Step 1: Determine Your Residential Status
Every fiscal year, NRIs must establish their residential status as per the Income Tax Act of 1961. Individuals are considered non-residents if they spend up to 181 days in India without losing their non-residential status. The Act specifies criteria for residency, including spending 182 days or more in India in the previous year or 60 days or more in the previous year and 365 days or more in the preceding four years.
Step 2: Reconcile Income and Taxes Using Form 26AS
Compare the TDS offset or input tax paid on your income tax return (ITR) with that displayed on Form 26AS.
Step 3: Determine Tax Liability and Assessable Income
Calculate taxable income, including interest on Indian bank accounts, property rent, and capital gains from Indian shares. Deduct eligible deductions per the Income Tax Act and calculate tax liability using applicable slab rates.
Step 4: Seek Relief from Double Taxation
If income is taxable in both India and another country, seek relief under the Double Taxation Avoidance Agreement (DTAA), considering the type of income.
Step 5: Choose ITR and Declare Exempt Income
File returns using ITR 2 (except for business income) or ITR 3 for business income. Declare exempt income such as dividends and interest on NRE/FCNR deposits.
Step 6: Provide Overseas Bank Account Information
For NRIs claiming a tax refund without an Indian bank account, provide overseas bank account details. Indian bank account holders not claiming a refund need not provide international bank account details.
Step 7: Disclose Assets and Liabilities in ITR
Provide details of assets and liabilities if total income exceeds Rs 50 lakh, including immovable and movable assets in India.
Step 8: Verify ITR
Confirm ITR within 120 days of uploading, either electronically via net banking or by mailing a signed ITR V to the Income-tax CPC in Bengaluru for physical verification.
