July 31st is the last date for filing your Indian income tax returns for the financial year 2010-2011. If you are a Non Resident Indian (NRI) and are looking at the best way to file your tax returns, here is a quick guide on various options, including e-filing. This guide will also help you understand if you need to file a return in the first place.
Who should file returns?
If you are an NRI, you would have to file your income tax returns for 2010-2011 if you fulfill either of these conditions:
- Your taxable income in India during the year 2010-2011 was above the basic exemption limit of Rs 1.6 lakh OR
- You have earned short-term or long-term capital gains from sale of any investments or assets, even if the gains are less than the basic exemption limit.
Note: The enhanced exemption limit for senior citizens and women is applicable only to residents and not to non-residents.
Are there any exceptions?
Yes, there are two exceptions:
- If your taxable income consisted only of investment income (interest) and/or capital gains
income and if tax has been deducted at source from such income, you do not have to file your
- If you earned long term capital gains from the sale of equity shares or equity mutual funds, you do not have to pay any tax and therefore you do not have to include that in your tax return
Tip: You may also file a tax return if you have to claim a refund. This may happen where the tax deducted at source is more than the actual tax liability. Suppose your taxable income for the year was below Rs 1.6 lakh but the bank deducted tax at source on your interest amount, you can claim a refund by filing your tax return. Another instance is when you have a capital loss that can be set-off against capital gains. Tax may have been deducted at source on the capital gains, but you can set-off (or carryforward) capital loss against the gain and lower your actual tax liability. In such cases, you would need to file a tax return.
By when to file returns?
The last date to file returns for the financial year 2010-2011 is July 31st 2011. However, remember thefollowing:
- If you do not have any tax payable (that is all your tax has been deducted at source), you can still file your tax return by 31st March 2012 without any penalties.
- If you do have tax payable, you can still file your returns by 31st March 2012 but you will be
charged an interest of 1% per month for every month of delay starting from 31st July 2011 till
the time you file your tax returns.
- If you do not file your tax returns even by the 31st of March 2010, you may be charged a penalty of Rs 5,000 for every year of delay.
What's the best way to file returns?
Traditionally, you could file your return either by giving a power of attorney to someone in India or by sending your form and documents to a tax expert in India who would then file returns on your behalf.
But nowadays, the easiest option for NRIs to file their Indian tax returns is by using the online platform. There are several options to file online.
Option 1: Income tax website
The income tax website allows you to efile your return. But the process maybe a bit cumbersome. Youwould need to download a software, fill in your details and upload an XML file. You would then need toprint and send a copy of the acknowledgement (known as ITR-V) to the tax office in Bangalore within 30days.
You can do this for free.
Option 2: End-to-end online
Some online service providers offer a more user friendly experience, for a fee of course.
Taxsmile.com for instance has preferred partners in various countries including US, UK and Australia. Explains Bala Balaguru, President of Athreya Inc, taxsmile.com's preferred partner for North America, "For a fee of USD 69, an individual tax payer will be able to file his tax return completely online.This fee includes a digital signature of 1 year validity. You would need to send a notarized copy of youraddress proof and photo ID to Athreya's office and we will create your account within 3 days. "
In addition to Income tax return preparation, the package also allows you to resolve up to 10 tax related queries as well as get the prepared return reviewed by taxsmile's tax professionals.
Athreya also offers a package without the digital signature in which case you would need to sign the ITR-V and courier it to the income tax office in Bangalore. This package however does not come with any support from tax professionals.
Another website elagaan.com also offers a similar service for NRIs. Says Naveen Kumar, Co-founder of elagaan.com, "Elagaan.com offers an end to end solution with digital signature being optional. If you choose not to take the digital signature, you would need to send a signed copy of the ITR-V to our office and elagaan would send it to the income tax office in Bangalore. Here we suggest our users to send 3-4 copies of their signed ITR-V, so that if a copy gets missed/lost in the process, elagaan sends another copy without any additional charges."
Elagaan.com offers services across 38 countries but has physical offices in the US and India only. It charges Rs 749 for filing your returns without a digital signature. If you want to opt for the digital signature, it comes with a price tag of Rs 899 for a year's validity.
Option 3: Combination of online and offline
Several websites offer a mix of online and offline service and each works differently.
Taxyogi.com has such an offering that NRIs could use. After entering your income details, the website generates an XML format of your return. You would then have to upload the XML form into the Income Tax website and complete the process there. You would need to print the ITR-V, sign it and send it to the Income Tax Department in Bangalore. This is a free version.
Taxspanner.com also offers a 'Foreign Income solution' package. Priced at Rs 1999, the return is prepared on the basis of information and documents provided by the user. This package includes consultation to a limited extent.
In case of websites like taxmunshi.com, you would have to scan and email your documents to them. They would file the return on your behalf. Once the return is filed, the ITR-V will be emailed to you. You would need to print a copy, sign it and send it to the office of taxmunshi.com and they would send it to the income tax office in Bangalore. The website charges US based NRIs around Rs 799 for a simple income tax return.
In all these cases, the user is required to specify the preferred mode of Refund ie ECS or cheque. In case of ECS, the user needs to provide the MICR code of Bank Branch where the account is held.
Remember that whatever option you choose, you must have a Permanent Account Number (PAN) in order to file your returns. Once you have it, pick from the above options the one most suitable to your needs, but do it fast. It's only a few days to the 31st July deadline.