Mr. Shah has been a Non Resident Indian for around 3 years now. When he took up the current assignment abroad, he did the usual banking formalities of converting his existing savings a/c in India into an NRO a/c. He had about 10 lakhs saved from his income earned in India, which he invested in an NRO fixed deposit @ 9.5 % p.a.At the end of the financial year, he realised that he had received only Rs 63,000/- as interest out of the Rs 95,000/- , and around 32,000/- has been deducted as taxes, at the applicable rate of 33.99 % p.a for NRO accounts. Now, Mr. Shah doesn’t actually have to pay tax, as he has no other Indian Income apart from this, and the total interest income is less than the exemption limit of Rs 1.5 lakhs p.a. Now, the only way he can claim this tax back is to go through the process of filing his returns which otherwise wasnt required.
During the course of my profession, I come across quite a few Non Resident Indians who are quite clueless about the tax treatment of their Indian investments and income and whether they have to file returns in India too. This article is for them.
Who is a Non Resident Indian?
An individual is considered a Non Resident Indian in a particular financial year if he does not satisfy one the following two conditions which are required to be a resident of India-
Stays in India for 182 days or more in the previous year.
Stays for at least 60 days in the previous year and for 365 days or more in the preceeding four years.