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Solutions for 6 of the Most Common Income Tax Questions

Solutions for 6 of the Most Common Income Tax Questions

There has been a rise in the number of cases where people have misreported their income. Keeping these numbers in mind, the Indian government has now decided to take up strict action against tax evaders. With our country developing at every sector, it is vital for every individual to abide by the taxpaying rules and regulations. Anyone who doesn’t abide by these rules will now face a wrath from the Income Tax Department.

But there are a certain set of people who are actually unaware of these tax liabilities and this blog is dedicated to them. Non-residents of India can also take help from the income tax queries and answers we are going to list down here.

Question 1: What exactly is tax liability?

Answer: – The tax liability of a person can be determined by ascertaining his or her residential status. Thus, the residential status of a person is a key factor in establishing how much tax he/she has to pay. Types of residents under the provisions of the law are: –

  • a resident
  • a Non-resident of Indian (NRI)
  • And, a resident but not an ordinary resident of India (RNOR)

Question 2:- What will be the residential status of an individual who has not returned to India recently?

Answer:- An individual who returns to India for three financial; years, he/she is termed as an RNOR i.e. resident but an ordinary resident of the country. The tax liabilities of an RNOR are same as NRIs.

Question 3: – Do I have to pay taxes in India if I am an NRI?

Answer: –  An individual who is not earning in India does not have to pay taxes for the country. But if a person is earning some kind of profit even if a portion of his money is lying in the savings accounts, then he is liable to pay taxes. Only the savings/profit part of the income will be taxed, there will be no additional tax. So, even if you are an NRI, you may have to pay taxes in India.

[ Also read: Understanding the Importance of Indirect Tax in India ]

Question 4: – Does an individual’s residential status change only ONCE in a lifetime?

Answer: – As per the I-T Law provisions, an individual’s residential status is determined every year. This means that the status may also change every year. Thus, the answer to the question is NO.

For example – A person could be resident for most of his life but decides to work out of the country. Therefore, his status may change to NRI if he doesn’t come back. But in case he decides to come back to India, the status in the next year will change to a resident in the next year. The process keeps changing as per the individual’s choice.

Question 5: – Which are the types of forms an NRI requires to fill in order to file taxes?

Answer: – Most people are unaware of the fact that NRI earnings are termed passive income in our country. Therefore, an NRI requires to fill the ITR -1 form – but only if his/her income does not exceed Rs. 5 million.  If the earning of an NRI is equal or more than the cost of 2 house properties, he/she needs to fill ITR-Form 2.


Question 6: Is it necessary for an NRI to have an Aadhar Card in order to file taxes?

Answer: – No, NRIs do not require to have Aadhar Card to file taxes. A resident of India requires entering his/her aadhar card number to file tax. This rule comes under Section 139AA of the Income-Tax Act. The same rule is not applicable to NRIs as they are not the “residents” of India.

For more such tax questions, you can get in touch with the team of Accounts Tax Master. You will get solutions for all your queries within minutes of posting them.

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