Income Tax Return: Filing it Right

It’s that time of the year when the taxman comes knocking to remind you that your income tax returns need to be filed. NRIs often assume that they do not have to file any returns as they earn and live abroad. However, if you are a non-resident Indian with a taxable Indian income of over Rs.100, 000, it is mandatory to file a return before July 31 every year.

Alternatively, as a non-resident Indian, you can appoint a chartered
accountant or an ‘agent’ in India to file returns on your behalf. An
agent could be your trustee or employee in India, or anyone you have
business dealings with.A resident who owes you any payment or who has
purchased an asset from you is also recognised as an agent by the IT
Department.

As a NRI, your income tax liability depends not on your nationality,
but on your residential status. If you have spent less than 182 days
of a financial year in India, you qualify for non-residential status.

As a NRI, what is my taxable income?

Any income earned from a business, property, assets, charges for technical
or professional services, consultancy services made in India, royalties,
remuneration paid by the Indian government for services provided outside
India and dividends paid by an Indian company abroad are components of
your taxable income
Interest payments, pension from Indian and overseas employers, income
from rent on property, profits from your Indian business if any, and capital
gains are also considered taxable.

If you happen to be a non-resident in partnership with a resident Indian,
the term “business connection”, applies to you, which covers the gamut
of activities such as a branch office, a local subsidiary selling foreign
products or services, an export-oriented unit or a financial arrangement
between a non-resident and a resident company.

As a NRI, which ITR do I need to submit?

Do check out http://incometaxindia.gov.in/download_all.asp for a guide on which tax return form you need to submit.

How do I work out my net income?

The IT Department has simplified the computation of net income of NRIs.
As a NRI, you can pay on your “gross income” which does not question the
expenses incurred on the receipts. Rate of tax applied on such income is
lower than general rates, accounting for the expenses that you may have
incurred.

Alternatively, net income can also be derived from a percentage
applied on gross receipts, and then taxed at the normal rate. As a NRI
you may get an advance ruling on your tax liability through an application
of Rs.2, 500, which you and the IT Department are bound by.

As a non-resident not wishing to appoint a local agent or a chartered accountant, how do I file my returns?

Electronic filing is feasible through http://incometaxindia.gov.in/eFiling/Main.asp which guides you through the process.

The form can be downloaded from the Income Tax department site. After logging on through the user ID and password, select your ITR form and upload the XML file.

The process is complete if an acknowledgement by way of a digital signature
appears. In case an acknowledgement is not received, the return will have
to be submitted physically. No documents are required to be attached with
the return, but can be called for at a later date to support the claims in
the return.

These documents include: details of taxable income and tax payable,
and refundable, as the case may be; counterfoil of tax payments made
during the year; and copies of bank statements, proofs of all deductions
and exemptions claimed in the return.

What is the last date for filing returns?

The last date for filing returns for the assessment year ending March 31, 2007 is July 31, 2007. Delays in filing returns invite a penalty of 1% per month, and a delay beyond March 31, 2008 would carry a further penalty of Rs.5000.

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