Ø  Basic provisions/requirements as to filing ROI:

ROI is a prescribed form through which the particulars of income earned by a person in a Financial year (FY) and taxes paid on such income are communicated to the Income-tax Department. The NRI is required to file the ROI in ITR – 2 and ITR- 3 in case he has income from business or profession. 

An NRI is liable to file ROI in India if's:

·  Taxable income in relevant FY (April 1 to March 31) exceeds Basic Exemption Limit of Rs. 2,50,000/- or Rs. 3,00,000/- as applicable or

·  Where taxable income* is less than Basic Exemption Limit but the NRI, during the relevant previous year:

i. has Short Term Capital Gain (STCG) on Equity Shares/ Units of Equity Oriented Mutual Funds/ Units of Business Trust; or

ii. has any Long-Term Capital Gain (LTCG) chargeable to tax; or

iii. has deposited an amount or aggregate of the amounts exceeding Rs. 1 crore in one or more current account maintained in India with a banking company or a co-operative bank; or

iv. has incurred expenditure of an amount or aggregate of the amounts exceeding Rs. 2 lakhs for himself or any other person for travel to a foreign country from his banking account in India; or

v. has incurred expenditure of an amount or aggregate of the amounts exceeding Rs. 1 lakh towards consumption of electricity in India; or

vi. has total sales, turnover or gross receipts of the business exceeding Rs. 60 lakhs; or

vii. has total gross receipt of profession exceeding Rs. 10 lakhs; or

viii. has total of tax deducted and collected of Rs. 25,000 or more; or

ix. has aggregate deposit in one or more savings bank accounts held in India of Rs. 50 lakhs or more.

Categories iii to ix above have been introduced recently under the Act. The  NRI  need to check and if required then provide relevant details in the ROI.

*Taxable income for the purpose of filing ROI means gross total income before giving effect to exemption on re-investment of capital gains (refer FAQs on Chapter 16 – Taxation of Capital Gains on sale of immovable property and Chapter 18 - Capital Gain on sale of shares, Mutual funds, bonds and debentures) and Chapter VI-A deductions (refer FAQs on Chapter 21 - Deductions from Gross Total Income) i.e. donations, investment life insurance policy/ Unit Linked Insurance Policy/ Equity Linked Savings Scheme, Mediclaim expenses, etc.

Ø   Exemption from filing ROI:

Any NRI covered by the special provision of the Act, as given below, are exempted from filing ROI:

a) If his, Gross Total Income during the relevant FY includes only:

AND

b) Tax on both incomes has been deducted at source as per provisions of the Act.

 Ø  Due Dates for Filing ROI in India:

The due date of filing ROI for FY 2023-24 [Assessment Year (A.Y.) 2024-25] is explained by an example below:

Note: Condonation of delay application can be made to prescribed Income tax authorities anytime upto six years from the end of A.Y. (i.e. upto March 31, 2030 for AY 2023-24)

 Ø  Revision of ROI previously filed:

Yes, if an individual discovers any omission or wrong statement in ROI previously filed he/she may file a revised ROI anytime on or before three months prior to end of relevant AY or before the completion of assessment, whichever is earlier. 

Example:

Ø  Consequences of filing Belated ROI:

If a NRI does not file his ROI within prescribed due dates, then he shall be liable for the following:

             i.        Specified losses such as Loss under head capital gains and Profits and gains of business or profession will not be allowed to be set off against the income in the subsequent years.

            ii.        Liable to pay 1% simple interest per month or part thereof on tax payable amount.

           iii.        Fees for filing ROI after due date is as under; 

Fees for delay must be paid before filing ROI or the same shall be adjusted against the refund amount (if any)

           iv.        In case of willful delay in filing ROI, NRI may be subjected to prosecution. Provided no prosecution for failure to furnish ROI, if:

·    ROI is filed before three months prior to end of relevant AY or before the completion of assessment, whichever is earlier or

·    Tax payable by NRI on total income determined by the Tax Officer as reduced by Advance Tax paid, if any and TDS does not exceed
Rs. 10,000/-.

Ø  Updated Tax Return:

·   The Finance Act, 2022 has introduced a facility known as ‘Updated Return’. The new provision allows the taxpayers to update /file fresh ROI within two years.

·    The facility is available for ROI pertaining to FY 2019-20 and onwards. Such Updated Return is required to be filed online on e-filing portal in Form ITR- U

·   It provides an opportunity to disclose income which was not offered in the original ROI upon payment of additional taxes. Such voluntary disclosure in Updated Return may protect from levy of penalty, in case the tax officer discovers the mistake.

·   However, one cannot file Updated Return in certain scenarios and some of the key scenarios are listed below:

-       Updated Return is a return of Loss

-       Updated Return is reducing the income tax liability from the return filed earlier

-       Updated Return results increase in refund

·   Time limit for filing Updated Return: The Updated Return can be filed within 24 months (2 years) from end of relevant AY. Accordingly, the due date is explained below:

·    The assesse is required to pay additional tax and interest as under if he opts to file updated ROI:

Ø   Condonation of Delay:

COD application can be made only with good reasons for delay. For your information, lack of knowledge of Indian laws/Income tax Act is held by the Court in India as a valid reason for condonation of delay in filing ROI.

Following are some of criteria’s based on which application for condonation shall be accepted or rejected by the Tax Officer at his discretion:

·  The claim is correct and genuine.

·  The case is based on genuine hardship on merits.

·    Income of the taxpayer is not assessable in the hands of any other person under any provisions of the Act

·   The case is a refund case, arising  as a result of excess tax deducted and/or collected at source and/or excess advance tax payment and/or Self- Assessment tax as per provisions of the Act

Due Date: Condonation of Delay (COD) can be filed only upto six years from the end of the AY for which such application/ claim is made. For example, COD for FY 2016-17 can be filed till March 31, 2024.

If the NRI has failed to file the ROI, within the specified due date, for FY in which he has earned taxable income and was liable to pay the taxes, then he/she may make an application to Income-Tax Department that he would like to file the ROI. Further, the Income-tax department may issue the notice to the taxpayer in response to which the NRI can file its ROI.

Note that, processing the COD application as well as issuance of refund is at the sole discretion of the Income-Tax Department.

Ø  Slab rates applicable to NRIs:

Different slab rates are provided in New Tax Regime and Old Tax Regime. An option is provided to the individuals to either be governed by new tax regime or old tax regime, whichever is beneficial for them. From FY 2023-24 onwards, the new tax regime is set as the default option. If anyone wants to continue with the old tax regime, he/she is required to opt for it at the time of filing the ROI.

Refer FAQ 5 of Chapter 14- TDS and Tax liability in India for slab rate applicable to NRI under New and Old tax regime

Ø  Benefits of voluntary ROI filing in India:

1. Claim refund of excess income tax paid:

TDS for NRIs is deducted at prescribed rates i.e. 10% to 30.9%. However, actual tax liability is generally lower for the following reasons:

a.  Income (other than capital gains) up to the basic exemption limit of Rs. 2,50,000/-  or Rs. 3,00,000/- as applicable, is not liable to tax. However, TDS is deducted at 30.9% in most cases.

b.  Income earned may not be liable to tax but the payer of Income deducts the tax:

i.  Capital losses can be set off against capital gains but TDS is deducted from capital gains prior to set-off of losses.

 ii.  TDS rate on NRO A/c is 30.9% but rate as per Double Taxation Avoidance Agreements (DTAA), may be lower.

iii.  Reinvestments of capital gains may be exempt but tax may be deducted by payer (such as banks, brokers, etc.)

In view of above, NRI is advised to claim refund for excess TDS deducted by filing ROI in the relevant FY. Further, NRI is entitled to receive interest @ 6 % p.a. on any tax refund. 

2. Set-off Benefits:

a. NRI may incur short-term or long-term capital loss on sale of investments. Such loss can be carry forwarded and set off against long-term capital gains from sale of investments in subsequent FY or FY’s provided ROI is filed within prescribed time in such FY in which he has incurred loss. Hence, the NRI should file ROI declaring losses in such a situation.

b.    Loss under the head ‘Income from House Property’ can now be set-off against income under any other head only to the extent of Rs. 2,00,000/- per FY . Earlier, there was no such limit on set-off of loss. Balance unabsorbed loss can be carried forward for set off in subsequent FY and the loss carried forward in subsequent years can be set off only against income from house property.

3.    Avoid non-filing notices from the Income-tax Department.

4.    Records/ Documentation:

The updated tax information/records help a NRI:

a.    To comply with procedural documentation for repatriation of income and assets from NRO a/c to NRE a/c / Overseas bank a/c. 

b.    To have ready records as and when he/she returns to India or have to submit the said documents in his / her country of residence.

                                                                                                                    - Updated 02/2024