Tax Query: Should NRIs file ITR in India if taxable income exceeds Rs 2.5 lakh?

If a non-resident Indian (NRI) has a vacant and locked house along with a bank interest income of less than Rs 2.5 lakh, does he need to file an income tax return (ITR)? In the previous years, he had been filing ITR as he had taxable income.

As per the income tax provisions in India, the rental income from the house property situated in India is considered as NIL for up to two self-occupied properties. 

A house property is considered as a self-occupied only if the following conditions are satisfied: 

  1. The property is used for residential purposes.
  2. The owner cannot occupy the property due to his employment, business or profession carried on at any other place.

In any other situation, an individual will be liable to pay tax on the notional rent in respect of the vacant property. 

Since the NRI has a vacant house situated in India, he will have to evaluate whether such a house can be considered as self-occupied. If not, he will have to calculate the taxable rental income in the following manner: 

Particulars Amount
Gross Annual Value (GAV) XXX
Less: Municipal taxes paid XXX
Net Annual Value (NAV) XXX
Less: 30% Standard deduction  XXX
Less: Interest paid on housing loan  XXX
Taxable rental income  XXX

The gross annual value will be the higher of the amount at which the property is expected to be let out, or the actual rent received or receivable in a financial year. Also, any repayment of the principal amount of any housing loan will be deductible under section 80C of up to Rs 1.5 lakh.

Also Read: Tax Query: Does reinvestment in agricultural land qualify for an exemption?

Furthermore, an NRI individual is required to file income tax returns if the taxable income exceeds Rs 2.5 lakh in a financial year. The threshold limit will be determined before giving effect to the deductions under chapter VI-A such as section 80C, 80D, and so on. 

For FY 2019-20, the income tax provisions have been recently amended for mandatory furnishing of income tax returns, i.e. the individuals fulfilling the following conditions will have to file ITR from FY 2019-20 onwards:

  1. Any individual depositing an amount or aggregate of amounts exceeding Rs 1 crore in one or more current accounts during an FY. 
  2. Any individual spending an amount or aggregate of the amount in excess of Rs 2 lakh for travel to a foreign country for himself/herself or for any other person during an FY.
  3. Any individual who has incurred an expenditure exceeding Rs 1 lakh on the consumption of electricity during an FY.

To summarise, if your taxable income does not exceed Rs 2.5 lakh in an FY and you do not fall under any of the conditions above, then you are required to file income tax returns for FY 2019-20. 

For any clarifications/feedback on the topic, please contact the writer at komal.chawla@cleartax.in

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