How an NRI Can Claim Tax Refund on Tax Deducted in India

For many Non-Resident Indians (NRIs), they live abroad but still earn income from India. The income earned can attract tax both in India and their country of residence (e.g. Indonesia, Malaysia etc.,). As a result, an NRI may end up paying tax twice on the same income. To avoid such cases of double taxation, NRIs can claim tax refund under the Double Tax Avoidance Agreement (DTAA). If you are an NRI, here is how you can claim you tax refund for tax deducted in India.

The Indian Tax Laws require deductions of TDS to any payment to NRI. However, an NRI can later claim a refund of the excess TDS deducted when filing for his / her Income Tax Return at the end of a financial year. The NRI is require to self-compute their income and income tax liability as stipulated by the slab rates when filing their Income Tax Return.

Collect Relevant Documents
The first step to claiming your tax refund is to collect all the relevant documents needed for filing returns. They include your PAN, and bank details. You will also need Form 26AS, which provides information related to the Tax Deducted at Source (TDS) during the year. If you are a salaried individual (part of Indian salary in applicable), Form 16 will be used to determine your TDS. You may also need details of the income earned from TDS certificates and interest income.

File the Income Tax Return (ITR) Form
Once you have collected the necessary documents, you will need to file either ITR2 or ITR3. While ITR3 is applicable to NRIs with income earned from businesses in India, ITR3 is applicable to those with no income from businesses in India. Capital Gains on sale of shares/mutual funds/bonds/property or rental Income are not considered businesses and are filed under ITR2.

When filing ITR2 or ITR3, download the Java Utility or the Excel sheet from the oncome tax website. Make sure that you select only the relevant sheets applicable to your sources of income in the ITR Form. Fill in the basic details, click on the Pre-Fill button and enter all the relevant data. Then, click on the calculate button to determine you interest and tax liability. The system will require that you validate yourself by entering a one-time password (OTP) that will be sent to you registered number. Then an XML file will be generated. Save it on your computer, and then upload it to the portal with your Digital Signature (DSC).

After uploading the XML file, your return will be processed. The system will generate the ITR-V form for the purposes of verification. You need to download this form or have it sent to your email from the IT department. As an NRI, you claim tax refund on tax deducted by filing income tax return. However, you should be aware of the TDS deductions applicable to you based on your sources of income.

When Will the Refund Be Issued?

Normally, it will take 2 to 6 months for an NRI to be issued a tax refund although there are some instances when the refund may be delayed. The NRI received the tax refund with an interest of 6% p.a., which is applicable from the end of the financial year. One can also reduce tax liability by taking benefits of deductions highlighted under Section 80C of the Income Tax Law.

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