A non-resident Indian (NRI) is a person who holds Indian passport and is a citizen of India but has gone out of the country, for an employment opportunity or doing any business. When an individual resides in India for less than 182 days in a year, he or she automatically acquires the status of an NRI.
According to the Income Tax Department, an NRI is an individual who is not a resident of India for tax purposes. In order to determine whether an individual is a non-resident or not, his residential status is required to be determined u/s 6 of the Income Tax Act, 1961.
An individual will be treated as a resident in India in any previous year if the person is in India for a period of 182 days, or more during the previous year or is in India for a period of 60 days or more during the previous year and 365 days or more during 4 years immediately preceding the previous year.
NRIs can invest in various financial investment opportunities available in India. They are also allowed to invest in residential/commercial properties but are not allowed to invest in agricultural or plantation property or a farmhouse. Likewise, they are also liable to pay taxes like other citizens, if they earn any income in the country.
Usually, NRIs are not required to file ITRs if they have not generated any income from the country. However, their income tax liability in the country depends on their total income generated from here during a specific financial year.
The Income Tax Act, 1961 mandates ITR filing for NRIs, but under specific conditions. Here are some possible scenarios which require mandatory ITR filing by NRIs:
Old Tax Regime: NRIs are required to file tax returns if total income in India is more than Rs 2.5 lakh in a financial year.
New Tax Regime: The new tax regime came in 2020, offering a simplified tax structure to taxpayers. NRIs opting for this regime are mandated to file ITR provided their total income in India is more than Rs 3 lakh in a particular financial year.
As mentioned earlier, NRIs who do not generate any income in the country are generally exempt from mandatory ITR filing.
For consideration, the sources that are taken into account include – Salaries earned while working abroad; business profits accrued outside India and rental income from foreign properties.
While NRIs with no income generated in India are generally exempt from mandatory ITR filing, they can still file tax returns if they wish to do so. And if they file ITR, they get some advantages. Filing ITR allows NRIs to claim a refund for excess tax deducted and carry forward capital losses. They also get an edge when applying for visas or loans requiring ITR proof.