The obligation to file income tax return will depend on the following:
a. Taxability of income in India; and
b. Quantum of taxable income in India.
Taxability of income in India depends on residential status in India, source of income and place of receipt of income. Residential status in India is determined based on physical presence in India in the current financial year (FY) and the preceding 10 FYs.
If you qualify as “resident and ordinarily resident" (ROR) in India as per the India income tax law, your global income will be taxable in India and you will be required to report all your assets outside India (such as bank accounts, immovable property, financial interests etc.).
If you qualify as “non resident" or “resident but not ordinarily resident" in India as per the India income tax law, your income will be taxable only on the following incomes: a. Income received in India or deemed to be received in India; b. Income accruing in India or deemed to accrue in India (for example, rental income from property situated in India).
Once you have determined your residential status and income which is taxable, the next step is to calculate the total taxable income in India.
Under the income tax law, an individual is required to file income tax return if the taxable income exceeds the maximum amount not chargeable to tax. For FY 2018-19, the maximum amount not chargeable to tax is ₹2.5 lakh for the purpose of determining quantum of tax liability.
However, for the purposes of determining threshold limit for obligation to file returns, the taxable income should be computed before giving effect to the following:
a. Deductions under Chapter VI-A (such as under Section 80C, 80D, etc);
b.Income exempt under Section 10(38) (exemption on long-term capital gains on listed equity shares and equity oriented mutual funds. Although, this exemption is not applicable from FY2018-19 onwards). To illustrate, for FY2018-19, the total taxable income after considering the deductions under Chapter VI-A, namely, under Section 80C of ₹1.5 lakh and for mediclaim under Section 80D of ₹25,000, is ₹2.40 lakh and hence tax payable would be nil. However, since the total income before considering the deductions under Chapter VI-A (i.e. ₹4.15 lakh) exceeds ₹2.5 lakh, the individual is still required to file the returns.
Further, an individual who qualifies as “resident and ordinarily resident" is mandatorily required to file tax returns in India if he/she holds any foreign asset or has a signing authority in any account located outside India, even if his/her total income does not exceed the threshold limit.
In your case, assuming you are returning to India in FY2018-19 and your taxable income in India for FY2018-19 without considering deductions under Chapter VI-A exceeds ₹2.5 lakh, you are required to file India income tax return.
If you are a “resident and ordinarily resident" and hold foreign assets or signing authority in a foreign account, you will need to file return even if your total taxable income is below ₹2.5 lakh.
Sonu Iyer is tax partner and people advisory services leader, EY India. Queries at email@example.com