Income Tax Returns | CA in Mumbai | Chartered Accountant | ITR Filing

CA Mumbai (38)

Rated among Top 100 CA in Mumbai - Best CA Mumbai by multiple websites such as Justdial, Webindia,, etc. In India, CA (Chartered Accountants) are regarded as the maestros of Accounts and Taxes, just as Sachin Tendulkar is for Cricket! This is because it is the most comprehensive course that allows gaining extensive knowledge and three long years of practical experience and exposure in planning income and investment portfolios, calculating taxes and filing ITRs under the mentor-ship of an already experienced CA (Chartered Accountant). In fact, with the advent of comprehensive online tools in the COVID era, there are a lot of applications and websites that provide both automated and manual support to plan and calculate taxes. But there are still a lot of factors that need to be considered before settling on a CA (Chartered Accountant) to plan the tax liability on one’s hard earned money. Let’s have a look at some of the factors that are noteworthy before finalizing on a CA (Chartered Accountant) / Tax Advisor: 1. Finding out the entity’s status: This is an important step since this requires assessment of the status of the taxpayer. This is because there are varied complexities in every type of entity which needs to be addressed accordingly by a relevant tax expert. See the following scenarios: Individual Status: If the taxpayer is an individual, he/she can refer to an CA (Chartered Accountant) who primarily has expertise in Direct Taxation. Corporate Status: If the taxpayer is a corporate entity, the Directors of the company might want to refer to a more seasoned CA (Chartered Accountant) / Tax Advisor who primarily has expertise in both Direct Taxation and Indirect Taxation, in addition to Corporate Tax, as well as Provident Fund, Employee State Insurance advisors, etc. Others: If the taxpayer is a Partnership Firm, LLP, etc., the partners or members might have to refer to a blend of above. 2. Assessing whether the Income and Tax Structure of the entity is complex enough to hire a CA as the fee charged may or may not be justified to the taxpayer. Following the above scenarios, an individual might just as for guidance from an CA (Chartered Accountant) in the family or friends in case the assess able income is not too big, whereas a firm or a company might need a proper team of expert advisors to mitigate the tax burden at a large level. 3. Not every CA (Chartered Accountant) is specialized in the field of taxation. Taxation is an extensive field with various branches. Finding someone experienced and specialized in the branch that a person needs help with is quite important. This could be understood in terms of the large different types of tax advisors that exists, viz., Income Tax, Gift Tax, Wealth Tax, Capital Gains Tax, Corporate Tax, GST, Customs & Excise, etc. 4. It is necessary to ensure that the CA (Chartered Accountant) is always available and updated in terms of the recent Income Tax Notifications or the ever so changing Income tax Return Forms to address any immediate changes in the taxpayer’s income or status. For example, a Capital gain somewhere in the middle of the year could change the calculations and planning of taxes and give rise to a requirement to pay Advance Tax. 5. A few common factors such as the past experience and area of practice of the CA (Chartered Accountant), the clients or industries they have served, the reasonability of the fee charged with respect to the general market fee, an example of a fruitful advise they gave to some client which was a turnaround for the client’s tax burden. Choosing a CA (Chartered Accountant) carefully is important because the person entrusts all the income details and their sources to them. So, the focus should be on to retain the same person for as long as they can be as that would ensure no scattering of personal information to a lot many people again and again. This also helps in maintaining a close relationship to build trust and faith in each other. So, keeping these small things in mind will help a taxpayer go a long way in finding a perfect advisor, consultant and a partner!

Your Guide to Bitcoin Taxation

With all the confusion on Cryptocurrency, This is your Guide to Bitcoin Taxation

Crypto Tax CA in Mumbai | Crypto Tax Chartered Accountant in Mumbai | Crypto Tax Consultant | Crypto Tax Advisor | Borivali | Kandivali | Malad

When you look at recent years, you will soon find that there has been a steady increase when it comes to the overall use of virtual currencies. This includes Dogecoin, Litecoin, Ethereum and Bitcoin. Crypto currencies are used not only as payment methods, but also as investment opportunities. Virtual currencies have also created a legal vacuum, which is now full to the brim with regulations. A lot of them revolve around tax and the way that cryptocurrency taxes are paid.

All About Bitcoin Tax

Bitcoin is the most prominent virtual currency. It’s important to know that it is a substitute for real currency and therefore holds the same value. You can change Bitcoin into Euro, Australian dollars, US dollars or another virtual currency. Usually any kind of cryptocurrency is traded online, anonymously. Bitcoin is unregulated as well, which means that it is not dependent on governmental backing or central banks. It’s important to know that Bitcoin has not obtained any kind of legal tender status in a lot of jurisdictions yet and certain tax authorities have noted its significance. If you want to find out more about Bitcoin tax, then take a look below.

The United States

The United States IRS service treats the currency, Bitcoin as being property as opposed to a currency. Any transactions that use Bitcoin will be taxed in the same way as property. This means that you need to report any Bitcoin transactions you do to the IRS so that they can be taxed. If you are a US taxpayer and you sell goods in exchange for Bitcoin currency, then you will be obliged to state the value of any Bitcoin you receive. You can file your crypto taxes in your annual tax return. The value of Bitcoin is based on the fair market value, on the date when the currency was received by the taxpayer. This would otherwise be the exchange data on the date of the receipt. If your virtual currency is an asset, such as stocks, bonds or any other type of investment property then it is your job as a taxpayer to take into account the taxable gains or losses. A taxable gain is when the USD market value in relation to Bitcoin is greater than the basis of the currency. A loss is when the market value is lower than the basis of the currency. If you happen to engage in Bitcoin mining or if you use your computer to validate transactions, then this will be subject to US taxation. If you find that the mining is successful, then the miner will need to include the fair market value and add it to your gross income. Wages that are paid in any kind of cryptocurrency, including Bitcoin are subject to tax withholding and social security. Taxpayers who do not comply may become subject to a range of penalties. For this reason, it’s vital that you take the time to understand the crypto tax in your area.

The EU

In the EU Bitcoin taxes are dependent on the country you are in. The purchase and sale of Bitcoin does not incur any VAT and Bitcoin transactions are in fact subject to other taxes as well. This can include income tax or capital gains. In the year 2015, the European Court of Justice ruled that any transactions that include Bitcoin are exempt from value-added tax. This is under the provision that it relates to currency, banknotes or coins, which are legal tender. According to the Court of Justice, Bitcoin is listed as being currency and it is not property. Nonetheless, many countries do tax Bitcoin with capital gains as well as income taxes.

The UK

In the UK, Bitcoin is a foreign currency. The tax rules that apply to losses and gains do in fact apply to transactions. Speculative transactions may not be subject to tax. HMRC do provide some vague information regarding the taxation and enforcement of Bitcoin transactions but they also say that each will be considered on the basis of circumstances and individual fact.


In Germany, Bitcoin has been considered as being private money since the year 2013. Although it is subject to 25% gains tax, this tax is only levied if the profits on the currency are acquired within a year of the receipt. This means that taxpayers who hold Bitcoin are not going to be subject to capital gains tax if they hold it for longer than a year. If this is the case, then their transaction will fall under the scope as being a private sale. The treatment of Bitcoin in Germany is very similar to shares and stocks.


In Japan, Bitcoin is known as being a payment method that is widely recognised. The sale of Bitcoin is completely exempt from consumption tax from 2017 and virtual currencies are asset-like values. This means that they can be transferred digitally. In the country of Japan, profits which are gained are considered as being business income and therefore are treated in accordance with capital gains for tax purposes. Source: Pexels (CC0 License)


In Australia, any transactions which use Bitcoin or any other type of virtual currency falls under the barter arrangement scope. AU tax authorities see Bitcoin as being an asset that can be used for capital gains. Businesses which conduct any kind of transaction by using Bitcoin should record and date the transaction, so that the value in AUD can be declared as being ordinary income. If Bitcoin transactions were being used for personal purposes then they would be exempt from taxation if any Bitcoin was used to buy goods or a service, which is for personal use or if the value is lower than AUD 10,000. It is important to note that if you held Bitcoin for investment purposes then you need to pay taxes on the gains. If you were to mine or exchange Bitcoin as a business, or for business purposes, then this would be considered as stock trading and would be taxed.

The World of Bitcoin Taxes

Different countries around the world view Bitcoin very differently and the tax you pay will largely depend on where you live, or where you are trading from. The EU consider Bitcoin to be a currency, but other jurisdictions, including Australia or even the US consider Bitcoin to be more of an asset or a property. If you want to find out how Bitcoin tax is calculated then the best thing that you can do is try and use an online tax calculator. When you do this, you can then simplify the whole process.

But how do I get my taxes sorted in India?

Fortunately we can help you sort out your Bitcoin taxes. Based on the categorisation of your transactions, we will help you calculate your crypto tax obligations and generate appropriate records based on your country requirements.

Disclaimer: The contents of this article are for information purposes only and do not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that we are not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. CA Mitesh and Associates is Mumbai's leading Cryptocurrency Taxation Firm which is committed to helping people navigate complex tax laws and banking regulations. Our main aim is to assist the individuals with applicable laws & regulations compliance and providing support at each & every level to make sure that they stay compliant and grow continuously. For any query, help or feedback you may get in touch here - Appointment with CA

CA in Mumbai | Chartered Accountant in Mumbai | Tax Consultant | Tax Advisor | Borivali | Kandivali | Malad

How to claim Benefits Under DTAA for NRIs

If you are an NRI living abroad, Read here to know How to claim Benefits Under DTAA for NRIs. NRIs can avoid paying double tax as per the Double Tax Avoidance Agreement (DTAA). Usually, Non-Resident Indians (NRI) live abroad, but earn income in India.

NRI and Income Tax implications - 2021

This article primarily focusses on NRI and Income Tax implications in India

This articles we will cover the following:

  1. How do I Determine My Residential Status?
      1. Is My Income Earned Abroad Taxable?
      2. Am I Required to File My Income Tax Return in India?
      3. When is the Last Date to File Income Tax Return in India?
      4. Do NRIs Have to Pay Advance Tax?
  1. Taxable Income for an NRI
      1.  Income from Salary
      2.  Income from House Property
      3.  Rental Payments to an NRI
      4.  Income from Other Sources
      5.  Income from Business and Profession
      6. Income from Capital Gains
      7.  Special Provision Related to Investment Income
      8. What are the Investments that Qualify for Special Treatment?
      9.  Special Provision Related to Long-Term Capital Gains
  1. Deductions and Exemptions for NRIs
      1. Deductions Under Section 80C
      2. Deductions allowed to NRIs under Section 80C
  1. Other Allowable Deductions
      1. Deduction from House Property Income for NRIs
      2. Deduction under Section 80D
      3. Deduction under Section 80E
      4. Deduction under Section 80G
      5. Deduction under Section 80TTA
      6. Deductions not Allowed to NRIs
      7. Investment under RGESS (Section 80CCG)
      8. Deduction for the Differently-Abled under Section 80DD
      9. Deduction for the Differently-Abled under Section 80DDB
      10. Deduction for the Differently-Abled under Section 80U
      11. Exemption on Sale of Property for an NRI
      12. How are You Taxed When You are a…
      13. Income Tax Filing for Foreign Nationals
NRI and Income Tax implications - 2021

1. How do I Determine My Residential Status?

You are considered an Indian resident for a financial year: i. When you are in India for at least 6 months (182 days to be exact) during the financial year ii. You are in India for 2 months (60 days) for the year in the previous year and have lived for one whole year (365 days) in the last four years If you are an Indian citizen working abroad or a member of a crew on an Indian ship, only the first condition is available to you – which means you are a resident when you spend at least 182 days in India. The same is applicable to a Person of Indian Origin (PIO) who is on a visit to India. The second condition is not applicable to these individuals. A PIO is a person whose parents, or any of his grandparents were born in undivided India.   You are an NRI if you do not meet any of the above conditions. For FY 2019-20 if an individual has come to India on a visit before 22nd March, 2020 and a) has been unable to leave because of lockdown on or before 31st March, 2020, period of stay from 22nd to 31st March shall not be considered. b) has been quarantined due to Covid19 on or after 1st March, 2020 and departed on evacuation flight on or before 31st March, 2020 or unable to leave India his period of stay from the beginning of quarantine to 31st march shall not be considered. c) has been departed on a evacuation flight on or before 31st March, 2020, period of stay from 22nd March 2020 to date of departure shall not be considered

  1. Is My Income Earned Abroad Taxable?
  2. Am I Required to File My Income Tax Return in India?
  3. When is the Last Date to File Income Tax Return in India?
  4. Do NRIs Have to Pay Advance Tax?

a. Is My Income Earned Abroad Taxable?

An NRI’s income taxes in India will depend upon his residential status for the year. If your status is ‘resident,’ your global income is taxable in India. If your status is ‘NRI,’ your income which is earned or accrued in India is taxable in India. Salary received in India or salary for service provided in India, income from a house property situated in India, capital gains on transfer of asset situated in India, income from fixed deposits or interest on savings bank account are all examples of income earned or accrued in India. These incomes are taxable for an NRI. Income which is earned outside India is not taxable in India. Interest earned on an NRE account and FCNR account is tax-free. Interest on NRO account is taxable for an NRI.

b. Am I Required to File My Income Tax Return in India?

NRI or not, any individual whose income exceeds Rs.2,50,000 is required to file an income tax return in India.     


c. When is the Last Date to File Income Tax Return in India?

July 31st is the last date to file income tax return in India for NRIs.

d. Do NRIs Have to Pay Advance Tax?

If your tax liability exceeds Rs 10,000 in a financial year, you are required to pay advance tax. Interest under Section 234B and Section 234C is applicable when you don’t pay your advance tax.

2. Taxable Income for an NRI

Your salary income is taxable when you receive your salary in India or someone does on your behalf. Therefore, if you are an NRI and you receive your salary directly to an Indian account it will be subject to Indian tax laws. This income is taxed at the slab rate you belong to.

  1.  Income from Salary
  2.  Income from House Property
  3.  Rental Payments to an NRI
  4.  Income from Other Sources
  5.  Income from Business and Profession
  6. Income from Capital Gains
  7.  Special Provision Related to Investment Income
  8. What are the Investments that Qualify for Special Treatment?
  9.  Special Provision Related to Long-Term Capital Gains

a. Income from Salary

Income from salary will be considered to arise in India if your services are rendered in India. So even though you may be an NRI, but if your salary is paid towards services provided by you in India, it shall be taxed in India immaterial of where you are receiving the income. In case your employer is Government of India and you are the citizen of India, income from salary, if your service is rendered outside India is also taxed in India. Note that income of Diplomats, Ambassadors are exempt from tax. Ajay was working in China on a project from an Indian company for a period of 3 years. Ajay needed the salary in India to take care of the needs of his family and make payments towards a housing loan. However, since salary received by Ajay in India would have been taxed as per Indian laws, Ajay decided to receive it in China.

b. Income from House Property

Income from a property which is situated in India is taxable for an NRI. The calculation of such income shall be in the same manner as for a resident. This property may be rented out or lying vacant. An NRI is allowed to claim a standard deduction of 30%, deduct property taxes, and take benefit of an interest deduction if there is a home loan. The NRI is also allowed a deduction for principal repayment under Section 80C. Stamp duty and registration charges paid on the purchase of a property can also be claimed under Section 80C. Income from house property is taxed at slab rates as applicable. Nandini owns a house property in Goa and has rented it out while she lives in Bangkok. She has set up the rent payments to be received directly in her bank account in Bangkok. Nandini’s income from this house which is in India shall be taxable in India.

c. Rental Payments to an NRI

A tenant who pays rent to an NRI owner must remember to deduct TDS at 30%. The income can be received to an account in India or the NRI’s account in the country he is currently residing. Maria pays a monthly rent of Rs30,000 to her NRI landlord. She must deduct 30% TDS or Rs 9,000 before transferring the money to the landlord’s account. Maria must also get a Form 15CA prepared and submit it online to the Income Tax Department. A person making a remittance (a payment) to a Non-Resident Indian has to submit Form 15CA. This form has to be submitted online. In some cases, a certificate from a chartered accountant in Form 15CB is required before uploading Form 15CA online. In Form 15CB, a CA certifies details of the payment, TDS rate, and TDS deduction as per Section 195 of the Income Tax Act, if any DTAA (Double Tax Avoidance Agreement) is applicable, and other details of nature and purpose of the remittance. Form 15CB is not required when:

i. Remittance does not exceed Rs 5,00,000 (in total in a financial year). Only Form 15CA has to be submitted in this case.

ii. If lower TDS has to be deducted and a certificate is received under Section 197 for it or lower TDS has to be deducted by order of the AO.

iii. Neither is required if the transaction falls under Rule 37BB of the Income Tax Act, where it lists 28 items.

In all other cases, if there is a remittance outside India, the person who is making the remittance will take a CA’s certificate in Form 15CB and after receiving the certificate submit Form 15CA to the government online.

d. Income from Other Sources

Interest income from fixed deposits and savings accounts held in Indian bank accounts is taxable in India. Interest on NRE and FCNR account is tax-free. Interest on NRO account is fully taxable.

e. Income from Business and Profession

Any income earned by an NRI from a business controlled or set up in India is taxable to the NRI.

f. Income from Capital Gains

Any capital gain on transfer of capital asset which is situated in India shall be taxable in India. Capital gains on investments in India in shares, securities shall also be taxable in India. If you sell a house property and have a long-term capital gain, the buyer shall deduct TDS at 20%. However, you are allowed to claim capital gains exemption by investing in a house property as per Section 54 or investing in capital gain bonds as per Section 54EC.

g. Special Provision Related to Investment Income

When an NRI invests in certain Indian assets, he is taxed at 20%. If the special investment income is the only income the NRI has during the financial year, and TDS has been deducted on that, then such an NRI is not required to file an income tax return.

h. What are the Investments that Qualify for Special Treatment?

Income derived from the following Indian assets acquired in foreign currency:

  1. Shares in a public or private Indian company
  2. Debentures issued by a publicly-listed Indian company (not private)
  3. Deposits with banks and public companies
  4. Any security of the central government
  5. Other assets of the central government as specified for this purpose in the official gazette

No deduction under Section 80 is allowed while calculating investment income.

i. Special Provision Related to Long-Term Capital Gains

For long-term capital gains made from the sale of transfer of these foreign assets, there is no benefit of indexation and no deductions allowed under Section 80. But you can avail an exemption on the profit under Section 115 F when the profit is reinvested back into:

  1. Shares in an Indian company
  2. Debentures of an Indian public company
  3. Deposits with banks and Indian public companies
  4. Central Government securities
  5. NSC VI and VII issues

In this case, capital gains are exempt proportionately if the cost of the new asset is less than net consideration. Remember, if the new asset purchased is transferred or sold back within 3 years, then the profit exempted will be added to the income in the year of sale/transfer. The benefits above may be available to the NRI even when he/she becomes a resident – until such an asset is converted to money, and upon submission of a declaration for the application of the special provisions to the assessing officer by the NRI. The NRI may choose to opt out of these special provisions and in that case the income (investment income and LTCG) will be charged to tax under the usual provisions of the Income Tax Act.


3. Deductions and Exemptions for NRIs

Similar to residents, NRIs are also entitled to claim various deductions and exemptions from their total income. These have been discussed here:

  1. Deductions Under Section 80C
  2. Deductions allowed to NRIs under Section 80C

a. Deductions Under Section 80C

Most of the deductions under Section 80 are also available to NRIs. For FY 2019-20, a maximum deduction of up to Rs 1.5 lakhs is allowed under Section 80C from gross total income for an individual.

b. Of the Deductions Under Section 80C, those allowed to NRIs are:

i. Life insurance premium payment: The policy must be in the NRI’s name or in the name of their spouse or any child’s name (child may be dependent/independent, minor/major, or married/unmarried). The premium must be less than 10% of sum assured.

ii. Children’s tuition fee payment: Tuition fees paid to any school, college, university or other educational institution situated within India for the purpose of full-time education of any two children (including payments for play school, pre-nursery and nursery).

iii. Principal repayments on loan for the purchase of a house property: Deduction is allowed for repayment of loan taken for buying or constructing residential house property. Also allowed for stamp duty, registration fees and other expenses for purpose of transfer of such property to the NRI.

iv. Unit-linked insurance plan (ULIPS): ULIPS is sold with life insurance cover for deduction under Section 80C. Includes contribution to unit-linked insurance plan of LIC mutual fund e.g. Dhanraksha 1989 and contribution to other units -linked insurance plan of UTI.

v. Investments in ELSS: ELSS has been the most preferred option in recent years as it allows you to claim a deduction under Section 80C upto Rs 1.5 lakhs, it offers the EEE (Exempt-Exempt-Exempt) benefit to taxpayers and simultaneously offers an excellent opportunity to earn as these funds invest primarily in the equity market in a diversified manner.

4. Other Allowable Deductions

Besides the deduction that an NRI can claim under Section 80C, he is also eligible to claim various other deductions under the Income tax laws which have been discussed here:

  1. Deduction from House Property Income for NRIs
  2. Deduction under Section 80D
  3. Deduction under Section 80E
  4. Deduction under Section 80G
  5. Deduction under Section 80TTA
  6. Deductions not Allowed to NRIs
  7. Investment under RGESS (Section 80CCG)
  8. Deduction for the Differently-Abled under Section 80DD
  9. Deduction for the Differently-Abled under Section 80DDB
  10. Deduction for the Differently-Abled under Section 80U
  11. Exemption on Sale of Property for an NRI
  12. How are You Taxed When You are -  We will discuss few scenarios
  13. Income Tax Filing for Foreign Nationals

a. Deduction from House Property Income for NRIs

NRIs can claim all the deductions available to a resident from income from house property for a house purchased in India. Deduction towards property tax paid and interest on home loan deduction is also allowed. 

b. Deduction under Section 80D

NRIs are allowed to claim a deduction for premium paid for health insurance. This deduction is available up to Rs 30,000 ( increased to Rs 50,000 effective 1 April 2018) for senior citizens and up to Rs 25,000 in other cases for insurance of self, spouse, and dependent children. Additionally, an NRI can also claim a deduction for insurance of parents (father or mother or both) up to Rs30,000 (raised to Rs 50,000 effective 1 April 2018) if their parents are senior citizens, and Rs 25,000 if the parents are not senior citizens. Beginning FY 2012-13, within the existing limit a deduction of up to Rs 5,000 for preventive health check-ups are also available.

c. Deduction under Section 80E

Under this Section, NRIs can claim a deduction of interest paid on an education loan. This loan may have been taken for higher education for the NRI, or NRI’s spouse or children or for a student for whom the NRI is a legal guardian. There is no limit on the amount which can be claimed as a deduction under this Section. The deduction is available for a maximum of 8 years or till the interest is paid, whichever is earlier. The deduction is not available on the principal repayment of the loan.

d. Deduction under Section 80G

NRIs are allowed to claim a deduction for donations for social causes under Section 80G. 

e. Deduction under Section 80TTA

Non-resident Indians can claim a deduction on income from interest on savings bank account up to a maximum of Rs 10,000 like resident Indians. This is allowed on deposits in savings account (not time deposits) with a bank, co-operative society or post office and is available starting FY 2012-13.

f. Deductions not Allowed to NRIs

Some Investments under Section 80C:

i. Investment in PPF is not allowed (NRIs are not allowed to open new PPF accounts, however, PPF accounts which are opened while they are a resident are allowed to be maintained)

ii. Investments in NSCs

iii. Post office 5-year deposit scheme

iv. Senior citizen savings scheme

g. Investment under RGESS (Section 80CCG)

Deduction under Section 80CCG or Rajiv Gandhi Equity Savings Scheme was introduced in effective assessment year 2013-14. The main purpose behind this deduction was to increase retail investor participation in equity markets. Upon satisfaction of certain conditions the deduction allowed is lower of 50% of the amount invested in equity shares or Rs 25,000. This deduction is not available to NRIs. No deduction under this section shall be allowed in respect of any assessment year commencing on or after the 1st day of April, 2018.

h. Deduction for the Differently-Abled under Section 80DD

Deduction under this Section is allowed for maintenance including medical treatment of a handicapped dependent (a person with a disability as defined in this Section) is not available to NRIs.

i. Deduction for the Differently-Abled under Section 80DDB

Deduction under this Section towards medical treatment for a dependent who is disabled (as certified by a prescribed specialist) is available only to residents.

j. Deduction for the Differently-Abled under Section 80U

Deduction for disability where the taxpayer himself suffers from a disability as defined in the Section is allowed only to resident Indians.

k. Exemption on Sale of Property for an NRI

 Long-term capital gains (when the property is held for more than 3 years) is taxed at 20%. Do note that long-term capital gains earned by NRIs are subject to a TDS of 20%.

NRIs are allowed to claim exemptions under Section 54, Section 54 EC, and Section 54F on long-term capital gains. Therefore, an NRI can take benefit of the exemptions from capital gains at the time of filing a return and claim a refund of TDS deducted on Capital Gains. Exemption under Section 54 is available on long-term capital gains on sale of a house property. Exemption under Section 54F is available on sale of any asset other than a house property. 

Exemption is also available under Section 54EC when capital gains from sale of the first property is reinvested into specific bonds.

i. If you are not very keen to reinvest your profit from sale of your first property into another one, then you can invest them in bonds for up to Rs.50 lakhs issued by National Highway Authority of India (NHAI) or Rural Electrification Corporation (REC). ii. The homeowner has 6 months’ time to invest the profit in these bonds, although to be able to claim this exemption, you will have to invest before the tax filing deadline. iii. The money invested can be redeemed after 3 years, but cannot be sold before the lapse of 3 years from the date of sale. With effect from the FY 2018-2019, the period of 3 years has been increased to 5 years. iv. With effect from FY 2018-19, the exemption under section 54EC has been restricted to the capital gain arising from the transfer of long term capital assets being land and building or both. Earlier, the exemption was available on transfer on any capital assets. The NRI must make these investments and show relevant proof to the buyer to get no TDS deducted on the capital gains. The NRI can also claim excess TDS deducted at the time of return filing and claim a refund.

l. How are You Taxed When You are a…

i. Resident Individual on a Temporary Foreign Assignment

Rahul worked out of Singapore on a temporary assignment for 4 months and earned in Singaporean Dollars during that time. He got this income credited to a bank account here in India. He has returned back home now. How should he file his income tax return? Rahul’s taxes for this year will depend on his residential status. Since Rahul has not been outside of India for more than 182 days, he will be considered a resident. He will be required to file his income taxes in India this year. This will also include his salary earned during the foreign assignment in Singapore. If the assignment extends to more than 182 days, Rahul’s residential status will change and he will be required to pay taxes only on the Indian income earned thus far. Here, note that Rahul’s foreign income credited to an Indian bank account is taxable in India.

ii. Resident Individual recently moved abroad

Prashant moves to the US on a new assignment. He gets his US income credited to an NRE account in India. He continues with his FD investments and has some money put away in a savings account in India. He just received Form 16 from his Indian employer. Should he file his returns this year in India? NRI or not, every individual must file a tax return if their income exceeds Rs 2,50,000. But note that NRIs are only taxed for income earned/collected in India. So, Rahul will pay taxes on income earned while in India, and income accrued from FDs and savings account.

Prashant’s income from India
Income from Indian employerRs 3,00,000
Interest income from FDsRs 25,000
Bank account savings interestRs 4,500
Gross total incomeRs 3,29,500
Section 80C – PPF investmentsRs 20,000
Section 80TTA exemptionRs 4,500
Taxable incomeRs 3,05,000
Tax slab at 10%Rs 5,500
Cess at 3%Rs 165
TDS deducted by employerRs 4,000
TDS deducted by bankRs 4,500
Tax RefundRs 2835

iii. Living in a Foreign Country

It’s been 3 years since Arjun moved to the US. He is paid in US dollars. He has his money invested in a savings account and FDs in India. He has bought an apartment and gave it on rent for Rs.35,000 per month. He gifts his parents a car and transfers Rs.10,000 every month to their account to help with their household expenses during the year. He also transfers Rs 20,000 in his father’s account to meet the cost of the insurance policy he has purchased for his parents.

Rental IncomeRs 4,20,000
Less: Standard 30% deduction under Section 24Rs 1,26,000
Income from house propertyRs 2,94,000
Income from FDs and bank accountRs 30,000
Gross total incomeRs 3,24,000
Deduction under Section 80DRs 20,000
Taxable incomeRs 3,04,000

  Arjun’s gift to his father and money transfer of Rs 10,000 to his mother are exempt from tax. Regarding the insurance expenses on his parents, Rahul can claim a deduction under Section 80D of Rs 20,000, since his father is over 65 years of age. He will be required to file a tax return in India as his gross income exceeds Rs 2,50,000.

iv. NRI Recently Moved Back to India

Returning NRIs assume RNOR (Resident, Non-Ordinary Resident) status when: a. You have been an NRI in 9 of the 10 financial years preceding the year of your return b. You have lived in India for 2 years or less (729 days or less) in the last 7 financial years The IT Department allows RNORs to continue to enjoy exemptions available to NRIs for a period of 2 years after their return. Therefore, deposits held in foreign currency, which are exempt for an NRI, shall be exempt to returning NRIs for 2 years. After these 2 years, returning NRIs are treated as resident individuals.

v. A resident with Global Income

If you are a resident Indian, your global income is taxable in India. This income may have been earned or received outside – but it shall be taxed in India. In case this income is also taxable in another country, you can take benefit of DTAA (Double Tax Avoidance Agreement).

If you are a resident and have earned any income from abroad, remember to disclose it in your income tax return.

m. Income Tax Filing for Foreign Nationals

An expatriate in India is someone who comes to live in India but is not a citizen of India.

5. How can NRIs Avoid Double Taxation?

NRIs can avoid double taxation (meaning: getting taxed on the same income twice in the country of residence and India) by seeking relief from DTAA between the two countries. Under DTAA, there are two methods to claim tax relief – exemption method and tax credit method. By exemption method, NRIs are taxed in only one country and exempted in another. In tax credit method, where the income is taxed in both countries, tax relief can be claimed in the country of residence.

6. Frequently Asked Questions