NRI Taxation - File Income Tax Returns Of NRIs & Expatriates From Experts
Taxability of Expatriate and NRI in India
Expat Taxation in India-
Expat Tax Filing
One of the challenges faced by Expats working in India is to find good professional advice relating to filing of tax returns in India since it involves familiarity with international tax concepts and interpretation of double taxation treaties between 2 countries.
In India, taxability of Expats depends upon his residential status, place of rendering of service and place of receipt of salary.
- In case of resident Expats, his income earned outside India also becomes taxable in India.
- In case expats visits India and renders service in India, he would be liable to pay tax on income earned in India even if salary is paid outside India.
- Expenses incurred by an employer in moving an expatriate to and from India and home-leave airfares are not considered taxable income in India. Similarly, payments made in an expatriate’s home country as retirements benefits are also not considered as income earned in India.
Under the Act, some concessions have been provided to Expats as mentioned below:
- In case any Expat is receiving salary in India for rendering service in India however it is in payroll of foreign enterprise, he will not be liable to pay tax in India if following conditions are fulfilled:
- the foreign enterprise is not engaged in any trade or business in India;
- the Expat is not present in India for more than 90 days in that year; and
- the remuneration is not liable to be deducted in computing the employer’s taxable income in India.
(2) A foreigner (including a non-resident Indian) who was not resident in India in any of the four financial years immediately preceding the year of arrival in India is entitled to a special tax concession if provided:
- the foreigner has specialized knowledge and experience in certain specified industries; and
- the individual is employed in any business in India in a capacity in which specialized knowledge and experience are used.
(3) Salary received by a non-resident foreigner in connection with employment on a foreign ship is exempt from tax if the employee’s stay in India during a year does not exceed 90 days.
In this regard, we provide our expert advisory service to expats working in India. Our service offering includes:
- Determination of Residential Status of Expats in India to determine tax liability
- Determination of accrual or receipt of income in India
- Interpretation of DTAA between India and home country of Expats as well as DTAA of other countries in case expats habitually abode in more than one country for availing treaty benefits
- Computation of capital gain tax liability of Expats in case of sale of shares, mutual funds etc
- Advising on types of documents to be maintained by Expats in support of filing tax returns and in claiming treaty benefits
- Expat Tax Return- Assistance in preparation and submission of Income Tax Return of Expats
- Replying to notices received from tax authorities and representation to discuss the case
- Advisory on various deductions, exemptions available under the Act
- Assistance in the opening of a bank account in India, applying for PAN, and making investments.
Due to globalization, a lot of Indians goes out of a country for jobs, vacations etc. and similarly a lot of foreign citizens comes to India. Accordingly, the citizens of one country have to pay taxes in one country or sometimes in both countries. Non-Resident Indians or NRIs are Indian citizens or Persons of Indian origin who has gone out of India either for employment or business etc.
Indian Income Tax Act, 1961 (“the Act”) provides for conditions for treating an individual as NRI, NRI Taxability and due dates for NRI Tax Return filing. NRI Tax and NRI Income Tax Returns are major source of revenue for India. The Act specifies circumstances when a person will be treated as NRI. According to same, a person would be considered as NRI in any Previous Year in case He/She fulfills any one of the below mentioned conditions:
- If His/her no. of days of stay in India during said Previous year was 182 days or more OR
- During Previous 4 years prior to said Previous Year, His/her total no. of days of stay in India was more than 365 days AND in previous Year, no. of days of stay in India was 60 days or more. (In case of person gone out for employment, instead of 60 days it is 182 days)
As per the Act, in case of person Resident in India, his global income is taxable in India. However, taxability of NRI is governed both by domestic laws as well as Double Taxation Avoidance Agreement (DTAAs) between both the countries.
Some Important provisions relating to NRI Taxability in India
- Taxability on Accrual or Receipt Basis
NRI becomes taxable in India in case any Income accrues or arises in India or is received in India. Accordingly, receipt of a salary in India, rental income, interest income from fixed deposits or saving bank accounts and capital gains on assets sold in India are taxable. Tax Return filing of NRI is required in India, if the income of an NRI is more than the basic exemption limit for the year or in case He wants to claim a refund.
- Taxability on basis of Source
In case, NRI has been assigned work in India, in that case, all incomes which accrue arises from employment in India will be taxable in India since a source of such Income is in India, however, there is some exception to above:
- Under the Act, in case His period of stay in India is less than 90 days, any remuneration received by Him as an employee of the foreign enterprise for service rendered by him during his stay in India will not be taxable in India.
- Under the DTAA, such income is not taxable in case His no. of days of stay in India is less than 183 days
However, aforesaid exceptions would be subject to some other conditions like there is an actual physical presence in India, their salary has been a cross charge to an Indian entity etc. Further, in case such individuals earns any personal income from outside India like rent, interest etc., same will not be taxable in India.
- Foreign Credit in case of Doubly Taxed Income
In case NRI has left India to work outside India, any income received outside India will not be taxable in India. Also, salary received in India would be taxable under domestic tax laws. Same might also be taxable in source country on receipt basis. In such a situation, He may claim either DTAA benefit under Dependent Personal Service (DPS) clause if there is DTAA between two countries or NRI may claim the foreign tax credit on doubly taxed income as per DTAA. However, He would require Tax Residency Certificate or TRC in respect of each of the tax year(s) for which such benefit is claimed. Such certificate is required to be issued by the country where the individual breaks residency.
- Income earned from India will be taxable in India
Any income earned by NRI under another source like interest on deposits, rental income on property in India etc. shall continue to be taxed in India. Also, an exemption under section 80C wrt certain investments will be available to NRI. Further, NRI would not be required to file a tax return in India in case His income during the tax year comprises only of investment income or income by way of long-term capital gains or both and also in the case, the necessary tax has already been deducted at source from such income.
- Taxability of NRI on permanently returning to India
In case RNOR returns India, his status will remain NRI for further next 2 years and only after 2 years, He will become Resident in India and accordingly, any income earned outside India will not be taxable in India unless it’s from a business or profession controlled from India during those 2 years. Once, he becomes a resident, his global income will become taxable in India.
- Taxability in case of absence of PAN
In the case of absence of PAN, a higher rate of Tax @ 20% is normally charged in case of NRI. However, as per recent amendments, even in the case of absence of PAN in India, the normal tax rate may be charged provided NRI furnishes some prescribed information and documents.
- Disclosure of Foreign Bank account and Assets
In case NRI becomes Resident and Ordinary Resident in any particular year, He would be required to disclose all foreign bank accounts, foreign assets and Foreign Income in the tax return otherwise would be subject to penalty under the newly introduced Undisclosed Foreign Income and Assets Bill, 2015
- NRI cannot open PPF Account
NRI cannot open PPF Account. In case He was already having PPF account before becoming NRI, He may continue to operate the same but only till maturity period. After maturity i.e 15 years, he has to remit the proceeds in the country of residence and cannot extend for a further period.
Inclusions in this package
Copy of Return, 26 AS and Computation
Guidelines for Tax Saving
Do's & Don'ts to avoid Litigation
Documents Required for NRI & Expatriates Tax Return
Documents to be Maintained by NRI & EXPATRIATES working in India in case of REVENUE AUDIT
- Tax returns filed in India and outside India
- Proof of taxes paid outside India
- Documentary evidence for Incomes earned outside India
- Travel details bifurcated into no. of days present in India and outside India.
- Supporting documents wrt any loans availed or given/donation tax savings investments etc.
- Details of all tax saving investments made in India for claiming section 80C deductions
- Details of all types of Income earned in India.
- Copy of complete passport and VISA
- Copy of Registration certificate issued by FRRO
- Copy of PAN card
- Secondment agreement issued by home country employer/employment contact issued by Indian employer.
- Pay slips/ Statements of reimbursement claimed from employer
- Indian and foreign bank account statements
- Personal and official credit card statements
- Lease deed with the landlord along with rent receipts
Nri Tax Services Provided by Ezybiz India
Non Resident Indians are major part of Indian Taxation and financial system since they actively take part in investment activities in India like investment in deposits, properties etc due to which they are also required to pay taxes in India and file NRI tax return in India.
Not all Non-Residents are required to prepare and file tax returns in India. Requirement of NRI Tax return filing will arise only when they have income in India in terms of capital gains or other income exceeding the basic exemption limit.
We have vast experience in providing NRI Tax Return filing service through our expert team of chartered accountants, company secretaries and finance professionals.
Besides NRI Tax return filing service, we also provides host of other NRI services like repatriation of money outside India, investment in properties, opening of bank accounts, starting a business in India, purchase and sale of properties etc.
Broadly, we provide following services to Non Resident Indians and Expatriates working in India.
- Preparation and filing of Income Tax Return in India [ NRI Tax return]
- Computation of capital gain tax liability in case of sale of property [NRI Capital gain tax computation]
- Preparation of form 15CA and 15CB wrt repatriation of money outside India [Form 15CA and 15CB filing]
- Preparation of TDS Challan in form 26QB relating to purchase of property by Non Resident.
- Assistance in business set up and Registration in India like company registration in India, opening of Branch office or Liaison office or subsidiary company registration in India. [ NRI Business registration]
- Income Tax Assessment and litigation advisory & compliance
- Representation before tax authorities at time of scrutiny assessment [ NRI Tax Assessment]
- Investment Planning in India [NRI Investment]
- Advisory on Taxation, FEMA and RBI matters
- Tax planning advisory and investment advisory [NRI Tax Advisory]