Non-resident Indians (NRIs) must file Income Tax Returns (ITRs), even if they do not reside physically in India. Initially, NRIs typically must file ITRs if their income in India exceeds a specified threshold ( ₹2.5 lakh under the existing regime or ₹3 lakh under the new regime as of 2024).
Also, the NRIs use a different ITR form compared to resident filers. For example, ITR-1 is no longer applicable to NRIs. Nevertheless, the NRIs can still avail deductions and exemptions on their Indian income, similar to residents (e.g., deductions under Section 80C of the Income Tax Act, 1961).
A recent survey conducted by SBNRI among NRIs regarding their ITR filing for the financial year 2023-24 has uncovered interesting trends. A substantial majority (73%) of NRIs intend to file their ITRs by July, highlighting a strong awareness of compliance. Approximately 19% of NRIs have already completed their filings, while a smaller segment (8%) do not plan to file their ITRs.
The survey findings also reveal specific trends among NRIs in the US. A smaller percentage (22%) of US-based NRIs plan to file their ITRs by July, which is lower compared to the overall trend. Interestingly, none of the surveyed US NRIs have already completed their ITR filings. A small fraction (3%) of US NRIs mentioned they do not intend to file their ITRs.
Furthermore, UK-based NRIs show a greater inclination to file their ITRs by the deadline compared to NRIs in the US. A significantly larger proportion (31%) of UK NRIs intend to file by July compared to US NRIs (22%). This indicates either a stronger awareness of ITR filing obligations or a more efficient filing system among UK NRIs.
In contrast to the general trend, a lower percentage of UAE NRIs intend to file by July (14%) or have already done so (2%). This implies that UAE NRIs may have less awareness of filing deadlines or encounter difficulties in completing their ITR submissions. Also, 8% of Canadian NRIs intend to file by July, mirroring the broader trend of 73% across all groups.
The data for NRIs in other countries contrasts with that of specific countries like the US and UAE. NRIs in these other countries exhibit a higher inclination to file by July (25%).
Emphasizing the importance of addressing the unique challenges faced by NRIs in tax filing, Mudit Vijayvergiya, Founder, SBNRI, said, “The survey clearly shows that NRIs are eager to comply with their tax obligations but often face difficulties due to complex tax regulations and lack of support. At SBNRI, we are committed to simplifying these processes and providing the necessary tools and guidance to help NRIs manage their taxes efficiently. This proactive approach by NRIs is a positive sign, and we aim to support them every step of the way.”
The survey shows that a substantial majority of NRIs are eager to meet the ITR filing deadline, demonstrating strong tax compliance and awareness. These findings are critical for policymakers and service providers to address the unique requirements of the NRI community, ensuring a smooth and efficient tax filing process.
Complexities galore for NRIs
Filing ITRs as an NRI can be complex due to several factors. For instance, NRIs often manage income from multiple countries, complicating the determination of their tax residency status and the reporting of their global income.
Furthermore, differing tax laws across various countries exacerbate the challenges. Each country has its own set of tax regulations, which may significantly differ from those in India. NRIs must grasp the tax implications in both their country of residence and India to prevent double taxation (being taxed on the same income twice).
Tax liabilities also extend to foreign income and specific accounts. The nature of income (such as salary, rental income, dividends) and the type of accounts (NRE or NRO) where it is deposited can influence tax obligations in India. NRE accounts, which hold foreign income, typically offer tax benefits, whereas NRO accounts, which hold Indian income, may incur taxation.
This report offers a thorough examination of the ITR filing habits and preferences of NRIs, highlighting their dedication to complying with tax laws and the continual requirement for supportive financial services. As the deadline nears, the data indicates that the majority of NRIs are prepared and proactive in handling their tax obligations, which augurs positively for the financial inclusion of this important demographic.
The survey findings hold significance because they provide insights that policymakers and service providers can leverage to enhance the ITR filing process for NRIs, promoting effective tax compliance. This could strengthen the tax administration system and potentially foster increased investment from the NRI community.