Non-resident Indian (NRI) - Exemption to file Income-tax return in India

1. Background

One of the crucial questions Non-resident Indian ask is whether they are required to file the Income-tax return in India or not.  We have briefly summarized the provisions of India's Tax Regulation for your reference:

2. Regulatory requirement

While the answer may differ from facts to facts, generally, they are required to file the Income-tax return as Indian Tax Authorities wish to analyze whether they have shown their returned income correctly or not and whether they have used any means to evade taxes or not.  Hence, filing the tax return by Non-resident Indian is mandatory as required under Sec 139(1) of the Income-tax Act.

3. Exemption

However, a specified category of taxpayers has been given a specific exemption from filing the tax return and the same has been discussed below:

Sec 115G of the Income-tax Act specifies that it shall not be necessary for Non-resident Indian to furnish return of his income u/s 139(1) if;

(a) his total income in respect of which he is assessable under this Act during the previous year consisted only of investment income or income by way of long-term capital gains from foreign exchange specified asset or both; 

and

(b) the tax deductible at source has been deducted from such income.

Accordingly, if both of the aforesaid conditions are fulfilled, then Non-resident Indian can opt not to file the Income-tax return and the same would be compliant with the Regulation.

Further, Sec 115C also provides the definition of Investment income and Foreign exchange asset and Specified assets which would help to gauge the impact of exemption provided therein.

- Investment income means any income derived (other than dividends) from a foreign exchange asset

- Foreign exchange asset means any specified asset which the assessee has acquired or purchased with or subscribed to in, convertible foreign exchange

- Specified asset means any of the following assets, namely:—
   (i) shares in an Indian company;
  (ii) debentures issued by an Indian company which is not a private company;
 (iii) deposits with an Indian company which is not a private company;
 (iv) any security of the Central Government;
 (v) such other assets as the Central Government may specify.

4. Conclusion

 Given the aforesaid provision specifically providing exemption, Non-resident Indian (NRI) must analyze whether they can fall into the exempted category or not and if yes, can opt not to file the tedious and complex tax return in India.

However, it would be advisable to consult the Non-resident Taxation Expert before adopting any position.  In case you require any further information or clarification, do reach out to us on (M) - +91 76000 08550 or (E) - casagar1987@gmail.com

Comments

Post a Comment

Popular posts from this blog

RELAXATION OF RESIDENCY RULES FOR NRIs & FOREIGN VISITORS

Image
1. Background Section 6 of the Income Tax Act, 1961 (‘the Act’) provides for ascertaining an individual’s residential status based on their stay in India during a financial year. Once a person is classified as a resident, the person’s global income becomes liable to tax in India. On account of the ongoing COVID-19 the pandemic situation, several individuals including NRIs or Foreign nationals who had traveled to India for different reasons have been compelled to stay in India on account of the lockdown announced by various countries including India. In this regard, there were several apprehensions that individuals who are forced to stay in India may exceed the specified days criteria which may lead to change in their non-residential status in India to that of a resident Indian and thereby could trigger taxability of his Global income in India. 2. CBDT Circular To address the concern, the CBDT has issued Circular No 11 2020 dated 8 May 2020 which provides for excluding a sp...
Read more

Force Majeure - All that you must know before invoking

Image
As every country and their citizens are grappled with the outbreak of dangerous virus ie COVID-19 and most of them are still under lockdown condition.  Even countries such as India with a total population of around 130 billion people are under complete lockdown condition for least 21 days as of now.  Being an unprecedented event in human history, its impact will also largely be unimaginable.      Since the majority of industries except for essential commodities remain closed, each lockdown day could pressurize them as they might not be able to meet the contractual commitment they would be having and hence, they must be thinking about several legal issues to minimize the loss to the maximum extent. One such legal issue is the invocation of a Force Majeure clause. Force majeure clause Force majeure clause is a contractual clause that alters parties' obligations and/or liabilities under a contract when an extraordinary event or circumstance beyond their c...
Read more