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More than three crores of Indians live outside of their homeland, and if you are one of them and wondering whether you need to file your income taxes here in India or in the country you are dwelling in, then you need to read this.

Often people think that every Indian who lives out of India is an NRI; however, that is not the case. For taxation purposes, the Income Tax Department of India has specific criteria to qualify as an NRI. Therefore, to understand whether you require filing your taxes in India or not, you need to find out your residential status.

Who is an NRI?

As per the Income Tax Act of 1961, an NRI or Non-Resident Individual in India is a person who is not a Resident in India. So, now you need to know who is a Resident in India, right? As per the Indian government and Income Tax Department, a Resident in India is any individual who:

• Was in India for at least 182 days in the previous year or
• Was in India for 60 days or more in the previous year and at least 365 days in four years immediately preceding the previous year.

So, if you do not meet these two criteria, you will be considered an NRI in India.

However, if you are a crew member outside India, or left India for employment outside the country, then the 60 days in the second criterion above will be replaced by 182 days. This also goes for Indian citizen and person of Indian origin (PIO) who visits India during the year.

Again, the 60 days in the second criterion above will be substituted by 120 days if the Indian citizen or the PIO has a total income, apart from income from foreign sources, over and above Rs. 15 lakhs in the previous year. These individuals will be considered deemed residents of India only if they do not pay or are liable to pay taxes in other countries.

Which incomes of an NRI are taxable in India?

An NRI needs to pay income tax on their income generated in India. While a resident in India has to pay income tax on the total income irrespective of the origin of the income. Let’s take an example to understand this.

Suppose you are working in the UK for two years now, and in FY 2022-23, you came to India for 25 days. This makes you an NRI, as you do not meet any of the two criteria to be a Resident in India. Now let’s say you earn around Rs. 50 lakhs in a year from the job you are doing in the UK, and back home in India, you have two house properties from which you earn a rental income of around Rs. 50,000 in a month. Therefore, the yearly rental income from these house properties is Rs. 6 lakhs.

Since your income from India is above Rs. 2.5 lakhs, you need to file ITR in India, though there will not be any tax liability if you opt for the default income tax regime. Your income from your job in the UK will not be taken into consideration for taxation purposes in India.

Now let’s say, you came to India in FY 2022-23 for 5 months or approximately around 150 days, then your income of Rs. 50 lakhs which you earn in the UK will also be considered for income tax payment if you do not pay any taxes on your income in the UK. Also, if you had lived in India for 150 days in the previous financial year, then you automatically become a Resident in India, and not an NRI as per the Finance Act, 2020.

Note: The interest you earn on your NRE account and/or FCNR account will be tax-free as well. However, the interest earned on NRO account/s will be taxable in India if you are an NRI.

What are the tax slabs applicable for NRIs?

The tax slabs for NRIs and residents in India are the same. So, if you are an NRI having income from India, then you have to pay taxes as per the following slabs:

Source: https://www.incometax.gov.in/iec/foportal/help/individual/return-applicable-0

What are the documents required for filing ITR?

As an NRI when you file your income tax in India, the documents you need to keep handy includes –

• Bank account statements of your NRE/ NRO or FCNR accounts
• Details of the income you earned in India
• Form 26AS in case of any tax credit is applicable or TDS is deducted
• Form 16 in case of any TDS is deducted on salary or Form 16A for TDS deduction on income other than salary. For instance, the interest earned on your NRO account, when credited to your account, TDS is deducted. So, for the same and similar instances, you need to submit Form 16.
• You need to have a valid passport, PAN card for verification purposes.

So, if your residential status is of an NRI and your income from India is over Rs. 2.5 lakhs for FY 2022-23, you must gear up for filing the ITR soon as the last date for doing is 31st July 2023.

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July is here, and you must be busy collecting all your documents for filing the ITR. So, have you made a checklist of all the documents you need to keep handy before sending that email to your CA or sitting before your laptop to file the ITR on your own? If you still need to, then this article is just for you, and if you already have made the checklist, there is no harm in making sure you have not missed any.

List of general documents

For filing your ITR for FY 2022-23, irrespective of the source of income, you need these documents:

• PAN Card: You need to use your PAN number to either log into the Income Tax Department website to file the ITR or put the number under the details required in the ITR form.
• Aadhaar Card: You need to keep this document handy as well, and you need to add the Aadhaar number as well in your ITR form. Moreover, the government has asked everyone to link their PAN with their Aadhaar, so linking both documents can help before filing the IT.
• Bank Account Statements: To file your ITR, make sure to download the account statements for all your current bank accounts from April 1st to March 31st of the relevant financial year. For instance, this year, while filing the ITR, you need to submit the bank statement of all your accounts from 1st April 2022 to 31st March 2023.
• TDS Certificates: If your employer, client, bank or anyone who has deducted TDS from the money they paid to you, you need to get the TDS Certificates from them which is Form 16, or Form 16A or you can download directly the Form 26AS as well from ‘Traces’ website.
• Investment Account Statements: For all your investments, especially for those you can claim deductions and exemptions under sections 80C/80D/80E/80TTA and others you need to submit the investment account statements as proof of investments.

While these are the documents almost every assesse will need, here are some more specific documents that you need to have if you have income from the below-mentioned sources.

Income from salary

• Rent receipts and agreement: If you receive HRA and live in a rented apartment, for claim deduction available for HRA, you need to produce the rent receipts and rent agreement.
• Gratuity payments details: If you have received a gratuity in a financial year, you need to keep the documents for the same handy to claim the deduction available for gratuity payment.
• Travel bills and leave encashment: Similar to gratuity, you need to keep all the travel bills with you to get an exemption for all your spending. Also, if you have encashed your leaves, make sure, you have thorough proofs for the same, to produce before the IT department to claim exemptions.
• Pension certificate: Pension is also considered within salary income, and thus if you are a pension holder, you need to submit the pension certificates while filing ITR.

For interest and dividend incomes

• Interest certificates: If you have received interest from your bank savings, fixed deposit accounts, or from post office savings account or any such financial vehicle, that pays regular interest, you need to submit proof of such income for filing ITR. You can submit interest certificates that your bank provides or you can also submit bank statements or post office account statements.
• Proof of Dividend Income: If you have received dividends from your investments, you need to keep the dividend warrants handy before filing ITR. As dividends are now taxable in the hands of the shareholder, you must submit all the proof of your dividend income.

For income from house property

Income from house property is one of the major sources of income in India. If you are one of them who receives rent for his or her property, here are the documents you need to have for ITR filing.

• Rent Agreement: Of course, the primary document is the rent agreement that you need to submit as proof of receiving rental income from your house property.
• Address proof of your house property: You need to submit any proof of address for the house property for which you are receiving rental income. If you share ownership of the property, you must provide proof of this information in order to claim any available deductions.
• Interest for your home loan: If you have purchased the house property on a home loan, for claiming deductions under section 24(b). Under this section, you will get deductions of up to Rs. 2 lakhs on the interest on a home loan for a house property, which is self-occupied for residential purposes.
• First-time homebuyers: If you are a first-time homebuyer, then you can get an additional deduction under section 80EE for up to Rs. 50000 against the interest you pay for the home loan.

For income from capital gains

• Purchase and sale deeds, agreements: If you generated income from capital gains, such as selling house property, stocks, and other such investments, you need to display the documents, which can prove the sale and the value of the sale. These documents can also help you get the tax exemptions available for capital gain incomes.
• Brokerage slips, transfer expenses: If you have incurred any expenses while transferring the investments, or house properties, which you have sold, can generate capital gains, you should keep some proof for such expenses, or brokerage slips and others to claim deductions against these expenses from your taxable income.
• Reinvestment purchase deed: If you have re-invested your capital gains from one house property to another, or invested in certain types of bonds such as NHAI bonds, then you can get an exemption on the capital gains. However, for these, you need to submit the purchase deeds, which prove that you have invested the capital gains from the premium property.

Filing ITR can be hassle-free once you have all these documents as per your sources of income ready with you.

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From 1st July, 2023, you will have to pay 20% TCS on your international credit card use if it exceedes Rs.7 lakhs in a financial year. TCS, Tax Collected at Source, is a tax collected by the seller from the buyer and deposited to the government. Till 30th June, the TCS rate is 5%.

In an earlier circular, the government has mentioned that all international credit card use will attract a 20% TCS.

However, the Finance Ministry on Friday said, “To avoid any procedural ambiguity, it has been decided that any payments by an individual using their international Debit or Credit cards up to Rs 7 lakh per financial year will be excluded from the LRS limits and hence, will not attract any TCS.”

This change establishes an equal upper limit of Rs. 7 lakhs, which currently applies to international educational and medical expenses.

However, you will be able to claim it back during ITR filing.

Here’s a snapshot of the events:

• The TCS on Liberalised Remittance Scheme was 5%.
• Currently, the scheme has a limit of $250,000, which is around ₹2 crore. Individuals need approval from RBI for remittance above this limit.
• The use of debit cards, forex cards and bank transfers fell under the scheme.
• The FY2023-24 Budget increased the TCS rates from 5% to 20%.
• Overseas tour packages and funds remitted under LRS (other than for education and medical purposes) came under this revised rate.
• International (other than medical and education-linked sectors) credit card transactions was included under the LRS ambit.
• As per an earlier circular, you had to pay 20% TCS on your international payments through credit cards.
• Now, you only need to pay the 20% TCS if the total transactions in a financial year exceedes ₹7 lakhs.

Let us look at how the update will impact different circumstances. We are considering the 20% TCS on international remittances that will come into effect on 1^st July, including the use of credit cards.

Vacation

This new update will make your international vacations expensive.

Let us assume you have taken a tour package for your European vacation. You have to pay 20% TCS on the package value of ₹ 10 lakhs, i.e. ₹2 lakhs.

This will increase the cost of your tour package to ₹12 lakhs instead of ₹10 lakhs. Moreover, you might have to pay more on GST and other charges.

The travel planner will collect the TCS from you and deposit it to the government.

Now, whether you have taken a package or not, when you make purchases such as a museum ticket, taxi rides, food and drinks through your credit card, you might have to pay 20% TCS if the total transactions exceeds ₹7 lakhs.

The new update does provide a little relief to people. However, you have to be very mindful of the transactions and plan your vacations accordingly.

Your credit card issuing bank will charge the 20% TCS on transactions above the limit and deposit to the government.

Education and medical cases

In the case of education loans, TCS of 0.5% is applied to remittances made for foreign education for amounts exceeding ₹7 lakhs. This provision has remained unchanged in this year’s budget.

However, if there is no education loan, the money parents send abroad will attract a 5% TCS if the amount is above ₹7 lakh. This provision existed before this year’s budget and has remained unchanged.

But, as the TCS is now revised to 20%, parents have to prove that the money is being used for educational purposes to get the benefit of the lower rate of 5% for amounts above ₹7 lakhs.

Tuition fees, dormitory fees, lab fees, exam fees, books and stationery, and university hostel fees can be easily linked to education and will come at a lower rate. However, it might be difficult to make the connection if your children stay in a shared apartment. Moreover, other expenses where the connection could not be made will fall under the revised TCS rate of 20% above ₹ 7 lakhs.

The situation will be similar for medical cases as well.

Conclusion

International vacations that exceed ₹ 7 lakhs might become costlier as most people make international purchases through credit cards. It is to be noted that the maximum ₹7 lakh threshold is for the entire financial year. So, if you make two or more international vacations or trips, you might easily exceed the limit.

Moreover, the 20% TCS will be applicable on international holiday packages.

The cost of education and healthcare-related costs that can’t be directly linked to these sectors will also come under the higher rate.

So, it is important to plan for international visits in a proper manner.

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