Non-Resident Indians (NRIs) will have to file Income Tax Return (ITR)Even if they are not physically resident in India. Initially, NRIs must generally file ITR if their income in India exceeds a specified limit ( 2.5 lakh under the existing system or (Under the new system, this limit will increase to Rs 3 lakh by the year 2024).
In addition, NRIs use a different ITR form than resident filers. For example, ITR-1 is no longer applicable for NRIs. Nevertheless, NRIs can still avail the same deductions and exemptions on their Indian income as residents (for example, deductions under Section 80C of the Income Tax Act, 1961).
A recent survey conducted by SBNRI among NRIs regarding ITR filing for the financial year 2023-24 has thrown up interesting trends. A large chunk of NRIs (73%) intend to file their ITR by July, indicating a strong awareness about compliance. Around 19% of NRIs have already completed their filing, while a small section (8%) are not planning to file their ITR.
The survey findings also reveal specific trends among NRIs living in the US. A small percentage (22%) of NRIs living in the US plan to file their ITR by July, which is lower than the overall trend. Interestingly, none of the US NRIs surveyed have completed filing their ITR yet. A small portion (3%) of US NRIs reported that they do not intend to file their ITR.
Further, NRIs residing in the UK are more inclined to file their ITR within the deadline than NRIs residing in the US. A larger share of NRIs residing in the UK (31%) intend to file by July compared to NRIs residing in the US (22%). This reflects either a greater awareness of ITR filing obligations or a more efficient filing system among NRIs residing in the UK.
Contrary to the general trend, a lower percentage of UAE NRIs intend to file by July (14%) or have already done so (2%). This means that UAE NRIs may be less aware of the filing deadlines or may face difficulties in completing their ITR submissions. Also, 8% of Canadian NRIs intend to file by July, reflecting a broader trend of 73% across all groups.
The data for NRIs in other countries differs from the data for specific countries such as the US and UAE. NRIs in these other countries are more inclined to file by July (25%).
Emphasizing the importance of addressing the unique challenges faced by NRIs in tax filing, Mudit Vijayvargiya, 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 rules 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 from NRIs is a positive sign, and we aim to support them at every step.”
The survey reveals that a large proportion of NRIs are keen to meet the ITR filing deadline, indicating strong tax compliance and awareness. These findings are important for policymakers and service providers to address the unique requirements of the NRI community, ensuring a smooth and efficient tax filing process.
There are many complications for NRIs
Filing ITR as an NRI can be complicated for several reasons. For example, NRIs often manage income from multiple countries, making determining their tax residency status and reporting their global income complicated.
Moreover, different tax laws in different countries add to the challenges. Each country has its own tax rules, which may differ significantly from those in India. NRIs must understand the tax implications in both their country of residence and India to avoid double taxation (being taxed twice on the same income).
Tax liabilities also extend to foreign income and specific accounts. The nature of the income (such as salary, rental income, dividends) and the type of account (NRE or NRO) where it is deposited can affect tax obligations in India. NRE accounts, which hold foreign income, generally offer tax benefits, while NRO AccountsThose Indians who have income may be taxed.
This report takes a deep dive into NRIs' ITR filing habits and preferences, highlighting their commitment to complying with tax laws and their continued need for supportive financial services. As the deadline approaches, the data indicates that most NRIs are prepared and proactive in handling their tax obligations, a positive sign for the financial inclusion of this important demographic.
The survey findings are significant as they provide information that can be leveraged by policy makers and service providers to improve the ITR filing process for NRIs, thereby promoting effective ITR filing. tax complianceThis could strengthen the tax administration system and lead to increased investments from the NRI community.
