NRI – Non Resident Indian –FAQs on Income Tax for AY 2014-15

CA Chirag Chauhan

Q) Who is NRI as per Income Tax Act?

A) Residential status of an individual or HUF or a company is of great importance in Indian Income Tax Act as the liability to pay tax in India does not depend on the nationality or domicile of the Tax payer but on his residential status. Residential Status is determined on the basis of physical presence i.e. the number of days of stay in India in any year.

An individual is resident if any of the following conditions are satisfied: (i) he stayed in India for 182 days or more during the previous year, or (ii) he stayed in India for 365 days or more during the four preceding years and stays in India for at least 60 days. 182 days in case of an Indian citizen or a person of Indian Origin coming on a visit to India or 182 days in case of an Indian citizen going abroad for an employment during the previous year. Otherwise he is Non Resident.

Hindu Undivided Family (HUF) or firm or other Association of persons is resident of India except in cases where the control and management of its affairs is wholly situated outside India in the previous year

A company is resident in India if-it is an Indian company, or during the previous year, the control and management is situated wholly in India.

Q) I am NRI, do I need to file my Income Tax Return for A Y 2014-15?

A) NRI need to file your return provided your taxable income in India during the Assessment Year 2014-2015 was above the basic exemption limit of Rs 2 lakh OR you have earned short-term or long-term capital gains from sale of certain investments and assets, even if the gains are less than the basic exemption limit. For NRIs, certain short term or long term capital gains from sale of investments or assets are taxed even if the total income is below the basic exemption limit. There is an exception: If your taxable income consisted only of investment income (interest) and/or capital gains income and if tax has been deducted at source from such income, you do not have to file your tax returns.

Q) Is Income Tax Return need to file compulsory Online for NRI for AY 2014-15?

A) Central Board of Direct Taxes (CBDT) in India issued a notification which has made it mandatory for individuals who have annual gross total income in excess of Rs 5 lakh to file their returns online from Assessment Year 2014-2015. This applies to all individuals including non resident Indians. So as an NRI with gross total income exceeding Rs 5 lakh in Assessment Year 2014-2015, you must file your returns electronically.

In case your taxable income exceeds Rs.5 lakh in the previous year, you would be required to file the return of income electronically either using the digital signature or through submission of the verification Form ITR-V after electronically filing the return of income. In case your income does not exceed the above limit, you would also have an option to file the return of income in paper form.

Q) Are NRI were liable to pay advance tax for Assessment Year 2014-2015?

A) As per the Income Tax Act, Individual must pay advance tax in three installments during the year in case the tax payable is likely to be Rs 10,000 or more after considering TDS deduction. In case of default interest is generally 1 percent per month for the default amount and extends till the date of payment. Therefore, NRIs should evaluate if they were liable to pay advance tax and whether the same was paid in time.

Q) What is last date to file your Income Tax Return? What if NRI do not have any tax payable?

A) The last date to file returns for the financial year Assessment Year 2014-2015 is July 31st 2014. However, If you do not have any tax payable (that is all your tax has been deducted at source), you can still file your tax return by 31st March 2015 without any penalties.

Q) What if NRI do not file return till 31 March 2015?

A) If you do not file your tax returns even by the 31st of March 2015, you may be charged a penalty of Rs 5,000 for every year of delay or sometimes may not be able to file your returns at all after 2016.

Q) My NRO account TDS has been deducted at source @30%. My interest income is 1 Lakhs Rs? Do I Need to File Return?

A) As your total income is less than 2 Lakh Rs, you are not liable to file return. However you can cliam refund of Rs 30,000/- of your TDS deducted for which you should file return. If you are expecting a refund, make sure that you put accurate bank details such as account number and IFIC code of the branch as refunds are processed electronically.

Q) Can NRI get Refund of TDS by Filing IT return for Last year 2013 March Ending.

A) Yes you can file your return for Financial Year ended 2013 and get refund.

Q) What all income is exempt for NRI?

A) Dividends from equity shares and equity mutual funds is tax free in India. Interest received on the NRE account and FCNR account is tax free. Long term capital gains on equity shares and equity mutual funds (provided you pay securities transaction tax at time of sale). Further, If you have given a property on rent, you can claim an ad hoc deduction of 30% of net annual value as repairs and maintenance expenses in addition to claiming a deduction on mortgage interest.

Health insurance premium in India for yourself or your dependents, you can claim a deduction under section 80D. If the health insurance is taken for your spouse and dependent children, you can claim a deduction of Rs 15,000 per annum. An additional Rs 15,000 is available as deduction on insurance premium paid on behalf of your parents. If either of your parents is over the age of 65, the additional deduction will be Rs 20,000 instead of Rs 15,000.

Contributions to an approved charity, you can claim a deduction under section 80G. Investments such as PPF, life insurance premiums, etc. can be claimed as deduction under section 80C up to a total of Rs 1 lakh.

Q) I am NRI has deposited Rs. 1 crore in a non-resident ordinary (NRO) account in the form of fixed deposit. I want to transfer the amount from NRO to a non-residential external (NRE) account. Is it compulsory to give Form 15CB and 15CA to banks? Who has to file these forms? The bank has deducted tax at source when it credited the interest amount. What is the ceiling for transfer from NRO to NRE during a year?

A) An NRI can transfer / remit out of the NRO account subject to production of documentary evidence in support of acquisition by the remitter and an undertaking by the remitter along with a certificate by a chartered accountant in Form 15CA and 15CB

As per regulations, NRI are permitted to transfer a maximum of $1 million per financial year to your NRE account. The transfer will be subject to payment of applicable taxes. So far the amount being transferred to the NRE account represents balances for which tax has already paid or exempt there shouldn’t be additional tax.

Q) I am a non-resident Indian (NRI) and have a piece of agricultural land and an apartment in India. I earn agriculture income and rental income from these two. Do I need to file income tax return? Also, can an NRI buy agricultural or farmland in India?

A) NRI would be subject to taxes in India on any income accruing or arising from an asset located in India. The agricultural income earned by you would be exempt, whereas the rental income from the house property would be subject to tax. You would be under an obligation to file an income tax return in India on or before 31 July 2014 for financial year 2013-14 if your taxable income exceeds Rs.2 lakh in the previous year. However, you may note that the income tax law prescribes a specific method of computing taxable income where the taxpayer has earned agricultural income. While this type of income is exempt from tax, it is nonetheless included in the total income for rate purposes.

Q) Is NRI allowed to buy Agriculture property or Farm house in India?

A) NRIs and Persons of Indian Origin are not allowed to buy agricultural property, plantation or a farm house.

Q) What are the tax implications for an NRI looking at selling his property in India?

A) If the property is more than 3 years old, long term capital gains tax will be incurred on the sale of the property. On long term capital gains, tax is payable @ 20%. However, tax can be minimised by making alternative investments in India.

Q) I am a NRI living in US. Can you please advise me if long term capital gains tax are payable on sales of shares purchased by paying STT, and if it is exempt is there a limit?

A) LTCG is fully exempted on sale of listed company shares, purchased by paying STT, provided the transaction is long-term. i.e that share are hold for period of more than 12 months

Q) I an NRI, bought a property in 2005 and sold it in 2014 at a difference of Rs 40 lakhs for Rs 80 lakhs. If I repatriate this amount to the US, am I liable for any tax? What is the procedure to repatriate money to the US?

A) You have earned a long term capital gain on your property. You have to pay taxes in India on this income and then obtain a certificate from a chartered accountant. After this certificate only, you would be able to repatriate the money abroad.

Q) During Year Ended 2014, I, NRI leased out my building to a bank which is paying rent monthly but is deducting TDS. Can you please let me know what kind of documentation is required from the bank to submit my taxes in India? Is form 16 sufficient?

A) Form 16 is enough to determine your income on rent and TDS deducted by the bank.

Q) Is the money received from sale of inherited property in India taxable for an NRI? Earlier it was mandatory to put it in an NRO account but now with the RBI go ahead can we transfer it to NRE account provided the tax is paid?

A) Yes, the money received from NRI is taxable in India. Sale proceeds will first be credited to NRO account. Then you have to obtain a certificate from the chartered accountant relating to payment of taxes after which the money would be transferred from NRO account to NRE account.

Q) I hold NRI status for this year 2014. I have FD and RD accounts in ICICI Bank and they are deducting taxes. Do I need to pay the tax for the interest I get from FD and RD?

A) If the FD and RD were opened under NRE status as (NRE-FD or NRE-RD) then the interest earned on the same will not be taxable. However, in case the FD/RD was opened when you were resident Indian then the said FD will be converted to NRO- FD (upon your status being changed to NRI) and the interest earned on the same will be subject to TDS. However, depending on your cumulative tax liability in India, you may claim refund while filing tax return in India.

Q) If I have 8 year NRE FRD and if in second year I become resident, how NRE FDR will be treated after third year and will interest thereon be taxable?

A) For returning Indians, funds held in fixed deposits in NRE accounts, interest will be payable at the rate originally fixed, provided the deposit is held for the full term even after conversion into resident account. However, the interest earned after the status was updated to resident will be taxable.

Q) If I buy a property out of NRE funds and later on sell the property and credit the proceeds to my NRO account, what are the tax implications?

A) Profits earned by selling property in India will be liable to Capital gain is the difference between the sale value of the property and its cost of purchase. Capital gains can be classified as short term (up to 36 months) or long term (more than 36 months), depending on the period for which the property is held. Short-term capital gain will be taxed at normal slab rates and long-term gain will be taxed at 20%.

If a residential property is sold after being held for more than three years and the proceeds are reinvested for purchase of a new residential property, then the capital gains will be exempt to the extent of the amount reinvested. The exemption is subject to the new property being purchased within a year before or two years from the date of sale, or if new property is being constructed within three years from the date of sale.

Q) Can NRIs can also claim exemption by investing the amount of capital gains in bonds issued by the National Highways Authority of India (NHAI) or Rural Electrification Corporation (REC) in case of Profit from sale of property which is long term?

A) Yes Investment in the specified bonds is to be made within six months of such sale and there is a lock-in period of three years for such bonds.

Q) I am an Indian resident taking up employment abroad. I want to know whether I am eligible to claim exemption of income under NRI category. If the employment is in Dubai, where there is no tax on income, will it make any difference?

A) Your employment in Dubai will not make any difference. As per taxation laws in India, your overseas income getting credited to your NR account in India will not be taxed. It is indifferent to overseas country tax regulations.

Q) I have an account in Qatar and want to send money to my resident (saving) account in SBI Bank, Will it be taxable? What is the ceiling for wire transfer? Can I open an NRO/NRE account before completing first six months out of India.

A) Yes, you can send money to your resident account and the said amount will not be taxable because it will be from your overseas earnings. There is no upper cap on the amount you can wire transfer to a bank account in India. Yes, based on a valid work visa and company offer letter, you can convert your existing resident account into NRO and open a NRE account as well.

Q) Can an NRI returning back to India, continue to hold his foreign earnings overseas, and gradually bring the money back to India as and when required?

A) You can bring your earnings as you wish. You should take care of income tax of your earnings. After you are return to India, your income earned outside India will not be taxable in India provided it is received in India for two years. After the two years, your worldwide income would be taxable in India.

For any query you can write to [email protected] . Before making any decisions do consult your Professional / tax advisor.  Author does not take any responsibility for misrepresentation or interpretation of act or rules. Neither the author nor the firm accepts any liability neither for the loss or damage of any kind arising out of information in this document nor for any action taken in reliance there on.

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