If you are an Indian citizen, it is a good idea to file an Income Tax Return even if you live in Canada and aren’t currently making income in India. Doing so will help protect your financial options if you ever do move to back to India, want to buy property there, or want to invest in the Indian stock market. If you don’t have plans to move back to India or invest in your home country, you can of course choose to skip filing your ITR, but we recommend doing so if you are at all unsure. It’s fast, easy, and helps keep your options open for the future.
As an Indian citizen who is living in another country, you are considered a Non-Resident Indian (NRI). Being an NRI doesn’t necessarily mean you have no tax liability in India, so your first step is to determine whether you are a Tax Resident or not. If not, then filing is optional, but if you are you must file or you will be charged mounting late fees that can get quite expensive and hurt your financial options in the future.
For example, if an American moves to Mumbai and works for an American company there, she would still be considered a tax resident because of where she lives. An Indian resident who moved to Quebec in April of this year however would also be considered a tax resident in India since they lived there for the first four months of the year. Even if you haven’t lived there for several years but you own property or have investments of some sort, you may be considered a tax resident and be required to complete income tax filing in India. You can determine your status by looking at the Income Tax (I-T) Act, which lays out the requirements to be a tax resident in India, such as the number of days you have stayed in the country that year. It also helps you determine what part of your income is taxable in India and which is not if you are a tax resident.
There has been an income tax filing extension for India this year to November 30, 2020. If you file before this date, you can avoid late fees and carry forward losses you incurred. Late fees for filing after November 30 can amount to up to 10,000 Rupees. You may be able to apply for an extension beyond this date depending on your circumstances.
To begin, register on the e-filing website for the Indian income tax department. Once you have an account you’ll need to collect all required documents to file, such as salary slips, Form 16, and any interest certificates you have. Once you have all of these, download Form 26AS, a tax document that has all of the details for taxes that were previously deducted from your income for the current tax year. Make sure you check it against your TDS certificates to avoid errors with your previously deducted taxes not being credited against your PAN. If there are any errors, make sure you take steps to correct them so you don’t overpay before proceeding. Calculate your total income for the year, compute your tax liability by deducting the taxes that have been paid, and make any remaining payments online.
You’re finally ready to electronically file your Income Tax Return in India. You’ll have to verify your tax return within the next 120 days to be sure it is accepted, but this can be done relatively easily online. Finally, your tax return will be processed and discrepancies will be corrected or clarified by the government.
Filing is quick and easy no matter where you live! Even if you believe it is optional for you, make sure you double-check your status before you skip filing to avoid hefty late fees and file before the filing last date.