NRIs must file updated returns for unreported capital gains to avoid penalties and interest
Filing an updated tax return is the only option for NRIs who have earned capital gains but failed to report them in their original return. This applies even if the income tax department raises a mismatch query via the e-campaign feature, reported livemint.com.
Understanding Updated Returns for NRIs
A common misconception is that switching mutual funds does not result in taxable capital gains because no direct credit to the bank account occurs. However, capital gains from such transactions are taxable and must be reported.
If you missed reporting capital gains in your original return, you can file an updated tax return under the guidelines issued by the Central Board of Direct Taxes (CBDT). While the due date for residents has been extended to January 15, 2025, NRIs are not covered under this extension.
NRIs can file an updated return until March 31, 2026. However, they must pay an additional tax of 25% (+ surcharge and cess) along with applicable interest. Exploring benefits under double tax avoidance agreements (DTAA) may also be an option to optimize taxes.
Does an Extended Stay in India Change NRI Tax Status?
An individual is considered a resident of India if they meet one of the following criteria:
- Stay in India for 182 days or more in the fiscal year
- Stay for more than 60 days in the fiscal year and 365 days or more in the preceding four fiscal years
For NRIs who have temporary extended stays in India, the tax status remains unaffected if they do not meet these thresholds. For example, a four-month stay in 2024-25 coupled with short annual visits does not alter NRI tax residency. The fiscal year in India runs from April 1 to March 31.
Implications for NRIs
Whether it’s unreported capital gains or extended stays in India, understanding tax laws and timely compliance is crucial for NRIs to avoid penalties and maintain non-resident tax benefits.
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