• Notification Date: 29-03-2024
• Notification No: N/A

Double Taxation the Biggest Challenge in ITR Filing; say NRIs

A recent survey has highlighted the complexities of tax compliance for NRIs and OCIs. India has the world’s largest overseas diaspora, with approximately 32 million NRIs and OCIs. India's NRI network sees a significant presence in Gulf countries, alongside Singapore, the US, Canada, the UK, and more. 

The survey conducted by SBNRI, a comprehensive investment platform for NRIs and OCIs, stated that 14.11% NRIs from Australia, followed by 13.10% and 8.06% from the UK and the US, respectively, feel that double taxation is the biggest challenge when it comes to filing tax returns as an NRI and OCI. 

At the same time, 12.10%, 9.05%, and 6.02% of NRIs from the US, the UK, and Australia found accessing taxation documents from abroad to be the most challenging concern for filing taxes as NRIs. 

The survey highlighted that 10% of US-based NRIs, followed by 7% from Australia, Canada, and Singapore, respectively, report only the income earned in India to the Indian Tax authorities. On the contrary, 6% from Canada, 4% from the US and Singapore, respectively, and 3% from Australia revealed that they reported both incomes earned in India and abroad to the Indian Tax authorities. 

The Indian government aims to simplify taxation for NRIs, yet challenges persist in the tax framework despite their dedicated initiatives. NRIs are obligated to file income tax returns in India, provided they have accrued earnings within the Indian territory during the relevant financial year. 

The determination of an NRI's income taxes in India is contingent upon their residential status for that particular year; this is mandated by the provisions of the Indian Income Tax Act, 1961. Should your residential status be classified as 'resident', it should be noted that your worldwide earnings will warrant taxation under Indian jurisdiction. 

Remuneration acquired within the Indian territory, or compensation rendered for services in India - encompassing earnings from property located in India, capital gains resulting from transfer of assets situated herein, income derived from fixed deposit schemes or interest accrued on savings bank accounts – serve as prime illustrations of income earned or accrued in the nation. It is crucial to note that such revenue streams bear tax implications for NRIs. 

Double taxation Avoidance Agreement (DTAA) in income tax prevents double taxation by allowing taxpayers to pay tax in only one country, boosting income savings and attracting businesses. It also aids in curbing tax evasion by offering relief from double taxation, making the country more appealing for investments. 

Filing taxes can be challenging for NRIs and OCIs, but exploring tax-saving opportunities is beneficial. Around 7% of NRIs in the UK and Australia, as well as 5% in Canada and Singapore, utilize available tax-saving options. Conversely, 2% in Australia, 4% in Canada and Singapore, and 6% in the UK are unaware of such options, the survey reported. 

Navigating beyond the fragmented tax landscape for NRIs, the survey also revealed that 5% of NRIs from Singapore, 4% from the UK, and 2% from the US don’t file tax returns in India.  

Among the ones that do file tax returns in India, only a fraction of them choose to do it themselves by filling out forms. While the majority, namely 12% from the UK, along with 10%, and 7% from the US and Singapore respectively hire a tax professional or advisor to do the same on their behalf.