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Compliance Calendar for the month of July, 2023 Simplifying Export Procedures: Tax-Free Supplies for International Trade

When it comes to non-residents with international income, filing income tax returns in India requires careful consideration. The specific forms for filing depend on the nature and source of income. To streamline the process, e-filing can be done either online or offline. Additionally, there are specific schedules that must be completed to report international income sources. Adhering to due dates and being aware of penalties for late filing is crucial for a smooth filing experience.

Forms Applicable for Non-Residents: Non-residents have two main options when it comes to income tax return forms:

ITR-2: This form is suitable for non-residents earning income from salary/pension, house property, capital gains, other sources, foreign assets/income, etc., excluding business or profession income.

ITR-3: Designed for non-residents with income from business or profession, along with additional sources of income.

E-Filing Income Tax Returns for International Income Sources: There are two approaches to e-filing income tax returns for those with international income sources:

  1. Online Mode:
  • This mode is exclusively available for ITR-1 and ITR-4 forms.
  • Taxpayers can conveniently complete and submit the ITR form online through the Income Tax Department’s e-filing portal. 2. Offline Mode:
  • This mode applies to all ITR forms.
  • Taxpayers can download the ITR utility (Excel or Java), fill out the form offline, generate an XML file, and upload it on the e-filing portal.

Step-by-Step Process for E-Filing Income Tax Returns with International Income Sources:

  1. Register on the e-filing portal using a valid user ID and password.
  2. Link PAN and Aadhaar (if applicable).
  3. Pre-validate at least one bank account and nominate it for potential refunds (if applicable).
  4. Choose the appropriate ITR form and assessment year.
  5. Provide the required details in the ITR form, including personal information, contact details, filing status, residential status, income specifics, deductions, taxes paid, etc.
  6. Review and verify pre-filled data from various sources such as Form 26AS, Form 16/16A/16B/16C/16D/12BA/12BB, etc.
  7. Calculate the tax liability or refund and make any necessary tax payments.
  8. Submit the completed ITR form and verify it using available methods such as Aadhaar OTP, net banking, bank account number, demat account number, etc.

Schedules for Reporting International Income Sources: Depending on the nature and source of international income, non-resident taxpayers may need to complete specific schedules in the ITR form:

  • Schedule FSI: Used to report income that is taxable in India but accruing or arising outside the country.
  • Schedule TR: Reports taxes paid outside India on income taxable both in India and foreign countries.
  • Schedule FA: Provides details regarding foreign assets and income from sources outside India.
  • Schedule PTI: Reports income from business trusts or investment funds, including income generated outside India.
  • Schedule 5A: Deals with the apportionment of income between spouses governed by the Portuguese Civil Code.

Due Dates and Penalties for E-Filing Income Tax Returns with International Income Sources: The due date for filing income tax returns for non-residents is typically July 31 of the assessment year unless the government extends the deadline. Failure to file within the due date can result in penalties under section 234F of the Income Tax Act, 1961:

  • A late fee of ₹5,000 if the return is filed after the due date but before December 31 of the assessment year.
  • A late fee of ₹10,000 if the return is filed after December 31 of the assessment year.
  • However, if the total income does not exceed ₹5,00,000, the late fee will not exceed ₹1,000.

It is important to note that late filing may have additional consequences and penalties as per the Income Tax Act, 1961, and the Double Taxation Avoidance Agreements (DTAAs) with foreign countries.

For non-residents with international income sources, timely and accurate e-filing of income tax returns in India is strongly recommended. Compliance with the provisions outlined in the Income Tax Act, 1961, as well as the relevant Double Taxation Avoidance Agreements (DTAAs) with foreign countries, is essential for a smooth filing process.

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