A person living abroad for the majority of the year but holding Indian citizenship is called an NRI (Non-resident Indian). This typically applies to those who spend less than 182 days in India during a financial year. NRIs play a significant role in the Indian economy and maintain various financial ties with their home country.
Do NRIs need to file ITR if they have no income in India? This is a common question for NRIs, and the answer depends on various factors. In this article, we'll discuss the specifics of ITR filing requirements for NRIs.
When is it Mandatory for NRIs to file Income Tax Returns?
Generally, NRIs are not mandated to file ITRs solely based on their non-resident status. However, their obligation to file hinges on their total income generated in India during a specific financial year.
The Income Tax Act 1961 dictates the income threshold that triggers mandatory ITR filing for NRIs. Here's the current scenario:
Old Tax Regime (Optional): NRIs must file ITR if their total income in India surpasses ₹2.5 lakhs in a financial year.
New Tax Regime: Introduced in 2020, this regime offers a simplified tax structure. NRIs opting for this regime are required to file ITR if their total income in India exceeds ₹3 lakhs in a financial year.
Exemption from ITR Filing for NRIs with Income in India
As established earlier, the requirement for NRIs to file ITRs hinges on their income generated in India. Therefore, NRIs with absolutely no income sourced from within India are generally exempt from mandatory ITR filing.
This means income sources like:
Salaries earned while working abroad
Business profits accrued outside India
Rental income from foreign properties
Exceptions and Benefits of Voluntary Filing (Even with No Income)
While NRIs with no Indian income are generally exempt from mandatory ITR filing, there are situations where submitting an ITR can be advantageous:
Claiming Tax Refunds for TDS (Tax Deducted at Source): Even in the absence of taxable income, NRIs might have had TDS deducted on certain payments received in India, such as interest on bank deposits or rental income. Filing an ITR allows them to claim a refund for this excess tax deducted.
Carrying Forward Capital Losses: If an NRI has incurred capital losses from stock market investments or sale of assets in India, filing an ITR enables them to carry forward these losses and offset them against future capital gains, potentially reducing their tax liability.
Applying for Visas or Loans Requiring ITR Proof: Certain foreign authorities, financial institutions, or scholarship programs might require ITR as proof of financial status. Filing an ITR, even with no income, demonstrates tax compliance and can expedite these applications.
Mandatory Income Tax Filing for NRIs Below Income Threshold
While NRIs with no income generated in India are generally exempt from mandatory ITR filing, there are additional scenarios where an NRI, even below the income threshold, must file an ITR as mandated by Section 139 (1) and rules 12 AB of the Income Tax Act, 1961. These situations involve specific financial activities or expenditures within India:
High-Value Deposits:
Savings Bank Account: Exceeding ₹50 lakh in deposits during the financial year necessitates ITR filing.
Current Account: Deposits exceeding ₹1 crore in a financial year with a bank or cooperative society in India require ITR filing.
Tax Deductions: If the TDS (Tax Deducted at Source) or TCS (Tax Collected at Source) on any income received in India surpasses ₹25,000 in a financial year, filing an ITR becomes mandatory.
Travel Expenditure: NRIs incurring travel-related expenses exceeding ₹2 lakh from their Indian bank accounts for themselves or others traveling abroad (excluding travel to specific neighboring countries (Bhutan, Sri Lanka, Nepal, Bangladesh, Pakistan, Maldives) and pilgrimage destinations) must file an ITR.
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