NRIs get breather to claim back tax paid at source

They are allowed to file manual applications by 31 March 2019..

The Indian tax authority has exempted NRIs from having to file applications online for deduction of taxes paid at source in a bid to ease hardship cases.

In a new circular issued by the Central Board of Direct Taxes (CBDT), manual applications can now be completed in specified forms before designated officials at transaction centres in India by March 31, 2019.

The applicable tax laws provide that if total income warrants deduction of income tax at lower or nil rate, the tax payer may apply to the assessing officer concerned requesting for a lower withholding certificate.

This was to be e-filed by filling up a specified form (Form 13). However, to remove genuine hardship being faced by certain applicants in filing online application, the tax department has allowed NRIs to file the information manually before the tax officer or in ASK Centres.

ASK (Aaykar Seva Kendra) is a one-stop computerised transaction facility for taxpayers to obtain the services provided by the income-tax department in its citizens’ charter.

A S Elavarasan, chairman of chartered accountants and auditing firm ASPA Management Consultancy, Dubai, clarified that the tax authority’s circular will be beneficial to those applicants who have not been able to register themselves on ‘Traces’.

Traces (TDS Reconciliation Analysis and Correction Enabling System) is a website of the income tax department for easy filing of correction statements by taxpayers for reconciliation and claiming deduction of taxes collected at source.

Who is eligible?

There is a general perception that NRIs need not pay income tax or file tax returns in India. Not true. NRI or not, any Indian citizen whose annual income, accrued in India, exceeds INR250,000 (£2,746, $3,533, €3,083) is required to file an income tax return in India and pay taxes where appropriate.

NRIs are taxed for income earned or collected in India, and income accrued from fixed deposits (FDs) and savings accounts as well as capital gains.

An NRI’s income tax liability in India depends on his residential status for the year. If the status is ‘resident,’ his global income is taxable in India.

For taxation purpose, an NRI is considered an ‘Indian resident’ for a financial year (April 1 to March 31) if he lived in India for at least 182 days in that particular financial year; or if he was in India for at least 365 days during the four years preceding that year, and at least 60 days in that year.

All Indians who live abroad and do not fall under these categories are considered Non-Resident Indians.

For those with NRI status, income which is earned or accrued in India is taxable in India.

Salary received in India or salary for service provided in India, income from a house property situated in India, capital gains on transfer of assets situated in India, income from fixed deposits or interest on savings bank account are all income earned or accrued in India and they are taxable.

At the same time, income earned outside India is not taxable in India. There is no need to pay tax on interest earned on an NRE (non-resident external) account and FCNR (foreign currency non-repatriable) account.

Claim back tax deducted at source

It is a usual practice that organisations, banks and other financial institutions deduct taxes at source and remitted to the government.

Eligible taxpayers can claim a refund or reduction of such taxes deducted at source.

Elavarasan said that NRIs generally tend to avoid filing income tax returns even when they earn income in India from various sources. Tax default or avoidance is a crime punishable under tax laws.

After the implementation of the new unified tax rules such as GST (goods and services tax) and compulsory use of the national ID (Aadhar Card) the tax base expanded and tax administration became transparent and stringent.

“Now that the authorities can track all transactions and identify defaulters easily, it is advisable to abide by the laws and file your tax returns on time. After all, there are various provisions to lessen the tax liability of NRIs,” said Elavarasan.