Watch: File Your India Taxes Right: Avoid Notices, Penalties & Costly NRI Mistakes | Return to India

2:51 So, let me begin with a simple observation. You know, most of the NRI issues or tax compliance issues happen not because they don't want to comply, but because maybe they feel very casual about it. so, the first thing to understand is, you know, you have maybe moved out of India, but your PAN never moves out of India. So, PAN is still there. That's why a lot of documents are there. A trail is building up over there. So, that is very important to keep in mind, you know, whether you are compliant, whether you are disclosing everything or not. So, today what we'll do is we'll quickly go through the you know, framework that applies in India. And we'll also be talking about return to India, which I know most of you are very keen to listen to. so, we will cover that as well. But, we will quickly go through the entire framework that applies for an you know, income tax return filing for NRIs. now, how we will take it is first is, you know, why should you care about India filing? Then when

3:53 Should NRIs file? Then how the taxation system actually works and the return to India or your transition phases or cross-border planning, how it has to be properly managed. So the first thing is, you know, as I said, your PAN never leaves India, which means there is a trail which is happening in India. Nowadays, it is very much documented in your own income tax portal. If you log into your portal, you can see a lot of details over there. So that's why gone are those that, okay, if I don't mention this in the return, nobody will come to know. Those days are not there now anymore. With the CRS, which is the common reporting standards and the FATCA framework. FATCA is a US specific law, whereas CRS is between many countries, 120-plus countries are signatory now.

4:46 Wherein, which means that a lot of information exchange happens between countries. So, for example, a US tax resident coming to India and opening an account in India gets reported to the IRS or vice versa. So that ways, a lot of cross-border movement of your documents already takes place nowadays. Whenever we open anything, we have to file these declaration forms and it is not just a formality, it gets actually reported to different governments. Now, the Indian income tax portal, like it has great detail about your entire financial footprint that happened during the year. Of course, the things that are not mentioned, like, you know, TDS if not deducted by the tenant, then obviously it won't reflect there. But apart from that, most of the things, anybody's deducting any of your taxes, if you're buying any property, all such type of transactions are already getting captured in your AIS report. Now, AIS is the detailed statement. TIS is the summary income head-wise how India taxes

5:47 Your income based on those five heads. TIS is the summary for that, and 26AS is basically a summary of the tax deductions that have happened. So, if you log in to your portal, you can check it yourself about all these, you know, what information is being reflected there. Now, the portal itself is kind of a very well-equipped engine. Last year, you can see the volume of income tax returns that were processed. 9.19 crore returns got processed last financial year. So, that shows the kind of, you know, data that income tax department is processing right now. And you'll be surprised to know even for small details like, you know, not reporting any particular income or anything else, you know, automated system-generated notices or communication is also getting generated nowadays.

6:40 So, any sort of mismatch, so anything that is being reflected in your AIS, and if you don't report it, can potentially trigger a notice. Now, this does not mean that whatever is given there has to be the full story or it is true. For example, if you have sold a property, it may reflect there, but you might have bought another property and claimed the exemption. But if you thought that since buying another house means that automatically I would get this exemption, that does not work that way. So, income tax department expects you to file a return to claim any sort of exemptions or deductions. So, for that, if you have not filed, even though the AIS is reflecting sale of property, it won't show purchase of property or it won't automatically correlate these two transactions. Although both the transaction may be shown there, it won't correlate also. So, all such loose ends have to be tied by filing a return. And you have to strictly check the AIS portal for that.

7:35 Now, these are some of the triggers when the ITR filing becomes mandatory. This is under section 139. First of all, I wanted to clarify that the return that we are filing right now is for the last

7:48 Financial year. And last financial year ended on 31st March 2026. The earlier income tax act, which is now not in force, applied till 31st March 2026. So, the return that we would be filing now is still for the old act. So, the old section numbers, old form numbers are all mentioned here because that is relevant even today. That is you know only for the prospective things. Like you know, if you're deducting any taxes or if you're remitting money out of India now, then the new tax year applies. So, that's why the new form numbers and all you will hear from your banks or for TDS your employers will tell you that the new forms apply. But that is for the prospective year. That is starting from 1st April 2026. So, that's why this disclaimer is a must that currently whatever we are talking about is for the last financial year, which means the last income tax act. And this is the last return that we would be filing under that income tax act.

8:46 Now, these are some special filing triggers. So, even if your minimum exemption limit is not breached, but let's say you become a resident and ordinary resident and you if you still hold foreign assets, then still you need to file a return. Or these are some other triggers. Yes. This is a special exemption you know given to specific asset classes under which a return filing may not be mandatory. But again, as I said, you know, you should not rely on all all such things. It's better to keep filing your return. We will come to it why it is advised. Now, this is a very important section, section 195. Any sort of income being paid to an NRI has to be offered for withholding tax or the TDS. For example, you know, when you're getting interest on your NRO account, the TDS is there. So, any slab rate income that you get, usually it is the tax rate is as

9:48 Per the maximum slab rate, which is 30% plus surcharge plus cess. Now, surcharge applies only in specific cases if your income is above a threshold, like 50 lakh plus, but cess does apply in every case, which is 4%. That's why the minimum TDS rate would be even on NRO interest is 31.2% or if a tenant is paying rent to an NRI landlord, again the same rate would apply, which is 31.2%. Of course, this rate can be reduced with the help of a DTA arrangement if there is any specific provision, but I'm talking about the general rate which applies to everybody. So, when you file a return, you can claim excess refund or whatever refund has to be claimed, you can file only when you file a return.

10:35 Again, one point I missed was when you sell a property, there is a TDS on the entire sale consideration. So, when an NRI sells a property, it's not like how a resident, you know, selling a property is treated. the entire sale consideration on that withholding tax applies. There is a mechanism under which you can go ahead and ask for a lower tax deduction certificate from the JAO, which is the jurisdictional assessing officer, but all that depends on the procedure and have you actually planned about it. so, to avoid all these things or whatever TDS you've already suffered, how to claim it back, the only way is by filing a return.

11:15 Right. so, you know, once you want to file a return, what are the processes? First, you need to determine your residential status. Now, residential status has to be determined strictly under the Income Tax Act. many people I've seen they confuse with FEMA or, you know, their passports and all. Now, that does not happen. In Income Tax Act, there are specific thresholds under which you qualify as a resident or a non-resident. We will come to those thresholds in the next slides, but I wanted to tell you that it does not depend on any other law. So, you have to strictly stick to the Income Tax Act for classification for any particular year. Now, what are these thresholds? First of all, there are two basic thresholds. If you meet either of these conditions, you become a resident. So, there are two broad categories under which you get classified. One is a resident and one is a non-resident. And within resident, there are two subcategories, which is ROR, that is a resident and ordinary resident, and there is a special category for returning NRIs, which they get to realign their assets and all.

12:15 That is called the RNOR status. Now, how do you get classified as a resident? So, there are two conditions, either of which if you fulfill, you become a resident in India. Obviously, 182 days or more, or 60 days or more, and plus 365 days or more in the last 4 years. Now, for a Indian citizen or PIO coming back to India, the 60-day threshold is relaxed to 182 days. So, practically for NRIs, 182 day threshold is what we need to look at. There is a special condition under which, you know, global Indians who do not satisfy residential status in any of the countries, they may get classified as a RNOR if their Indian income is more than 15 lakhs, but that is a very special case. So, we won't talk much about it.

13:03 That is a special case. If that applies to you, we can discuss it on a later basis. Now, once you get classified as a resident, then as I said, there is a special relaxation relaxation for a returning NRI. You have to satisfy any of these conditions. If you satisfy these conditions, you become a ROR. If not, then you are a RNOR. So, you know, first condition is out of the last 10 years you have to be an NRI for at least 9 years to be able to qualify as an R and OR. Or the other condition is in the last 7 years, not this year, the year before that, 7 years as a complete you have to calculate. If you have been staying in India for less than 730 days, then also you qualify as an R and OR. So, this is a very important condition. If either of this you satisfy, you become an R and OR. R and OR is very important because in most cases, you know, your global income does not become taxable immediately, which means you get a a lot of planning runway during this time when you are just coming back to India. You get time to settle your assets and all those things

14:05 Overseas. Now, let's come to the classification. Once we classify the three things, then how does the taxation depend? Taxation is simple. For an NRI, he pays tax only on whatever he earns in India. for an R and OR, again the same thing, only one extra exemption exception is there which says that if there is any business being controlled from India or actively managed from India, then that also becomes taxable for R and OR. So, practically for NRI and R and OR, most of the things does not change, you know, for salaried people at all. It only changes for somebody who has an active business being run from India. And the third category is R R and OR, which is like me, you know, for whom everything becomes taxable. So, even if I get a dividend from a US asset or I have any holdings overseas, I'll have to pay tax in India that way. So, for R and OR, everything is taxable. For NRI, only India portion is taxable. And NRI, the special status, only, you know, India income plus any business income

15:06 That is being run from India, only that becomes taxable. Now, once you classify according to your residential status, then we come to the income because income has to be also classified. So, income gets classified under these five heads: salary, house property, capital gains, other sources, and business profession. One important point here is the F&O turnover, if you have any, which is futures and options. That gets classified as a business income and not as a capital gain. So, I see many of the NRIs, you know, wrongly classifying it as capital gains, but that is not allowed. So, business income is the income for a F&O business. But yes, so you classify your income under these five heads. You fill in all these details in the income tax return, and that's how you process a return.

15:54 Now, what forms do apply for an NRI? First of all, ITR 1, which is the simplest form, and you know, everybody tends to file that form, is not applicable to an NRI at all. So, be very careful not to select this form. This is only for a resident Indian. And you know, if you by default file ITR 1, then you're declaring yourself to be a resident, which can attract a lot of other notices, like, you know, if you're a resident, then why have you not paid tax on your global income? Why have you not shown your foreign assets and all these things? So, that's why be very careful never to select ITR 1 for an NRI. ITR 2 is the one which by default applies to most of the cases, and ITR 3 would apply only if you have got business income, or as I said, you know, F&O turnover. Apart from that, for most NRIs, ITR 2 is the form that would apply to you.

16:44 Now, what are the tax slabs? Tax slabs for this year are very simple. It is in multiples of four. So, up to 4 lakhs, it's exempt, and then 4 to 8, 5%, and you know, likewise. Of course, there is cess and surcharge. Cess is 4%, and surcharge would depend on your gross total income. If it exceeds more than 50 lakhs, then there is a surcharge also applicable on your income. Surcharge is nothing but a tax on tax. So, an additional tax is applicable. Now, this is very important. Many people see that up to 12 lakhs there is no income tax in India nowadays, but that is a special case only for a resident that too if he has a regular income, which is a slab rate income, not for capital gains and all. And that too applies only to a resident, not to an NRI. And even this applies only when you file a return and actually prove that your income is lesser than 12 lakhs. So, it's not a default escape. You cannot assume that since my income is lesser

17:45 Than 12 lakhs, I will not file a return and all. That does not apply. Now, these are the filing dates. For NRIs, the default would be in most of the cases 31st of July except for the business income cases. So, for most NRIs, 31st July is the deadline. Returns have just come in. You know, ITR 2 and all have been made live last week itself. And slowly return filings have also started. The pace is slow right now, but yes, it will catch up by around 15th of June. We can see actual fully functional portal. Now, I'll quickly talk about DTA as well

18:23 Because returning NRIs for them, it matters a lot. A DTA is basically a double taxation avoidance agreement. How does it matter is basically when you are shifting from one country to another, that country may tax you as a resident. So, for example, if you move back to India in July. So, for US, they follow a calendar year. So, for them you have lived in US for most part of the year, which is more than 6 months. So, they may consider you a tax resident. At the same time, in India, we follow April to March. So, it doesn't matter whether you have come from US or not. For us, we will only calculate April to March. Now, when we look at that calculation since you have come in July, you stay in India for more than 182 days. And supposing if your history is not you know, much to qualify as a RNOR, then and if you suddenly become a ROR in the first year itself, then it means your global income is taxable, which means US also wants you wants to tax your US income. India also wants to

19:25 Tax that income which accrued from April to July, whenever you came back. So, how do you, you know, navigate such cases? There is a special treaty with US and most other countries. This treaty gives you the allocation that which country has a right to tax whom, how much would be the rate, is there any special rate or preferential rate, or for example, you know, social security benefits earned in US is not taxable in India. Why? Because there is a treaty which says so. So, according to the treaty, we have to analyze each head of income, each particular income source. For example, you know, 401K, whether they'll be taxable in India or not. And if taxable, then will they be taxable at the entire amount or only the income portion? Or, you know, during the RNOR phase, what will happen? Whatever accruals are happening, what will happen to that? Or is there any special, you know, sort of treaty or a clause which says that, okay, US wants to tax my 401K only at the time of withdrawal, which is

20:25 After 60 years or 59 and 1/2 years, then would India want to tax it on a yearly basis or would India also defer it? Is there any provision? The answer is yes, there is a special provision for US, UK, Canada, and all. But all these things are given in the treaty itself, which is the double taxation avoidance agreement. That's why familiarizing yourself with the treaty is very important, especially for such cases, you know, wherein you are either a US citizen coming back to India and now planning to settle back in India because for US citizens also, US would want to tax you on the global income. India would also want to tax you on the residency. Then what happens? How the allocation and everything would happen there? So, all these things are given in the double taxation avoidance act. Now this is an example for example you know somebody working in UAE he has invested in mutual funds in India. There is a special benefit for that you know because the treaty says that there are five heads given under capital gains which talks about all the different you

21:25 Know asset classes which can be taxable in India. But there is a residual clause which says that if if there is an asset which is not in the list then it will be taxed only in the country of residence. Now if somebody from Dubai or UAE has redeemed some mutual funds in India and if he qualifies all these conditions if he has all the valid documents and all then practically it means that with the help of this treaty benefit he can you know get a refund of whatever TDS has happened on his mutual fund redemptions also. So all these things have to be analyzed properly with the double taxation avoidance act. This is the documentation checklist. We don't need to get into it now. So returning to India is a very important transition window. The planning should start well before you you know actually come back or book a ticket because the dates matter how many days you stayed in India matters how many days you are staying in US matters.

22:25 So a lot of things change. Secondly there are two different clocks which apply when you land in India. One is a FEMA clock which goes as per your intention. So if suppose you have come back for employment or business or if you want to settle back in India then the moment you come back you become a person resident in India from day one and which means that you know all your special accounts like NRI NRO account need to be closed or redesignated to a resident saving account or whatever other possible accounts are like RFC. All these things can be planned only under FEMA framework. Now income tax on the other hand goes back and checks your last financial So, Income Tax Act is not on that particular date what is happening. It does not calculate on that basis. It calculates as a whole for the last financial year. What was your status? What is the income source? And how would we tax you? So, that is how these two clocks work in a different way. So, it may happen that you become a resident under FEMA, but you still qualify as a non-resident or a RNOR under Income Tax Act, which is perfectly

23:27 Legal. So, the perfect tax planning that we do is within the FEMA framework, whatever is legally allowed to be done under the FEMA framework, we do that and based on the Income Tax exemptions or DTA provisions, whatever tax planning can be done during the transitional years, we try to do that. That is how typically a returning NRIs, you know, case looks like. Now, these are some of the common mistakes which I see. It's a complete list. Specifically, not declaring your status properly, mixing the two like, you know, FEMA versus Income Tax Act, mixing the status for both of them. Or, even if AIS shows a redemption of your mutual funds, you do not file a return. Or, you assume that since whatever is shown in the AIS, I'll show that as the complete income, which is not true. Like, you know, you have bought it at a cost, you've sold it at a price. So, the AIS will only show the redemption value. It will not show your capital gain. So, you have to match everything properly. All these things are what I see in a, you know, NRI return. And specifically, after coming

24:28 Back to India, once you become a ROR, then I call it the compliance cliff because ROR is something which can take your compliance from, you know, 1 to 10 directly. Because once you become an ROR, India expects you to disclose all your foreign assets. It can be 401K, HSA, or whatever. Everything has to be disclosed properly, classified properly. If you want to defer your taxation to up to retirement like 59 and a half or 60, then you have to keep filing a particular form before the return and you have to do it meticulously before the due date. And also, you know, you have to disclose everything on a line by line basis. Now, specifically in case of RSUs or shares and all in US, you get an option to sell those on a lot by lot basis, but India goes by a FIFO basis. So, what we need to do is whenever you come back to India and you transition into ROR, we have to reconstruct everything from day one.

25:24 Like you bought the first lot of shares, then what has happened over the historical period, have you treated it properly as per the Indian law or not? Because that lot system does not apply in India, so we reconstruct the entire, you know, whatever capital assets you have and that is how in a detailed way it needs to be reported with a ROR return. So, that's why be very careful and one very important thing is if you do not need any accounts, like if you have got multiple accounts, multiple checking accounts or multiple custodian accounts and you don't need them, then consolidate into one or two because that makes the reporting easy and the compliance much easier for you on a later stage. So, the final takeaway is this, you check your residential status year on year basis. Do not assume you're an NRI just from passport or FEMA or any other status. Reconcile your AISTIS.

26:18 AISTIS is not always accurate, mind well. There may be errors in that, but you get a opportunity to say that also. So, within that portal itself, if you find something or some information does not pertain to you, you can go and report it there itself. So, before filing a return, check whether everything is accurate. If not, you report it and then only file a return. And know when your filing is mandatory, but even if it is not, it is much advised because when you file a return even as an NRI, you get to tell Income Tax Department that how many days you stayed in India in the last financial year and four years before that cumulatively. So, you establish a footprint for five years. So, whenever you're trying to transition back to India or do any major transaction in India, this history will help a lot.

27:04 Also, for lower tax deduction certificate like Anthony just mentioned, you know, it's a lot of compliance to be done. But again, the requirement is that you have to be a return filer. only then you will get the certificate or in most cases they they do not allow to such a certificate. So, all these things help in building a proper footprint because your PAN is still in India and they are recording every transaction whatever you are doing. so, it's a good thing to, you know, comply with law, tell them that you are an NRI, and don't tax me on my global income, or don't look at my foreign assets. That becomes very important. Also, planning the return date is also very very crucial. it shouldn't be like, you know, from the example that I gave you just now that even US wants to tax you being a resident and India also wants to tax you in the same year. That shouldn't happen.

27:55 That is what I call the crash landing in India. So, if you want a proper runway can be planned and NRI status can be properly managed. >> Okay. So, yeah. Thank you very much, Sagar, for walking us through. So, before we open up for Q&A, I want to take couple of minutes to just talk about the Desi Return India tax filing service. so, we understand some of the pain points on the NRI side and people who are moving back to India, especially some of the things that Sagar was mentioning about you know, FEMA perspective, the residential status which is different from the income tax, and some of the you know, common mistakes that people make. So, we actually have four offerings, I think, basically like to make it simple. So, which is you know, the first one is for people who have like passive income, you know, income from dividends, interest, rental income, anything, or they have a capital gains from the mutual funds, it starts at $49. And for the other one, which is everything included in the

28:56 First essential, plus if you have sold a property, or if you have a business income, so that is considered in the second category. And the third category is if you have any foreign assets that you have to disclose, or investments that you have to report, that is the third category. But if you have any situations where you are on HNI, or you have an income more than 1 CR, or if you don't have a schedule FA from any of these clients, so that's it would be a custom quote. So, send us an email, so we would quote that, and so you can move forward with that. We wanted to keep it very competitive. Just I think we wanted to make sure because it's a pain point, and we wanted to offer this. So, that's on the pricing side. In terms of the process, I think we have a link that I will share with you shortly. You can go there, depending on your income sources, you can choose what would be appropriate for you, and then there is an onboarding form which will take about 5 minutes where you can upload your documents. And this will be reviewed by the CA team, and if there's any mismatch or

29:58 Disparity, there will be a follow-up email so that we can make sure everyone is on the same page before a draft income tax is you know, getting ready, and then that would be filed after the approval. So, that's I think the overall process. Here is a quick, you know, link on where you can find this service. The other thing that I didn't include here is we also have a tool that I will post in the chat window here, which will help you in determining whether someone is required to file Indian tax filing return or not. So, you can there are a few questions that the tool would ask, and then it would guide you if you are supposed to file Indian tax filing or not. So, that can help you in the process also.