NRI Tax Filing Benefits and Consequences & Penal Provisions of Non-Filing or Late Filing of ITR in India
Due to their roots in India, NRIs, PIOs, OCIs do incur/own various financial transactions in India, which attract Income Tax in India. Following are general & frequent transactions and Incomes, which form part of NRIs Indian ITR:
Table of Contents
- Components of a General NRI ITR – Frequent Financial & Income Transactions Of NRI, PIO, ITR
- Benefits of Filing Indian ITR By Non-residents (NRIs, PIOs, expats etc)
- Refund Claim
- Reporting of NRI, PIO status and other information
- ITR Form Filing Acknowledgement Importance
- Track Record With Income Tax Department
- Carry Forward of Losses
- Remittance of Money From India to Abroad
- Application for Lower TDS Certifiate
- Communication of Income Element of A Financial Transaction In India
- Borrowing, Credit Card From India
- Screening By Tax Expert
- Future Plans To Return India
- Penal Provisions, Consequences of Non-Filing or Late Filing of ITR in India
- Non Residents Income Tax Return Services In India
- NRI, PIO, NON-Residents Various OTHER INFORMATION & Services
- Frequently Asked Questions
- Q. What kind of financial transactions of Non-Residents (NRIs, PIOs, Expats), which is taxable in India and need a reporting in ITR? What are the frequent transactions of Non-Residents (NRI, PIOs) for which they should file an Income Tax Return in India? Whether Non-Resident Foreign Income is Taxable or Tax Free in India?
- Q. What if ITR is not filed? Whether there are any penal provisions for not filing an ITR in India?
- Q. What are other consequences, if ITR is filed late or ITR is not filed in India by the assessee?
Components of a General NRI ITR – Frequent Financial & Income Transactions Of NRI, PIO, ITR
NRO Deposit Interest Income
Almost all NRIs, PIOs keep bank account in India. These bank account are generally in two categories ie. NRO Account and NRE Account. Interest Income of NRO is taxable and TDS is also deducted thereon. Interest of NRE is exempt. NRIs, PIOs, OCIs need to report their Interest Income to the IT Deptt via ITR. They need to report Interest incomr from both type of accounts i.e. NRO as well NRE in the ITR form. This is a most common income which form part of NRI, PIO ITR.
Sale of Immovable Property in India
A maximum range of NRIs, PIOs, OCIs hold a property in India. This is either in the form of investment made by them in past or inheritance from their parents. Later or sooner, NRIs PIOs decide to sell this property. Hence, this sale transaction become part of their ITR. NRIs need to report the capital gain/loss arising on the sale of that property to the Income Tax Department.
Rent from Immovable Property in India
In many cases, where NRIs, PIOs are holding a property in India, they earn rent income from the let out of property. This rental income form part of NRIs Income Tax Return. Again, TDS deducted thereon can be set off against the tax payable or can be claimed as refund in the ITR.
NRIs, OCIs, PIOs, are eligible to do invest money in securities in India under Portfolio Investment Scheme of RBI. Hence, they do frequent sale-purchase of Mutual Funds and Shares in India. Sale of these securities attract capital gain/loss and TDS thereon.
NRIs, PIOs need to report these transactions to the Income Tax Authorities by filing the ITR where they can claim the TDS also which is deducted on sale of these transaction. Also, if there is a loss this loss can be carried forward to future years and can be set off again future year capital gains.
Redemption of Insurance Policy
In some cases, NRIs do investment in Insurance Policy (ULIPs etc) in India. On redemption of policy, Insurance Company do TDS deduction which reflects in the IT Deptt records. NRIs report this transaction to the IT Deptt via filing an ITR where they report exact amount of income element of the Insurance Policy and also claim TDS.
Interest From Bonds, Capital Gain Bonds
In many cases, where NRIs invest in Bonds (including Capital Gain Tax Saving Bonds) in India, they earn interest income from the bonds. TDS is also deducted thereon. This interest income and TDS form part of the NRI ITR and need a reporting in the ITR form.
Till FY 2019-20, dividend income is exempt in the hands of shareholders. However, wef FY 2020-21, dividend income from shares will be taxable in the hands of shareholders receipient. It will also attract TDS provisions. Hence, it is going to form part of ITR filing in India by NRIs. NRI can report their divident income and claim TDS by filing ITR with Tax Authorities.
Benefits of Filing Indian ITR By Non-residents (NRIs, PIOs, expats etc)
In many cases, people have very less income in India, which is below taxable limit, hence, ITR filing is not mandatory. This is a situation which is very much applicable in case of NRIs, OCIs, PIOs, Foreign Citizens, Expats etc.
Hence, a question arises that why to file ITR, What are the benefits of filing ITR in India? Here it need to understand that filing of ITR leads to several benefits.
Following are various reasons, benefits of filing ITR:
In many cases, NRIs have some TDS deducted in India (may be small amunt). NRIs face TDS provisions even on small interest income from bank on their NRO accounts. Hence, by filing an ITR that TDS can be claimed as Refund back. It will take few steps and process to get this refund to their bank account.
Reporting of NRI, PIO status and other information
In today’s scenario, due to International Agreements, Income Tax Department has access to lot of information. In many cases, due to unavailability of information about the status of NRIs, PIOs etc, Income Tax Department Investigaton Cell sends notices to NRIs, PIOs seeking various information about foreign transactions (e.g. Remittance from India to Abroad). If NRIs, submit a Return of Income in India, then their residential status and other requisite information automatically flows to this department. Hence, ITR filing helps avoidance of these kind of notices, enquiries.
ITR Form Filing Acknowledgement Importance
NRIs, PIOs can show the acknowledgement of ITR submission as a requisite or alternative document at various places. It will help as a legal and govt document for various purposes. It can also be helpful as an address proof at various places.
Track Record With Income Tax Department
Continuity of filing of ITR helps as a track record with the Income Tax Department. Even NRIs, PIOs if they wish to seek their tax status they can check it online on Income Tax Portal (www.incometaxindiaefiling.gov.in). NRIs, PIOs can keep themselves updated with all Income Tax Updates if they keep filing their ITR regularly. It plugs all kind of harsh notices etc also from Income Tax Department.
Carry Forward of Losses
Sometimes, NRIs, PIOs incur very occassional transaction in India e.g. sale of some inherited property. In that case, even if there is a loss, then filing of ITR will allow them to carry forward that loss to set it off against any future capital gain.
Remittance of Money From India to Abroad
Many times, NRIs PIOs do approach bank for remittance of their NRO account money to outside India. Bank require them for Form 15CA, 15CB. For this, NRIs PIOs approach a Chartered Accountant. In that case, ITR filing record helps them to get the Form 15CA and 15CB submission expeditiously and conveniently.
Application for Lower TDS Certifiate
If NRIs, PIOs wishes to sell a property in India then buyer inform them to deduct TDS (20% plus surcharge & cess on long term property) on total sales amount. In that case, NRI or PIO can approach to the Income Tax Department for lower TDS certificate. In that case, ITR record of last 2-3 years help them for early processing of their lower TDS application.
Communication of Income Element of A Financial Transaction In India
ITR Filing also helps in communicating to the IT Deptt about taxable component of a financial transaction in India. E.g. if an NRI redeem an insurance policy or mutual fund investment, he can report the taxable component of that transaction to the IT Deptt via ITR.
Borrowing, Credit Card From India
For any loan or credit card application, ITR copy is pre-requisite. Hence, if NRIs, PIOs apply for any loan in India for any investment, property purchase etc, then ITR copy helps in getting them loan sancetioned conveniently.
Screening By Tax Expert
If any person (specifically NRI, PIO) file an ITR in India with the help of some Tax Expert then at the time of preparing of Tax Return a screening of bank transactions and other transactions is done by the Expert. This screening helps in getting some important advisory, planning and steps, which can reduce lot of tax burden, penal provisions and inconvenience to NRIs, PIOs. Also, in all cases, Tax Expert advisory leads to economic beneficial to NRIs.
Future Plans To Return India
ITR filing can be very helpful, productive and beneficialthose NRIs, PIOs who are planning to return back to India in future. This will help them to keep their Tax Status maintained, and on coming back to India they will have a continuous record of their tax filings etc with the Income Tax Department. This will clearly mark their tax compiant status as per their Residential Status and avoid chances of litigation.
Penal Provisions, Consequences of Non-Filing or Late Filing of ITR in India
(Applicable to FY 2019-20, FY 2020-21)
Many people have this question in their mind that what will happen if ITR is not filed or if ITR is filed late.
Many think that why should they file the ITR?
What are consequences if ITR is not filed or late filed. Here is a summary of all these questions.
If a person (including NRIs, PIOs, Other Non-Residents, Resident Indians) donot file their ITR or they file the ITR after due date, then they will have to face following penal provisions and/or consequences:
Late Filing Fee U/s 234F
Late filing fee is Rs 1000 to 10,000 as per the delay and Total Income. Brief summary of late filing fee is as under:
|ITR Late Filing Fee U/s 234F (Rs)|
|ITR Filing Date||Total Income (Upto Rs 5 Lakh)||Total Income (More Than Rs 5 Lakh)|
|Upto Due Date
(i.e. July 31, 2020)
|Between Due Date To December 31 (i.e July 31, 2020 to December 31, 2020)||1,000||5,000|
|Jan 1 to March 31 of Assessment Year (i.e. Jan 1, 2020 to March 31, 2021).||1,000||10,000|
If ITR is not filed by due date, interest penalty of section 234A @1% per month is levied on the tax payable amount. This interest penalty is levied for the period starting from the month after the due date till the month in which ITR is actually filed. So, if the ITR is filed 3 months after the due date, 3 months interest penalty (i.e 3*1%=3%) will attract. This interest penalty is in addition to late payment interest of tax u/s 234B.
Carry Forward of Losses Not Allowed
If ITR is not filed by due date, then assessee loses the right of carry forward of current year losses. Eg if in current year an NRI has incurs a Capital Loss on sale of property or securities then he loses the right to carry forward the losses if NRI or PIO do not submit his ITR by due date.
Late Processing of Refund
In many ITRs, there is a refund claimed (of excess TDS deducted). Late filing of ITR means late processing of Refund. Similarly, Non-filing of ITR means No Refund. Processing of ITR and Refund happens after filing of ITR only. Hence, CPC will not be able to process the Income Tax Refund unless ITR is filed. Hence, if ITR is not filed or filed late the refund processing will be accordingly.
If a person who is required to file the ITR but he does not file the ITR, this may lead to opening of scrutiny proceedings against him. In today scenarios, generally all type of incomes attract TDS. This TDS reflects in the Income Tax Deptt records. If a person misses the ITR filing and then IT department issues him notices and question him. These enquiries lead to Scrutiny Proceedings also in many cases. In case assessee still donot response the notice, IT Department do Best Judgement Assessment also.
Notices For Certain Transactions
If a person does not file ITR, but incurs certain transactions e.g. Credit Card Expenses, Mutual Fund/Shares Purchaes, Property Purchase etc, then IT deptt issue notices to that person about his income status. If he has already filed an ITR then this notice can be avoided.
Non Residents Income Tax Return Services In India
Fore more Information about Non-Resident (NRI, PIO, Expats, Seafarer) Income Tax Return (ITR) in India, Please refer to:
- Income Tax Return In India NRIs, Expatriates, OCIs, PIOs, Foreign Citizens, Indian Residents
- NRI Income Tax Exemptions, Deductions, Reliefs in India
- Determination of Residential Status For Filing ITR in India
- Changes in Residential Status Rules Budget 2020
- Income Taxation of Seafarer, Mariner in India
- Process of Filing of ITR in India – NRIs, PIOs, OCIs, Foreign Citizens, Residents
- Is there any way to file ITR for earlier years by Non-Residents and Others
NRI, PIO, NON-Residents Various OTHER INFORMATION & Services
- Non-Resident Indian – Income Tax & FEMA
- CA Services To NRIs, OCIs, PIOs, Foreign Citizens
- Property Sale, Capital Gain Tax Implication, Exemption, Tax Planning Advisory Services
- TDS Exemption or Lower Rate TDS Services For NRIs, PIOs, Others (Form 13)
- Remittance/Repatriation of Money From NRO Account to NRE/Foreign Account (Form 15CA, 15CB)
- NRIs, Foreign Citizens Property Buying Tax & FEMA Advisory Services
- Property Sale, Acquisition and Management Services for NRIs, PIOs, Foreign Citizens
- Recently Migrated NRIs – Needful Actions To Be Taken By NRIs – Tax, RBI Regulations etc
- Indian Budget 2019 – Impact On NRIs, Foreign Citizens
- India Budget 2020 – New Residential Rules Applicable To NRIs, PIOs
- Aadhaar – PAN Linking In India – How It Will Affect NRIs, Foreign Citizens Living Abroad
Frequently Asked Questions
Non-Residents (NRIs, PIOs) are the people who are working and living abroad. In some cases, where a foreign citizen comes India (expat), he come for a short period and many times he remain a Non-Resident in India as per his stay in India. Hence, the main source of income is outside India for the Non-Residents and outside India Income (Foreign income) is not taxable in India. Hence, it is important for Non-Resident (NRIs, PIOs) that what are the transactions, which attract taxation in India as well filing of ITR with Tax Department. So, there are various transactions, which attract tax in India e.g. Capital Gains, Interest on Deposits, Rent, Dividend etc. In addition to this, for newly migrated NRIs, Expats there may be salary income also which attract tax in India. A detailed summary of these transactions are given above.
Q. What if ITR is not filed? Whether there are any penal provisions for not filing an ITR in India?
If ITR is not filed with the IT Deptt when ITR filing is applicable, then in short term it leads to loss of carry forward of losses, Penalty Fee, loss of TDS refund late filing fee, and also interest on tax payable amount. Further, in long term, it leads to income tax department litigation in the form of ITR notices for non-filing of ITR, Scrutiny Proceeding etc, Hence, it is advisable to file the ITR and timely file the ITR. The penalty provisions are explained in detail in above section..
Q. What are other consequences, if ITR is filed late or ITR is not filed in India by the assessee?
If an assessee (including NRI, PIO, Expat) file the ITR late or donot file the ITR, then other than the penal provisons there are various consequences which are faced by the assessee. These consequences are in the form of loss of excess TDS refund, loss of losing the right to carry forward of losses, late processing of ITR etc. More detailed summary of the various consequences are provided in above section.