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A person living abroad for the majority of the year but holding Indian citizenship is called an NRI (Non-resident Indian). This typically applies to those who spend less than 182 days in India during a financial year. NRIs play a significant role in the Indian economy and maintain various financial ties with their home country.
Do NRIs need to file ITR if they have no income in India? This is a common question for NRIs, and the answer depends on various factors. In this article, we'll discuss the specifics of ITR filing requirements for NRIs.
Generally, NRIs are not mandated to file ITRs solely based on their non-resident status. However, their obligation to file hinges on their total income generated in India during a specific financial year.
The Income Tax Act 1961 dictates the income threshold that triggers mandatory ITR filing for NRIs. Here's the current scenario:
As established earlier, the requirement for NRIs to file ITRs hinges on their income generated in India. Therefore, NRIs with absolutely no income sourced from within India are generally exempt from mandatory ITR filing.
This means income sources like:
While NRIs with no Indian income are generally exempt from mandatory ITR filing, there are situations where submitting an ITR can be advantageous:
While NRIs with no income generated in India are generally exempt from mandatory ITR filing, there are additional scenarios where an NRI, even below the income threshold, must file an ITR as mandated by Section 139 (1) and rules 12 AB of the Income Tax Act, 1961. These situations involve specific financial activities or expenditures within India:
High-Value Deposits:
Tax Deductions: If the TDS (Tax Deducted at Source) or TCS (Tax Collected at Source) on any income received in India surpasses ₹25,000 in a financial year, filing an ITR becomes mandatory.
Travel Expenditure: NRIs incurring travel-related expenses exceeding ₹2 lakh from their Indian bank accounts for themselves or others traveling abroad (excluding travel to specific neighboring countries (Bhutan, Sri Lanka, Nepal, Bangladesh, Pakistan, Maldives) and pilgrimage destinations) must file an ITR.
Consulting a tax professional specializing in NRI taxation is important. They can provide personalized direction based on your specific financial activities and income sources in India. This ensures you are adhering to tax regulations and avoiding any potential penalties for non-compliance. Book Consultation Today!
According to FEMA guidelines, there is no penalty for failing to declare your NRI status. However, you are required to promptly close your current and savings accounts or convert them into an NRO savings account.
In instances of not filing tax returns, tax authorities may interpret it as an attempt at tax evasion. Failure to submit an income tax return could lead to imprisonment, with potential sentences ranging from six months to seven years, in accordance with Section 276CC of the Income Tax Act.
The Foreign Exchange Management Act (FEMA) provides explicit criteria for classifying individuals of Indian origin as either Resident Indian or Non-Resident Indian. To qualify as a Resident Indian, an individual must have resided in India for a minimum of 60 days in the preceding year and at least 365 days in the preceding four years.
