Indian Expats In The UAE: Should I File ‘zero Tax Return’?

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Dubai: Are you an Indian expatriate living in the UAE? If so, you may have wondered about whether or not you should be filing a ‘zero tax return’?

Non-resident Indians (NRIs) are required to file taxes on their earnings, if their earnings are above the required limit. However, even if you do not have earnings that require you to file taxes, it is not a bad practice to file zero tax returns, according to Dixit Jain, founder of The Tax Experts, a Dubai-based tax consultancy. This is because having a running file with the Indian Income Tax (IT) department can be helpful for expatriates planning to settle in Indian.

“Whenever you go back to India for good, the IT department will have details of your earnings and know that you have been an NRI for those years, so your records will be updated with the tax department. It is also easier to get housing loans, as banks ask you for your tax details. I would highly recommend everyone to file tax returns, even if you have incurred losses in a particular year on your investments. The losses from one year can be carried forward to the next, if they are on your record, to offset any profits in the future on which you may have to pay taxes,” he said.

Whenever you go back to India for good, the IT department will have details of your earnings and know that you have been an NRI for those years, so your records will be updated with the tax department.

– Dixit Jain, founder of The Tax Experts, a Dubai-based tax consultancy

Who needs to pay taxes in India?

While most Indians living in the UAE may have some form of investments in India, whether through rent on property, or returns on mutual funds, it is important to check if the income is ‘taxable’, according to Jain.

“There are certain criteria that need to be met for the income to be taxable. For example, if you have interest accrued from a Non-Resident External (NRE) account, it is tax exempt. However, if you have a Non-Resident Ordinary (NRO) account, the interest accrued is part of taxable income,” Jain said.

“Similarly, there are multiple streams of income that may be taxable or tax exempt,” he added.

The 1961 Income Tax Act in India, which defines taxable income in very specific ways, also provides a ‘basic exemption limit’ for tax, which is set at Rs250,000 (Dh 11,506).

This means that any NRI who has taxable income in India amounting to over Rs250,000 has to file income tax returns.

Also, it is important to note that there are some incomes that will be taxed, even if they are lower than Rs250,000, the most common of which is income from share trading. For a detailed guide on how NRIs can file tax returns from the UAE, click here.

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