Filing Returns on certain Income made by NRIs

As per Income Tax Act 1961, there are a few categories of earnings made by Non Resident Indians on which they have to file returns. They are Investment returns and Long Term Capital Gains.

The features of both the Incomes have been discussed below Investment Income is the income obtained from investing in Foreign Exchange Asset which is other than the dividend income, under Section 115C of Income Tax Act.  No deductions are given on this income. In case the assesse hold any other income part from this, then his investment income will be deducted from the whole of his income and then deductions would be given, under Section 155D of the Income Tax Act.

  • Section 115 E of the Income Tax Act levies tax on investment income at a rate of 20%.
  • There are cases when the assesses only source of income is investment income and his taxes are deducted at the source, in such a case he need not file any retunes because the taxes have already been deducted. This is valid under Section 115G of the income Tax Act.
  • Long Term Capital Gains are generated out of a Foreign exchange asset, under section 115C of the Income Tax Act.
  • There is no provision to allow deductions for long term capital gains during the previous year.
  • If the NRI has some other income apart from the one from long term capital gains then he will be given deductions as per Section 115D of Income Tax Act.
  • The tax rates for the above mentioned category of income will be 10% for the Capital gains which is made out of Foreign Exchange Capital Asset, as per Section 115E of the Act.
  • In case the NRI is found to invest the income from capital gains in savings certificate or Specified assets as per Income Tax Act 1961, then the whole of the capital gain will not be chargeable according to Income Tax Act. Section 115F, provided this investment is made within a period of 6 months and the new asset is equal to the consideration of long term capital gain.
  • If the cost of new asset is lesser than the income made through long term capital gains then the difference will be taxable.
  • The assesse who is an NRI has to understand the provision and tax laws well to calculate his taxes and then make moves accordingly.
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