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  7. Do NRI Need to File ITR if There is No Income in India?

Do NRI Need to File ITR if There is No Income in India?

Updated on: 05 Jul, 2024 12:26 PM

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 and answer the most asked question, i.e., do NRIs need to file ITR in India even if there is no income.

Contents

When is it Mandatory for NRIs to file Income Tax Returns?

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:

  • Old Tax Regime (Optional): NRIs must file ITR if their total income in India surpasses ₹2.5 lakhs in a financial year.
  • New Tax Regime: Introduced in 2020, this regime offers a simplified tax structure. NRIs opting for this regime are required to file ITR if their total income in India exceeds ₹3 lakhs in a financial year.

Exemption from ITR Filing for NRIs with Income in India

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:

  • Salaries earned while working abroad
  • Business profits accrued outside India
  • Rental income from foreign properties

Exceptions and Benefits of Voluntary Filing (Even with No Income)

While NRIs with no Indian income are generally exempt from mandatory ITR filing, there are situations where submitting an ITR can be advantageous:

  • Claiming Tax Refunds for TDS (Tax Deducted at Source): Even in the absence of taxable income, NRIs might have had TDS deducted on certain payments received in India, such as interest on bank deposits or rental income. Filing an ITR allows them to claim a refund for this excess tax deducted.
  • Carrying Forward Capital Losses: If an NRI has incurred capital losses from stock market investments or sale of assets in India, filing an ITR enables them to carry forward these losses and offset them against future capital gains, potentially reducing their tax liability.
  • Applying for Visas or Loans Requiring ITR Proof: Certain foreign authorities, financial institutions, or scholarship programs might require ITR as proof of financial status. Filing an ITR, even with no income, demonstrates tax compliance and can expedite these applications.

Need help filing your NRI taxes? Our experts can help you ensure accurate ITR filing while maximizing your tax refunds.

NRIs must file their income tax returns in India to

Mandatory Income Tax Filing for NRIs Below Income Threshold

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:

  • Savings Bank Account: Exceeding ₹50 lakh in deposits during the financial year necessitates ITR filing.
  • Current Account: Deposits exceeding ₹1 crore in a financial year with a bank or cooperative society in India require ITR filing.

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. File NRI ITR with Experts!

Frequently Asked Questions

Q- What happens if you don't declare NRI status?

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.

Q- What happens if no ITR is filed?

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.

Q- What is the 4-year rule of NRI?

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.

Q- Should I file ITR if my income is not taxable in India?

You must file an Income Tax Return (ITR) if your total income exceeds the basic exemption limit. Even if your income is below this limit, you may still need to file an ITR for specific types of income, such as capital gains or income from foreign assets.

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CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.