduction on interest received on Saving Bank Accounts by individuals (other than Senior Citizen) / HUF, with a limit of ₹10,000.

These deductions play a significant role in reducing the taxable income of taxpayers, providing relief and incentives for various investments, payments, and activities. However, it’s important to note that certain deductions are not applicable under the new tax regime, and taxpayers need to carefully consider their options before making decisions regarding deductions and tax planning.