NRIs need not file ITR for interest income below taxable limit

As per the I-T Act, exemption of HRA is permissible where expenses have been incurred on payment of rent in respect of residential accommodation occupied by the individual.

l My daughter was an NRI for FY 2019-20 and took up employment in December 2019. She has some interest income in India, but well below the taxable limit. Will her foreign income be taxable in India and will she have to file a return?—Praveen Godbole

Non-resident Indians (NRIs) are liable to pay tax in India on income that is received or is deemed to be received in India during the previous year or income that has accrued or arisen to such NRI in India during the previous year. Income earned abroad by NRI is not taxed in India and same shall be taxed abroad. The obligation to furnish ITR shall arise where the total income (earned in India) exceeds maximum amount not chargeable to tax (Rs 2.5 lakh) Hence, furnishing of ITR in respect of interest income, being below taxable limit, is not required.

l I am joining a startup for one year. Half of my remuneration will come from an Indian company and the rest from overseas. What will be the income tax liability?—Rajeev Maheshwari

Assuming that you are a resident individual, deriving income in the nature of salary, you shall be liable to pay tax on your global income in India, being income received by you from Indian company as well as income derived from overseas sources and same shall be taxable at the applicable slab rates. As a salaried individual, you can claim certain deductions/ exemptions available under I-T Act.

l I am living with my parents in Delhi. Can I avail HRA exemption by adjusting rent paid to my parents? —Hari

As per the I-T Act, exemption of HRA is permissible where expenses have been incurred on payment of rent in respect of residential accommodation occupied by the individual. However, exemption is not available if an employee resides in his own house or does not incur any expenditure on payment of rent. It has been held in several cases that in the normal course, a taxpayer would not pay rent to his spouse or parent. Such arrangements have been considered a sham to reduce tax liability. Thus, payment of rent to close relatives shall not be considered to be legitimate payments in the absence of substantive/cogent documentary evidence to prove the same.

The writer is director, Nangia Andersen Consulting. Send your queries to fepersonalfinance@expressindia.com