End of the year Tax Compliance for NRI’s in the US

Tax compliance it is no secret, that a considerable number of Indians move out to other countries in the search of better opportunities. This obviously means that they are now liable to pay taxes in the new country that they have moved in to.

However, this does not detach them from paying taxes back in India, as long as they have some income source of investments. It is essential for NRIs to be tax compliant in India as well. Knowing the residential status is the very first step in this ordeal.

Residential Status

As per the Indian laws, if an individual has stayed less than 60 days for a fiscal year, he/she would be tagged as a non-resident. Individuals who leave the country for opportunities in other countries, the threshold is at 182 days for the specific fiscal year.

There is also a category called “resident but not ordinarily resident”. Individuals who have stayed in the country for 729 days or more in the last seven fiscal years before the current fiscal year, are put into this category.

It is important to note that tax residents are individuals whose global income is taxed in India. However, non-residents only need to pay taxes on their income or investments in India.

Income Earned

Now that residential status is taken care of, the next step is to determine the income that an individual has earned in a fiscal year. The following are some of the major sources of income and their impact on taxation.

  • Any income generated from rental properties in the country will be taxed in India.
  • Any form of salary earned in the country is taxable for a non-resident.
  • Income generated from consultancy or business opportunities is taxable in India.
  • On the transfer of capital assets, the capital gains are also taxable.

Deductions

Once you have accessed the income that is taxable, the next step is to check if you are eligible for any deductions. Just as resident Indians can opt for deductions, non-residents can also do the same. Some deductions that they are eligible for include investments in Equity Linked Savings Schemes, premiums paid for life insurance, ULIPs, etc. up to INR 1,50,000 for a fiscal year. Similarly, the standard deduction of INR 50,000 is also available.

Compliance

An individual must obtain a Personal Account Number of PAN. This would come into the picture if the non-resident Indian’s income exceeds INR 2,50,000. This is the minimum threshold level for paying taxes.

Filing of Taxes

Should the income in India exceed the defined minimum threshold level, non-residents need to file tax returns. Taxpayers who don’t have to get their books audited need to file their tax returns by the 31st of July. Other taxpayers need to file their taxes by 30th of September. The Income Tax Department offers e-filing for its taxpayers through its official website. You can use the same for convenient and quick tax filing.

The Income Tax Department is constantly working towards easier tax compliance. The intent is to expand the taxpayer base. It does not come as a surprise that several new measures are already in place. For instance, a vast majority of the tax filings, return filings and even returns are carried out online.

With several plans in motion to reduce the turn around time furthermore. If you are a non-resident Indian, you can benefit from these new measures. You can duly report your income and file for tax returns at the end of a fiscal year to avoid any sort of complications.