Photo: iStock
Photo: iStock

Q&A: NRIs whose income is above Rs2.5 lakh in India need to file ITR

An individual is required to file ITR if total income exceeds the maximum amount not chargeable to tax (i.e. Rs2.5 lakh) for FY18

I have been living in the UAE for 5 years. Recently I got a short-term assignment in India and was paid for it in rupees minus TDS (tax deducted at source). I am entitled for a refund, but I can let it go as it is a small amount. My non-resident Indian (NRI) status is intact as I stayed in India for only two months. Is it mandatory for NRIs to file income tax returns (ITR)?

—Jitender Nagpal

Taxability in India depends on source of income, residential status and place of receipt of income. Salary earned in relation to services rendered by you in India is an India-sourced income. Based on this, it is taxable in India, irrespective of the place of receipt.

An individual is required to file ITR if total income exceeds the maximum amount not chargeable to tax (i.e. Rs2.5 lakh) for FY18. If your total income is above Rs2.5 lakh, you are mandatorily required to file ITR in India. The due date to file ITR for FY18 is 31 July 2018.

Is income of an Overseas Citizen of India (OCI) from non-resident (external) or NRE account tax-exempt?

—Jasraj

Interest income earned from an NRE account (savings or fixed deposit) is exempt from income tax in India, provided the individual qualifies as a “person resident outside India" under the exchange control law. Determination of residential status is different under the income-tax law and exchange control law. An individual may qualify as a “person resident outside India" if she is leaving India for employment outside India or for business or vocation outside India or for any purpose indicating the intention to stay abroad for an uncertain period.

An OCI is an individual who holds an Overseas Citizenship of India card. Interest earned from NRE account is tax-exempt in India for an OCI who is also a “person resident outside India" under the exchange control law.

My fund house has sent a letter that I need to file FATCA (Foreign Account Tax Compliance Act) compliance information. I have always been a resident Indian. Am I still required to file it? How do I do this?

—Anadi Saran

India has signed an agreement with the US under FATCA of the US. Under this agreement, financial institutions in India are required to report details of financial investments made by US taxpayers in India to US tax authorities, and vice-versa.

The financial institution in India may obtain a self-declaration from you with respect to your residential status in the US and investments in India. Since you are a resident Indian national, you may enter those details in the self-declaration form; other details won’t be applicable to you. Most financial institutions have made the process to file FATCA self-declaration online. Check with your fund house on that.

Sonu Iyer is tax partner and people advisory services leader, EY India

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