NRI Income Tax

Income tax in India is typically imposed on individuals who are residents of the nation, and their income arises or accrues in India itself. In certain cases, however, non-resident Indians (NRIs) are also liable to pay tax in India.

NRI tax liability generally arises in the following cases:

• On rental income from a property in India
• On salary from an Indian company setup in the country where s/he is residing
• On royalty income for services rendered in India

Filing Returns for Tax on NRI Income

An NRI not registered with the Indian Income Tax authorities is required to make an application in Form 49A for allotment of Permanent Account Number (PAN). The PAN has to be compulsorily quoted in all communications with the IT authorities, including while filing an income-tax return. The income tax return form for NRIs differs on the basis of the nature of their income. The relevant tax-return forms for NRI’s are:

• ITR 1: NRIs with income from salary, pension or family pension
• ITR 2: NRIs receiving income from other sources, excluding business or profession
• ITR 3: NRIs who are partners in a domestic partnership firm, provided they are not involved in another business or profession
• ITR 4: NRIs receiving income from a domestic business or profession An NRI can file an income-tax return in-person or electronically, each having its pros and cons:
• Personally: This entails submitting the ITR form personally to an income tax official. An NRI may also authorize another individual to submit the form personally on his/her behalf. However, this may be an extremely tedious procedure.
• Electronically: This entails completing and submitting the relevant ITR form at the official Income Tax Department website at www.incometaxindiaefiling.gov.in. Although a relatively easier process, electronic filing may be overwhelming for someone not well versed with computers and the Internet.