Filing Return of Income in India
Who Should file Return of Income?
You are liable to file Return of Income only if your total taxable income* in India without giving effect to the provisions of section 10A, 10B, 10BA or Chapter VI-A in the relevant Financial Year (April –March) exceeds the basic exemption limit (i.e. Rs. 2,50,000/-for F.Y.2015-16)

*-Non Resident Indian (NRI) earning below mentioned income shall be liable to file returns in India, irrespective of their Total Income being less than the Basic Exemption limit.
  • Income from Short Term Capital Gains on equity shares or units of equity oriented mutual fund.
  • Income from Long Term Capital Gains, which are chargeable to tax.
Exception:
It shall not be necessary for a Non-Resident Indian to furnish a Return of Income if –
a) his total income in respect of which he is assessable under this Act during the relevant financial year consisted only of investment income** or income by way of long –term capital gains ***or both; and
b) the tax deductible at source has been deducted from such income.
      
** “investment income” means any income derived [other than dividends from Domestic Company] from a foreign exchange asset#;

 *** “Long –term capital gains” means income chargeable under the head “Capital gains” relating to capital asset, being a foreign exchange asset which is not a short - term capital asset;

#“Foreign exchange asset” means any specified asset which the assessee has acquired or purchased with or subscribed to in, convertible foreign exchange;

Thus, if you don’t have any income which is chargeable to tax, you are not required to file Return of Income.

Also, if you have only Investment Income or Income from Long Term capital gains or both (as explained above) and the tax has also been deducted at source from such income, then you are not required to file Return of Income.

However if you have short term capital gains on equity shares or units of equity oriented mutual fund (even if less than Rs. 2,50,000/-i.e. the basic exemption limit ) yet you are liable to file Return of Income.

Due Dates for Filing Return of Income:
                               
Before the Prescribed DateAfter the Due Date, But before the Extended DateAfter the Extended Date
Every person whose accounts are not required to be audited is required to submit return of income by 31st July every year for the income earned during the prior year ending 31st March provided his income exceeds the maximum amount not chargeable to tax i.e.Rs. 2,50,000/-.If a NRI do not file the Return of Income by the prescribed date,

1. He can file the Return of Income within subsequent 20 months
2. He is liable to pay interest at 1 % p.m. on the tax payable. 
If the Tax is deducted at source from your Income in the Past years and you have not filed the Return of Income within the prescribed time, you may apply to Income Tax Department to condone the delay and accept delayed return and thus claim Refund of Tax.

For Example 


Income for the year endingActual Income Earned File the Return of Income byFile the Return of Income by Extended date
31st March 2011More than Rs. 1,60,000/-31st July, 201131st March 2013
31st March 2012More than Rs. 1,80,000/-31st July, 201231st March 2014
31st March 2013More than Rs. 2,00,000/-31st July, 201331st March 2015
31st March 2014More than Rs. 2,00,000/-31st July, 201431st March 2016
31st March 2015More than Rs. 2,50,000/-31st July, 201531st March 2017

Impact of non-filing of Return of Income:


It may result in to penalty of Rs.5000/- for each year. Also, one may be subject to prosecution u/s 276CC.

However, a person shall not be preceded for penalty or prosecution for failure to furnish Return of Income, if-
  • The return is furnished by him before the expiry of the assessment year or
  • The tax payable by him on the total income determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source (TDS), does not exceed three thousand rupees.i.e. his balance tax liability after considering TDS and Advance Tax does not exceed three thousand rupees.

Why the NRI should file the Return of Income?

1. The tax deduction at source for NRI is prescribed at maximum rate in the Income –tax Act,1961 (11% to 34%). However, the actual liability to tax for the year computed in accordance with the provisions of the Act is generally lower for following reasons.
     
i. Income up to the basic exemption limit of Rs. 2,50,000/- (other than capital gains) earned by NRI is not liable to taxation.

However, the tax is deducted at source at 33.99% from such income.

ii. The income earned may not be liable to tax but the Payer in following cases deducts the tax.
          
a) The Capital losses can be set off against Capital Gains but tax is deducted at source from capital gains without setting off the losses.

b) The rate of TDS on NRO Account is 33.99 % (for Financial Year 2014-15) but tax chargeable on Income as per Double Taxation Avoidance Agreements (DTAA) with the country where NRI resides, may be lower.

c) The reinvestments of capital gains, as prescribed may exempt it from tax but the tax may have been deducted from the capital gain received.
 
In view of above, NRI should file Return of Income if his tax deducted at source is more than his actual tax liability. He is entitled to claim refund of Tax with interest at 6 %p.a.
     
2. Sometimes, NRI may incur short-term or long term capital loss on sale of investments. He can setoff such loss against long term capital gain from sale of investments in subsequent year or years provided he has filed Return of Income within the prescribed time for the year in which he has incurred loss. Hence the NRI should file the Return of Income declaring loss in such a situation.
     
3. NRI may file Return of Income in some years and may not file in some years.But if he receives a notice from the Tax Department to file the Return of Income, he must respond by filing Return of Income if he is liable.
     
4. The updated tax information / records helps NRI to comply with the procedural documentations for repatriation of Income and Assets held in India. It also helps him to have ready records as & when he returns to India.