ITR filing for NRIs 2024-25: What you need to know?

Do NRIs need to file ITR in India?

Let's understand and answer this question through a real-life example.

Ananya, a girl from Chennai got a really great job in Singapore in a top tier tech company. As an NRI with a global income, she enjoyed financial freedom as well. However, during a recent talk with her cousin reminded her of the Indian tax rules reality. Her cousin warned her not to forget filing her NRI ITR filing for 2024-25, especially with the mutual fund redemption and rental income back in India. She knew her foreign income is not taxable in India but the complicated NRI tax rules are still applicable to her income that is sourced from India. She felt overwhelmed even while thinking about the forms and deadlines.

This situation isn't unique only to Ananya; it could apply to you if you are an NRI as well.

Many NRIs often face this dilemma, where their global ambitions meet the tax laws in India. They wonder how to manage their tax duties in India effectively. This article is curated for you to understand the NRI tax rates, its implications and how you can get exemptions and deductions, etc.

Tax Slabs in India for NRIs:

NRIs are liable to pay taxes as per the Indian tax slab on any income derived from India based. They can choose between the old and new tax systems. A surcharge may apply for higher income levels.

Here are the tax slabs for NRIs for the Financial Year 2024-25 (Assessment Year 2025-26):

1. Old Tax Regime:

• Up to Rs.2,50,000: Nil
• Rs.2,50,001 to Rs.5,00,000: 5%
• Rs.5,00,001 to Rs.10,00,000: Rs.12,500 + 20% of the amount exceeding Rs.5,00,000
• Rs.10,00,001 and above: Rs.1,12,500 + 30% of the amount exceeding Rs.10,00,000

2. New Tax Regime:

• Up to Rs.3,00,000: Nil
• Rs.3,00,001 to Rs.7,00,000: 5%
• Rs.7,00,001 to Rs.10,00,000: Rs.20,000 + 10% of the amount exceeding Rs.7,00,000
• Rs.10,00,001 to Rs.12,00,000: Rs.50,000 + 15% of the amount exceeding Rs.10,00,000
• Rs.12,00,001 to Rs.15,00,000: Rs.80,000 + 20% of the amount exceeding Rs.12,00,000
• Rs.15,00,001 and above: Rs.1,40,000 + 30% of the amount exceeding Rs.15,00,000

Taxable Income for NRIs:

The income that accrues or is received in India is subject to taxes under Income Tax Act during ITR filing. But the good news is Income earned outside India is not taxed. Sources of taxable income consists of:

• Capital Gains: Derived from the sale of capital assets in India.

Tax Advantage: Capital gains arising from sale/or redemption of Mutual funds in India are not taxable in case of NRI residing in Singapore, UAE, Mauritius.

• Salary Income: Taxable if received in an Indian bank account or for work done in India.
• House Property Income: From properties in India, including deductions for property tax, a 30% standard deduction, and home loan interest.
• Income from Other Sources: Includes interest from fixed deposits and savings accounts in India.

Income Tax Exemptions and Deductions for NRIs in India:

For NRI ITR filing, knowing about exemptions and deductions is key to reducing tax liabilities under Income Tax Act.

Key Exemptions:

• Section 54: Exempts LTCG from selling residential property in India if reinvested in another Indian home.
• Section 54F: Exempts LTCG from selling any capital asset (other than a house) if reinvested in a residential property in India subject to certain conditions.
• Specified Bonds: Investing LTCG in bonds like NHAI or REC can save tax.
• NRE/FCNR Account Interest: Interest earned from these accounts is fully exempt.
• LTCG from Listed Equity/Equity Mutual Funds: Exempt under specific conditions.

Key Deductions:

• Section 80C: For investments like ULIPs, ELSS, life insurance premiums, children's tuition fees, etc.
• Section 80TTA (up to Rs.10,000): For interest earned on NRO savings bank accounts.
• Section 80G: For donations to social causes.
• Section 80E: For interest paid on education loans.
• Section 80D: For health insurance premiums.

Update on ITR Filing Due Date for NRIs:

For NRI ITR filing for FY 2024-25, the usual due date of July 31 is extended to September 15, 2025, due to delays in the e-filing system. Despite this extension, it is advisable to prepare documents early to ensure compliance with NRI tax rules.

What Are The Documents Required For Tax Filing?

For smooth NRI ITR filing under NRI tax rules, gather these important documents:

• PAN Card & Passport: For identity and residency verification.
• Valid mobile number linked with Aadhaar / e-Filing portal / your bank / NSDL / CDSL (for e-Verification)
• Income Proof: Form 16 (for Indian salary), bank statements for all accounts held (for interest), property address & tenant details (for rental income), and Shares trading or Mutual funds investment statements.
• Deduction Proof: Insurance policies, donations etc.
• Tax Proof: Tax challan paid details, TDS certificates.
• Banking: Indian bank account details for refunds.
• Residency: Record of days stayed in India to confirm NRI status.
• Foreign Income/Assets: Information on income earned and bank accounts held outside India.

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How can NRI file ITR in India? A Step-By-Step Guide:

Here are the steps for NRI ITR filing under NRI tax rules:

1. Determine Residential Status: Confirm your NRI status based on days spent in India (maximum 181 days for employment or visit).
2. Reconcile Income & Taxes: Match your income and TDS with Form 26AS & AIS.
3. Ascertain Taxable Income & Liability: Identify your Indian taxable income (such as capital gains, rent, Indian bank interest) and calculate tax while using available deductions.
4. Claim DTAA Relief: If applicable, claim relief under the Double Taxation Avoidance Agreement for income taxed in both India and your resident country.
5. Select correct ITR form & declare Exempt Income: Use ITR 2 (or ITR 3 for business income). Report exempt income like NRE/FCNR interest and certain LTCG.
6. Disclose Bank Account Details: Provide Indian bank account details for refunds. If you don't have an Indian bank account while claiming a refund then you may need to provide your foreign bank account details.
7. Provide Assets & Liabilities (if applicable): If total income exceeds Rs.50 lakh, disclose your Indian assets and liabilities.
8. ITR Verification: Verify your ITR (either e-verify or send ITR-V) within 30 days of filing to prevent invalidation.

Conclusion:

Under NRI tax rules, NRIs are taxed only on income earned or received in India, including capital gains from Indian assets. Foreign income is not taxed. NRIs must file ITR if their Indian taxable income exceeds the basic exemption limit. They can claim relevant deductions and exemptions. To avoid penalties and understand your obligations, simplify your NRI ITR filing now with Taxspanner.