Do Non-Resident Indians (NRIs) Need to File Income Tax Returns (ITR) in India?

The Core Principle: Taxable Income in India

The primary factor determining whether an NRI needs to file an ITR in India is the source of their income. An NRI is generally required to file an ITR in India if they have any income that accrues or arises, or is deemed to accrue or arise, in India during a financial year.

This means that irrespective of where they reside, if an NRI earns certain types of income from sources within India, they are liable to pay tax on that income in India and, consequently, may need to file an ITR.

Types of Income Taxable for NRIs in India

Here are the common types of income that are taxable for NRIs in India:

1. Income from House Property: Rental income from property located in India.

2. Capital Gains: Gains arising from the sale of assets located in India (e.g., property, shares, mutual funds).

3. Salary Income: If the salary is earned in India for services rendered in India, or if the salary is paid by the Government of India for services rendered outside India.

4. Interest Income: Interest earned from savings accounts, fixed deposits (FDs), or other investments with banks or financial institutions in India.

5. Business or Professional Income: Income earned from a business or profession carried out in India.

6. Other Sources: Income from sources like dividends from Indian companies (though often exempt post-April 2020 if TDS applies), royalty income, or fees for technical services, if they accrue or arise in India.

When an NRI is Not Required to File an ITR

An NRI is generally not required to file an ITR in India if:

• Their total income taxable in India for the financial year does not exceed the basic exemption limit (which varies based on age for residents, but for NRIs, it is generally the same as the lowest slab for residents, i.e., ₹2.5 lakhs, unless specific higher thresholds apply).

• Their only income from India is derived from interest, dividends, mutual funds, or capital gains on shares/units, and tax has already been deducted at source (TDS) on such income at the applicable rates under the Income Tax Act. In such cases, if the TDS deducted covers the full tax liability, filing an ITR might not be mandatory for claiming a refund but is often advisable for record-keeping or if there's any under-deduction.

Double Taxation Avoidance Agreements (DTAA)

India has entered into Double Taxation Avoidance Agreements (DTAA) with many countries. If an NRI is a tax resident of a country with which India has a DTAA, they might be able to claim benefits under the DTAA to avoid paying tax on the same income in both India and their country of residence. To avail DTAA benefits, it is usually necessary to:

• Obtain a Tax Residency Certificate (TRC) from the country of residence.

• Furnish Form 10F.

• File an ITR in India to declare the income and claim DTAA relief.

Due Dates for ITR Filing

The due dates for filing ITR for NRIs are generally the same as for resident individuals:

• July 31st of the assessment year (for individuals whose accounts are not subject to audit).

• October 31st of the assessment year (for individuals whose accounts are subject to audit, or for those whose income includes business/professional income requiring an audit).

Conclusion

In summary, an NRI is required to file an Income Tax Return in India if their total income from Indian sources exceeds the basic exemption limit. Even if income is below this limit, filing might still be necessary or beneficial in certain scenarios, especially to claim refunds of TDS or avail benefits under DTAA. It is always advisable for NRIs with Indian income to consult a tax professional for personalized advice to ensure compliance.