When should an NRI file tax return in India?

You’ve packed your bags and left India to settle abroad. But, you earn an income from the assets you still own back home or have deposits lying in bank accounts. If you are an NRI, you may be unsure about filing a tax return in India. As a thumb rule, if your gross total income is more than Rs 2,50,000, before allowing any deductions(under section 80), you must file an income tax return in India. While resident senior citizens and super senior citizens enjoy higher exemption limits, maximum exemption limit of Rs 2,50,000 is fixed for an NRI irrespective of his or her age.

For estimating this gross total income, a resident has to include all the incomes earned by her anywhere in the world, while a non-resident’s gross total income for paying taxes in India only comprises income which is earned by them in India. So what are the incomes a non-resident is taxable for in India?

Income from salary will be considered to arise in India if your services are rendered in India. So even though you may be an NRI, but if your salary is paid towards services provided by you in India, it shall be taxed in India. If the NRI owns a house property situated in India such income is taxable in India. Capital gains from sale of property in India shall be taxable in India. Similarly income earned from deposits held in India must be included in your income. If the sum total of these incomes exceeds Rs 2,50,000 the NRI must file a tax return in India.

Another scenario where an NRI must file a return is when the NRI is seeking a refund. This can happen when Tax Deductible at Source (TDS) has been deducted on the NRIs income but her gross total income is below the Rs 2,50,000 threshold. A refund can only be sought by e-filing your tax return.

Where an NRI has losses to carry forward a return must be filed by her.

Let’s look a few scenarios where an NRIs income would be considered as ‘earned’ in India and included in the tax return in India.

* You have accounts or deposits in India. Any returns in the form of interest in these accounts is income earned in India.

* You moved abroad during the financial year 2014-15 and you are an NRI for purposes of income tax for financial year 2014-15. Prior to your move, you spent a few months in India and earned salary in India, your employer has provided you a Form 16 and all taxes are duly deducted by your employer. If your gross income from this employer and including all your other incomes in India for the entire financial year exceed Rs 2,50,000, you must file a return in India. If your gross income does not exceed Rs 2,50,000, you should still file a return to claim refund of TDS deducted.

* You have a house property in India which you rented out for an annual rent of Rs 3,00,000. That is your only income from India. As per rules of taxation for house property, you can deduct 30% of the rent allowed as standard deduction and also property taxes paid by you, if the resulting amount is less than Rs 2,50,000, you may not have to file a return in India. Usually, tenants deduct TDS on rent before making a payment to NRIs, and therefore if TDS was deducted on your rental income, you can file a return to seek refund.

* You own two or more than two house properties in India, though none of these is let out. There is no rental income. In such a case as per the income tax act only one house property shall be considered to be self-occupied and its income shall be considered nil and all others will be considered deemed to be let out properties and therefore you will have income from house property and you will be required to file a return in India, if your income exceeds Rs 2,50,000.  You have deposits in India and bank deducted TDS from your deposits. While your total Income in• India is less than Rs 2,50,000, file a return in India to claim refund for the excess tax deducted. Do note that NRIs cannot submit Form 15G and Form 15H to prevent deduction of TDS.

* You have been settled abroad and you decide to sell your only house property in India which was given to you by your parents, any capital gain on this house property is liable to be taxed and therefore a return must be filed by you.

* You decide to buy a car for your parents who reside in India, no return of income is required to be filed by you, and there is no tax liability for you upon gifts to your parents.

The due date to file income tax return for NRIs and Residents individuals is August 31, 2015 for income earned in the financial year 2014-15. If there is tax payable in your return, you may have to pay penal interest, so do calculate your taxes and file your returns timely.

Guest column by www.cleartax.in ClearTax is India’s largest Income Tax e-Filing website for Individuals and Businesses.