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Case Study NRI lives and works in the USA

Case Study NRI lives and works in the USA

Case Study: Srishti lives and works in the USA. She checked her Form 26AS online and found out that a TDS entry of Rs 20,000 is showing. This TDS had been deducted at 30% on interest earned by her in her NRO account. Srishti has no other income in India.

Does Srishti have to pay any tax in India and is she required to file an income tax return?

Whether your Income will be taxed in India depends upon your residential status.

First let’s find out Srishti’s residential status. Since she is an Indian citizen and has gone to USA for her job – she will be a resident if she spends 182 days or more in India. Srishti left India on 3rd July 2013 and came back to India on 15th March 2014. Therefore in the financial year that begins on 1st April 2013 and ends on 31st March 2014, Srishti has spent less than 182 days in India. Since she is an Indian citizen on an employment abroad, to qualify as a resident she must spend 182 days or more in India. Therefore, Srishti is an NRI for the purpose of Income Tax in India.

For Srishti, only her income which is earned or accrued in India shall be taxable in India. Her income in the USA is not taxable in India since she is an NRI. Interest earned in India is taxable for an NRI. (Do note that interest on NRO account is taxable whereas interest earned on NRE account is exempt from tax).

Srishti needs to add up all the income she has earned in India. The interest earned on the NRO account of Rs 70,000 is Srishti’s only income. For FY 2013-14, the minimum income which is exempt from tax is Rs 2,00,000. Srishti’s total income in India is less than the minimum exempt amount and therefore she does not have to pay any tax on it. In fact, since no tax is payable by her, she must claim a refund of the TDS deducted on her interest income.

A refund can only be claimed by filing an income tax return for that financial year.

If capital gains from selling an asset is your only income in a financial year and TDS has been deducted on that, then you are not required to file your income tax return for that year.

Case Study NRI lives and works in the USA

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