"Which form does an NRI need to file tax returns?"

I am working in the US and need to file my income tax returns in India. I qualify as an NRI but also have two months income in India for which my employer has issued a TDS certificate. How and where do I file my return? Which form do I need to use for the return?

— Rajesh Juneja

From the information provided by you it seems that you were employed in India for 2 months and have gone abroad for the purpose of employment. You can file your returns in any of the following forms:

Form 2A - This form can be used if your income is less than Rs 200,000, and if your income does not comprise income under the head Profits and Gains from business or profession and if you don't have any brought forward losses.

Form 3 - This form can be used if your income is more than Rs 200,000.

Saral - This is a general form that can be used by anyone.

You are required to file your return based on the ward or circle of Income Tax where you are covered. If you have filed IT returns in the earlier years then the IT ward or circle number would be mentioned on the stamp affixed on the acknowledgement of such a return. If such acknowledgement was not available then the IT return would need to be filed based either on the name of your employer in India.

I purchased a flat in October 1999 and made the final remittance through normal banking channel. I could not fill Form IPI-7 within 3 months as the registry (purchase deed) submitted in October is still in the Registry office as the builder had to submit some additional documents.

Now, the builder is in a position to submit the required documents as mentioned in the purchase deed, thus please clear which form we have to submit - the IPI-7 under FERA or under FEMA. I have not taken the possession yet. Are there any further IT formalities to be completed by me in India?

— Rohit Singh

NRIs are given general permission by the Reserve Bank of India for acquiring immovable property other than agricultural or plantation lands in India. However, such property has to be acquired out of foreign remittances either brought into India through regular banking channels or from any foreign currency accounts in India. The NRI has to file a declaration in form IPI-7 with the RBI about details of the property and the mode and source of payment for the same within 90 days of the purchase. In your case, you had to file such a declaration before January 2000 as the purchase transaction was completed in October 1999. Registration is a further formality and this does not affect the completion of the purchase transaction. However, you may still file the declaration with the reasons of the delay that may be condoned by RBI authorities.

Any income arising on account of the residential property in India would be taxed in India.

I am working in the US since July 1999. I need to file my tax returns for 1999-2000. I guess I qualify as an NRI as I have been out of India for more than 182 days in 1999-2000 financial year. I have a car and telephone in India in my name. Which form do I need to use to file my tax returns? Is there an IT return form for NRIs? Where do I file my returns? Is there a facility to file my returns in US itself or do I need to send it to the Indian Income Tax office?

— Rajesh

You have not mentioned if you had any income liable to tax in India during the period April 1999 to July 1999. If your apprehension regarding filing of return is merely on account of owning a car/telephone in India, you need not file IT returns in India. Otherwise, depending on your income you would be required to file your return. Moreover, if you have to file a return then you would be needed to file it in India but you can give a power of attorney to your representative in India who could file your returns on your behalf.

You can use any of the following forms to file your IT return:

Form 2A - This form can be used if your income is less than Rs 200,000, if your income does not comprise Income under the head Profits and Gains from business or profession and if you don't have any brought forward losses.

Form 3 - This form can be used if your income is more than Rs 200,000.

SARAL - This is a general form that can be used by anyone.

You are required to file your return based on the ward or circle of Income Tax where you are covered. If you have filed returns in the earlier years then the IT ward or circle number would be mentioned on the stamp affixed on the acknowledgement of such a return. If such acknowledgement was not available then the IT return would need to be filed based either on the name of your employer in India or if you were self-employed it would be based on your name.

I am an NRI, employed in a foreign firm. My profession is in merchant navy. I have an NRE account in which my salary comes in US dollars. Please advise me if my income is taxable.

If taxable,how much tax should I pay (as a percentage of my income). My income is US $1500. If my income is non-taxable, then do I need to file IT return?

— Harish Mohan

We have based our answer on your information that you are an NRI employed by a foreign firm. Any income of a non-resident earned and received outside India and later on remitted into India is not taxable in India. Hence, if your salary is earned and received outside India and is remitted into your NRE account thereafter, it is not liable to tax in India.

I have the following situation for which I want to know the tax implications. I was working in India until May 1994 and moved to the US. I have been working in the US till now.

I bought some shares through company private employee offering at Rs 20 in 1992. The company is not yet public today. There are private offers now for Rs 3000. I was told I will get a cheque from the buyer once I transfer the shares. My question is:

1. Do I need to pay any tax since I am an NRI?

2. If I am going to be taxed, how much will it be? Is there any benefit since I am holding it for more than eight years?

3. Can I do a transfer of the sale to US dollars, through some procedure without any tax implications from either India or US?

— Raghu Ramamurthy

The incidence of taxation is attracted if any income arises or accrues or is deemed to arise or accrue in India. Also income received or deemed to be received in India is subject to tax in India. Hence in your case regardless of your residential status if such income has any of the above characteristics it would attract tax in India. The capital gains resulting from the sale of shares would be taxed accordingly.

As the asset is a long-term asset, the capital gains would be taxed at 20% (with effect from April 1, 2000 - plus 2 per cent surcharge if the net income exceeds Rs 60,000 or 3 per cent surcharge if the net income exceeds Rs 150,000). To avail of any deductions from the capital gains, you would need to either invest in eligible investment under section 54EC or in a residential house property under section 54F, subject to the conditions mentioned in those sections.

Such sale proceed is not freely repatriable from India to any country outside India without the special permission of the RBI.

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NRI Tax Center

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