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NRIs can’t use ITR-1 to file tax returns

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I am a non-resident Indian (NRI) for tax purposes and I own one property each in Singapore and Coimbatore. I file ITR-1 return annually. Since I own only one property in India, can I continue to file ITR-1?

—Jairam Amrith

Please note that ITR-1 cannot be filed by non-residents. NRIs usually file their tax under ITR-2. However, the government is yet to notify ITR-2 form for the current assessment year 2020-21; it has only notified ITR-1 and ITR-4. Any changes can only be known once the Central Board of Direct Taxes (CBDT) releases all the tax filing forms. While filing the ITR, you can declare both the properties owned by you.

Our family owns some properties in Goa and the annual income is around 5 lakh per annum. Our family members are spread over Canada, Tanzania, the UK and Australia. How much tax are we supposed to pay? Are there any tax deductions we can claim?

—Malcolm Griggs

Income tax on rent earned from a property situated in India is taxable in India. From the annual rental income of 5 lakh, you are allowed to deduct any property taxes paid in the financial year. You are allowed to claim 30% standard deduction from this net value (rental income less property taxes paid). This deduction is allowed towards any repairs or maintenance of the property, irrespective of whether any actual expenditure towards this has been made. You can also deduct interest up to 2 lakh, if any, for a home loan for the said property. No other deductions are allowed.

Since there are multiple owners of the property, the rental income will be taxable according to the share of each owner in the property. They may each report their share of the rental income and claim the deductions as mentioned above. Since all the owners are likely to be non-resident, you may have to look at the taxability of this income in the country of residence as well. To make sure you are not doubly taxed on the same income, you may take the benefit of the Double Taxation Avoidance Agreements (DTAA) between India and the country in question for each of the owners.

Archit Gupta is founder and chief executive officer, ClearTax.

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