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Income Tax Return filing: Under what circumstances is an NRI exempt from filing ITR?
Edu-Visor Update 17-12-2021
Like any other individual taxpayer, a Non-Resident Indian (NRI) is required to file his return of income in India if his gross total income received in India exceeds Rs 2.5 lakh for any given financial year. The filing of income tax return should be done in accordance with provisions applicable in the case of the corresponding resident assessee.
However, the following non-resident assessees are not required to file the return of income in respect of their income taxable in India provided the payer has withheld taxes from the payment of such income.
A. Non-resident Indian
Where the total income of a non-resident Indian consists of the following incomes, no return is required to be furnished if tax has been deducted from such income:
(a) Investment income from a foreign exchange asset (i.e., shares or debentures of an Indian co., etc.);
(b) Long-term capital gains from such foreign exchange assets.
B. Non-resident sportsperson
No return is required to be furnished by a non-resident and non-citizen sports person, including an athlete, if his income consists of the following income and tax has been deducted therefrom:
(a) Income from participation in any game or sport in India (other than the winnings from lotteries etc. as referred under Section 115BB);
(b) Advertisement Income;
(c) Income from contribution of articles relating to any game or sport in India in any newspapers, journals or magazines.
C. Non-resident sports association
“No return is required to be furnished by a non-resident sports association or institution if its income consisted of any amount guaranteed to be paid or payable in relation to any game or sport played in India (other than the winnings from lotteries etc. as referred under Section 115BB) and tax has been deducted therefrom,” says Naveen Wadhwa, DGM, Taxmann.
D. Non-resident entertainer
No return is required to be furnished by a non-resident and non-citizen entertainer if his income consists of any income received or receivable from his performance in India and tax has been deducted therefrom.
E. Non-residents having specified income
No return is required to be furnished by a non-resident person (including a non-resident foreign company), if its total income consists of the following incomes and tax has been deducted therefrom:
(a) Interest on bonds as referred to in Section 115AC issued by an Indian company under the following schemes and purchased in foreign currency:
# Foreign Currency Exchangeable Bonds Scheme, 2008;
# Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993;
# Depository Receipts Scheme, 2014;
(b) Dividend on GDRs as referred to in Section 115AC;
(c) Dividend income;
(d) Interest received from Government or Indian concern on monies borrowed or debt incurred by Government or Indian concern in foreign currency;
(e) Interest received from an Infrastructure Debt Fund as referred to in Section 10(47);
(f) Interest on borrowings in foreign currency or monies borrowed by way of Rupee Denominated Bonds as referred to in Section 194LC;
(g) Interest on investment made by FII or QFI in Rupee Denominated Bond of an Indian company or Government security as referred to in Section 194LD;
(h) Distributed income being interest received or receivable from a Special Purpose Vehicle as referred to in Section 194LBA(2);
(i) Income from units, purchased in foreign currency, of a mutual fund, as specified in Section 10(23D);
(j) Royalty or fees for technical services [other than those referred to in section 44DA(1)] received from the Government or an Indian concern in a situation as referred to in Section 115A(1)(b).
If the income of a non-resident is covered under clause (c) to (j) as referred above, he shall be exempt from the filing of return of income provided the tax has been deducted from such incomes at a rate not less than the rate prescribed under relevant provisions.
F. A foreign company whose POEM is in India
A foreign company is said to be a resident in India if its place of effective management (POEM) is in India. However, no return is required to be filed by a foreign company if its total income consists of only the following incomes and tax has been deducted therefrom at a rate not less than the rate prescribed under relevant provisions:
(a) Dividend Income;
(b) Interest received from Government or Indian concern on monies borrowed or debt incurred by Government or Indian concern in foreign currency;
(c) Interest received from an Infrastructure Debt Fund as referred to in Section 10(47);
(d) Interest on borrowings in foreign currency or monies borrowed by way of Rupee Denominated Bonds as referred to in Section 194LC;
(e) Interest on the investment made by FII or QFI in Rupee Denominated Bond of an Indian company or Government Security as referred to in Section 194LD;
(f) Distributed income being interest received or receivable from a Special Purpose Vehicle as referred to in Section 194LBA(2);
(g) Income from units, purchased in foreign currency, of a mutual fund, as specified in Section 10(23D).
This relaxation from the filing of return of income is available even if a foreign company is deemed a resident in India.
G. Non-resident having income from an investment fund located in IFSC
“Section 194LBB provides that where any income, other than business income, is distributed to unitholders (whether resident or non-resident) in respect of units of Investment Fund, tax shall be deducted therefrom at the applicable rates. Consequently, the deductee is required to furnish his return of income according to Section 139 of the Act,” informs Wadhwa.
The CBDT has exempted a non-resident (and a foreign company) deductee from the requirement of filing of Income-tax return. This exemption is subject to fulfillment of the following conditions:
(a) The non-resident has earned income from an Investment Fund set up in an International Financial Services Centre (IFSC) located in India;
(b) This income is the only income of such non-resident which is taxable in India; and
(c) Tax due on such income has been deducted and deposited to the credit of Central Government in accordance with section 194LBB;
(d) He has not been issued a notice to file the return of income under provisions of Section 142(1) or Section 148 or Section 153A or Section 153C.
H. Non-resident or foreign co. having income from investment in a specified fund
The CBDT has exempted non-resident or foreign co. from the requirement of filing of Income-tax return. This exemption is subject to fulfillment of the following conditions:
(a) The assessee (i.e., a non-resident or a foreign company) has earned income in India from the investment made in Category III AIF, which fulfills the conditions of being a specified fund as referred under Section 10(4D);
(b) The assessee does not earn any income in India other than the income from investment in the aforesaid AIFs during the previous year.
(c) Income-tax due on such income has been deducted at source and remitted to the Central Government by such AIF at the rates specified in Section 194LBB; and
(d) Assessee has furnished the following details and documents to the AIF:
# Name, e-mail id and contact number;
# Address in the country or specified territory of which he is a resident;
# A declaration that he is a resident of a country or specified territory outside India; and
# Tax Identification Number allotted in his home country and if such number is not available, then a unique number on the basis of which the Government of his home country identifies him.
(e) The assessee has not been issued a notice for filing return of income under Section 142(1) or Section 148 or Section 153A or Section 153C for the relevant assessment year.
I. Eligible foreign investor
The CBDT has exempted a non-resident being an eligible foreign investor from the requirement of filing of Income-tax return. This exemption is subject to fulfillment of the following conditions:
(a) He operates in accordance with SEBI’s circular;
(b) He has made transactions only in the capital asset referred to in Section 47(viiab) which are listed on a recognized stock exchange located in any IFSC;
(c) The consideration on transfer of aforesaid capital asset should be paid or payable in foreign currency;
(d) He does not earn any income in India, other than the income from transfer of aforesaid capital assets; and
(e) He has furnished the following details and documents to the stock broker through which the transaction is made:
# Name, e-mail id and contact number;
# Address in the country or specified territory of which he is a resident;
# A declaration that he is a resident of a country or specified territory outside India; and
# Tax Identification Number allotted in his home country and if such number is not available, then a unique number based on which the Government of his home country identifies him.
(f) He has not been issued a notice for filing of return of income under Section 142(1) or Section 148 or Section 153A or Section 153C for the relevant assessment year.
Team Edu-Visor