NRI Tax Filing in India has come under scrutiny: here’s all you need to know

NRI Tax Filing in India has come under scrutiny: here’s all you need to know

by | Oct 10, 2019 | capital gains, income tax, tax filing, tax savings

NRI Tax Filing in India has come under scrutiny: here’s all you need to know

NRI Tax Filing The Indian Income Tax Department has made strides of improvement over the years when it comes to its processes. Thus, there are higher chances of your tax filing or lack of filing coming under the radar of the Income Tax Department. Here are some prominent reasons why you might receive a notice from the Income Tax Department.

  • Delay in Filing IT Return

If you fail to submit your IT return by the deadline set by the IT Department, you will most likely receive an intimation from the department.

  • Misreporting of Capital Gains

The IT department expects its taxpayers to report all the short term and long term capital gains that they have made. Failing to do so might add extra scrutiny to your returns.

  • Mismatch with Form 26AS

There ideally should not be any mismatch when it comes to Form 26AS, your TDS, Form 16 or Form 16A. Any mismatch between these would warrant notice from the department.

  • Failing to disclose income

Any taxpayer who fails to disclose income to the IT department would also come under the lenses of the department.

All You Need to Know

If you are an NRI, here is all that you need to know when it comes to tax filing in India.

  • Residential Status

India, like most other countries that rely on income taxes, depends heavily on the residential status of an individual to calculate income taxes. Individuals satisfying any of the following conditions would qualify as a  resident Indian, otherwise a Non-resident.

  •           You have spent a minimum of 182 days during the financial year in question.
  •           You have spent a minimum of 60 days during the financial year in question and cumulative of 365 days in the previous four years.
  • Taxable Income

For resident Indians, their global income is taxable in India as per the applicable tax slabs. However, if you are a non-resident Indian, you are liable to pay taxes only on the income generated in India. This could include salary received for consultation, rental property in India, interests earned on fixed deposits, capital gains on shares, selling of capital assets, etc.

  • When to File

NRIs or any individual for that matter, need to file their income tax returns only if their annual income exceeds the minimum threshold of INR 2,50,000 for a fiscal year. For example, if you have only one source of income in India and it is interest earned on your fixed deposits, you would be taxed accordingly. If the interests earned for a year is INR 80,000 you do not have to file your tax returns. On the other hand, if you have one or more sources of income and together, they add up to INR 3,00,000 for a financial year, you will have to pay taxes and file your returns.

  • Tax Filing Timeline

The standard deadline for NRIs for filing their taxes and returns is 31st of July. Should there be any changes in the dates, the IT department would notify everyone of the same.

  • Advance Tax

The concept of Advance taxes come into the picture when the tax liability of an individual exceeds INR 10,000 for a financial year. This is in general to avoid tax evasion. Failing to do so will warrant fines and penalties under Section 234B and 234C.

Staying a step ahead and being aware of the various intricacies of the income tax will help you avoid any notices or fines from the IT department or even coming under their lenses as well.

How to save money from your Employee Benefits offered to NRIs in the US

How to save money from your Employee Benefits offered to NRIs in the US

by | Sep 26, 2019 | 401 Plan, federal income tax, income tax, state tax, tax deductions, tax filing, tax rate, tax savings

How to save money from your Employee Benefits offered to NRIs in the US

ForIf you are an NRI and doing a job in the US, you will have to pay taxes to the US Government according to the tax laws framed by the US Government.  an NRI doing a job in the US, there are numerous taxes to be paid. However, some substantial amounts of money can be saved by an NRI by availing of the various employee benefits offered by the employer in the US.

Let us have a look at the taxes which an NRI doing a job in the US is supposed to pay.

Taxes to be paid by an NRI employee in the US

Social Security taxes

Every individual working in the US has to pay the Social Security Tax. This amount is contributed by you and your employer together. Half of this amount is contributed by your employer and you will contribute the other half for the payment of the Social Security Tax. An amount ranging to 6.2% of your gross salary is deductible from your salary for the payment of social security tax.

Medicare Tax

The Medicare tax would be paid by you for the health care services to be availed after your retirement. Your employer will deduct 1.45% from your gross salary for making the payment of the Medicare Tax. Even if you will not be present in the country to avail the retirement benefits, but you are still liable to pay this tax.

Federal Income Tax

This is a tricky category of taxation for the US residents including NRIs and PIOs as well. You will have to pay taxes on the income earned in the US but you will not be able to claim any deductions which the US citizens will avail. However, if you are willing to avail of these deductions then you will have to pay tax on your income earned outside the US as well.

State Tax

You are liable State Tax for that particular state in which you are working.

Global Income Tax

You will have to pay this tax if you are earning dividends on mutual funds, shares, agricultural income, etc.

Paying all these taxes would definitely reduce your take-home salary by a considerable amount. However, in the US your employers will provide a number of employee benefits which would be very helpful for you in saving money.

Let us check out some of these benefits available to NRI employees in the US which help in saving money.

Health Savings Account (HSA)

In case your employer is providing a good health plan with a high deductible, you can consider the option of opening a Health Savings Account (HSA). The maximum limit on the contribution to be made by families is $6900 and for singles, the maximum limit is $3450. This money is taken from your paycheck and is accumulated in a Savings Account that can be used during medical emergencies. However, your withdrawal from the HSA will be tax-free only when you are doing it for medical expenses.

Flexible Spending Account (FSA)

This is another benefit provided by your employer is giving you an opportunity to set aside the entire amount in this account free from ant taxation. The contribution into this account has to be made by your employer but you will have to use the money in this account within a stipulated time period otherwise you tend to lose the amount.

Medical Insurance

This insurance is a major benefit provided by your employer and it will cover expenses incurred in hospital visits, doctor’s visits, medicines, prescriptions, etc.

401(K)

This is otherwise known as your retirement plan and by this; you are contributing towards your savings for your retirement. The contribution to this corpus for retirement is made by you and your employer as well. The maximum limit on the contribution made by you would be up to $19000. Moreover, if you are above the 50 years you can contribute an additional $6000 into your retirement corpus.

Health Reimbursement Account (HRA)

This can be termed as Group Health Plans and are sponsored by you and your employer. The amounts which qualify for your medical expenses in a particular year up to a specific limit are free from taxes. The amount which remains unused can be used in the subsequent years as well.

Accident Insurance

This insurance covers medical examinations, emergency treatments, and ambulance or transportation charges, in-hospitalization expenses.

Hence, in addition to the above-mentioned benefits provided by employers, there are a number of other benefits as well such as Dental Insurance, Vision Insurance, Disability Insurance, Accidental death and, dismemberment insurance, etc. These benefits offered by employers can be a great help to NRIs working in the US in saving money.

How to Become a Financially Literate NRI in the US?

How to Become a Financially Literate NRI in the US?

by | Sep 13, 2019 | income tax, tax savings, taxes, Taxtips

How to Become a Financially Literate NRI in the US?

To become financially literate NRI  means to be able to manage your money efficiently. It is basically the ability to clearly understand the concept of how money is made, how it is managed and invested, how it is spent economically. Precisely, financial literacy is the skill which lets you utilize your money efficiently and utilization of your money in accomplishing your long term financial goals.

Financial literacy is not a subject that is included in your school or college syllabus; rather it is a clear understanding of your personal debit and credit. This will need constant attention to your expenses and an urge to always sideline your income and expenses together.

Major components of Financial Literacy

The major five components which you can associate with financial literacy are mentioned below.

  • Basics on Budgeting

Creating a budget and maintaining that budget is an important concept of financial literacy. Without a proper budget, you will never be able to understand the whereabouts of where your money is coming and where it is being spent and you will end up in a financial crisis.

  • Interest and its impact

 It is an important concept and needs to be understood as it affects your finances in an intensive manner. This will help you in saving and also better utilization of your money.

  • The habit of saving

For maintaining a healthy and stable financial life, saving is very important. This will inculcate the skill of looking towards accomplishing long-term goals in the future and planning present actions accordingly.

  • Debit and credit

 Proper knowledge about debit and credit is needed to be able to handle finances diligently.

  • Beware of financial frauds

With the widespread use of technology in financial spheres like internet banking, online shopping, electronic fund transfer; your financial data is more prone to risks and should be protected.

When you are residing in a different country, you should have the basic financial literacy related to the financial sphere of that particular country. This will be helpful for you in utilizing your money, saving money and also investing in some useful avenues.

Tips to be a financially literate NRI in the US

Reconciliation of bank accounts regularly

You should make it a habit of going through your bank statement every month when they are sent to you by the bank. By this, you will know in detail about your income, spending and any diversion in a saving plan if you have one.

Utilization of financial tools

There are a large number of financial tools and applications which can help you understand the confusion associated with dollars. You can get to know in details about the income, debit, credit, etc. Moreover, financial tools will give you tips and suggestions on financial planning for improving your financial literacy.

Take online courses

There are numerous professional courses and sessions available online. You can enroll in these sessions and increase your knowledge of finances, NRI taxation policies, NRI tax saving methods, etc.

Make friends

You can join your friends from the US so as to increase your exposure. This will help you in understanding the various financial implications in the country, ways how money is utilized or saved in the US, taxation rules in the US, etc. With the help of online tools, you can have educational gatherings among friends where you can discuss finances and financial goals.

Be vigilant and aware

Since you are in at a new and unknown place now, you should be vigilant about your finances and security related to financial information. You can read books, visit libraries, watch online videos on finances, financial security and financial goals.

Hence, initially, you would definitely find certain differences and difficulties in understanding about finances at a new place. But you can start understanding the methods, rules and, laws gradually.  As an NRI, it is quite necessary for you to understand the finances of the US so that you tend to save a good amount or invest in good avenues.

 

Top 7 tips for Self Employed NRIs in the US

Top 7 tips for Self Employed NRIs in the US

by | Aug 9, 2019 | IRS, tax deductions, tax filing, Tax Planning, Tax Refund, tax savings, taxes

Top 7 tips for Self Employed NRIs in the US

The person sitting next to you on your flight could be running a small-scale successful business. Working parents now choose to work from home more often than not. The changes in the landscape of career options have been vast over the past few years. Thus, it is no secret that more and more people are willing to take risks and explore more career options that are not only better paying but fulfilling as well. If you are an individual who wants to explore self-employment or are an NRI who wishes to look for self-employment options, you also need to be aware of how taxes work. Here are the top 7 tips, self-employed NRIs which will help you make the most of taxes.

Proper Research

The first step to successful tax filing begins with proper research. Do you due diligence in finding out the total income for a fiscal year. You would also want to be aware of the list of deductions applicable for you. You must also be aware of the deadlines by which you must file your taxes and start acting accordingly. For instance, if your self-employment income exceeds INR 400 for a fiscal year, you are required to file your taxes.

Status

Self-employment doesn’t necessarily mean that you ought to have a company or firm registered to your name or even the income doesn’t have to be your primary source. Given the vast landscape, you could have a primary job and work on your passion over the weekends and earn some money out of it. It is essential that you report all such incomes in your tax returns.

Proper Documents

While preparing for tax returns, having all the relevant documents will help you save a considerable amount of time as well as confusion. From the beginning of a fiscal year, ensure that you keep all the receipts for expenses that you wish to claim, relevant forms, rent bills or mortgage bills if you work from home etc. in a separate folder. Documents such as Form 1099-K or 1099-Misc might also be needed. Having them at a single place will ensure that you have a smooth tax filing process.

Tax Estimations

If you are work for an organization, they take care of withholding applicable taxes before crediting your salary. However, for self-employed individuals, things are a bit different. Since there aren’t any fixed sources of income, you out to estimate your taxes and pay them on a quarterly basis. For the current year, if your tax bill is more than $1,000 you will have to pay estimated taxes.

Work-Related Expenses

The IRS allows individuals to claim deductions on a number of work-related expenses. For example, if you bought a computer or a laptop for your work, you can claim the amount as deduction. You can even claim expenses for driving down to meet a client for business purpose. Keeping a track of such expenses will help you tackle the tax return process in a better way.

Required Forms

Self-employed individuals usually document their income in Schedule C along with any profit or loss of the business. If you own a business with simple earning structure, you would need to file Schedule C-EZ. Thus, understanding the right form depending on your self-employment type is essential.

Tax-Tools

If the tax filing and return process seems overwhelming, you can take the help of several tax tools available. You would only have to provide the essential information, post which the tools will take care of the rest.

Self-employed individuals can use the above tips to handle taxes or overcome tax phobia in a much better way.

Top 5 Tips to build your Retirement Corpus from your Tax Refunds

Top 5 Tips to build your Retirement Corpus from your Tax Refunds

by | Jul 26, 2019 | IRA, tax deductions, Tax Extension, Tax Planning, Tax Preparation, Tax Refund, tax savings, taxes

Top 5 Tips to build your Retirement Corpus from your Tax Refunds

Should I start investing for my retirement? When is the right time to start my retirement planning? These are some of the questions that a lot of us ponder over. And in the process of just thinking and not acting, we miss out on some crucial investments.If you have received some tax refunds, instead of spending it away, it is worth investing it for your retirement corpus. Today is the right time for you to start planning for your retirement. Here are some important tips that will help you build your retirement corpus.

401(K)                                             

This might seem very obvious, yet a lot of taxpayers forget to exercise this option. If your employer offers a traditional 401(K) plan and you have the right eligibility, do not shy away from it. What makes this option interesting is that your investment is pre-tax. In simple words, the amount will be deducted even before any tax is calculated on your income. This allows you to make the most of it and invest more. Some employers offer Roth 401(K), which essentially deducts the amount after taxes have been calculated. Consider the tax bracket that you might retire in and choose a plan accordingly.

Catch-Up Contributions

Since there is a cap on the amount that you can contribute towards 401(K) for a fiscal year, it is recommended to start early with your retirement plans. However, it all changes as soon as you reach 50 years. The restrictions on the amount that you can invest are no more valid, thus you can invest more for your retirement. If you have missed out on some payments in the past, this is the time to do the catch-up.

IRA

The IRA or the Individual Retirement Account is another way by which you can invest for your retirement. You can either choose between a traditional IRA or Roth IRA. The Traditional IRA can be beneficial depending on whether you and your spouse have retirement plans in place from your employer. Based on your tax eligibility the contributions can e tax deductible and your funds will grow tax-free until you withdraw the funds. Roth IRA makes for a good choice if you qualify for phased out income limits. The investments are tax free if you reach 59 and a half years.

Match your employer

If you work for an employer that offers 401(K) it might be worth matching their contributions. Your employer can invest as much as 50% of your contributions, up to a maximum of 5% of your salary. Thus, if you are taking home $60,000 a year, you can contribute $3,000 for your 401(K). Your employer will have to contribute another $1,500. You would not want to miss out on this amount.

Automatic savings

Another smart way of ensuring that you save and money on a regular basis for your retirement is to set up automatic monthly contributions. This will save you from putting in efforts on a monthly basis and get your contributions some discipline. You can reach out to your bank to see the available options to invest automatically on a monthly basis towards your retirement funds.

If you have received any funds as income tax refunds, retirement investment is one of the smartest things that you can do with those funds. There are enough options available for you to either enhance your existing contributions or start fresh if you have not already. Individuals who haven’t yet started, you can start today and make the most of the different options available.

 

3 tax tips for second homeowners for NRIs in the US

3 tax tips for second homeowners for NRIs in the US

by | Jul 12, 2019 | Tax Extension, tax filing, Tax Planning, Tax Preparation, tax rate, Tax Refund, tax savings, taxes

3 tax tips for second homeowners for NRIs in the US

tax tips for second homeowners ,Buying a second home is a big decision and requires a lot of efforts on your end. It could well be that you already have a home and are planning for a holiday home or a weekend getaway or just for investment.However, amidst all this, do not forget that it comes along with a lot of tax considerations as well. Here are three major tax tips that you must consider before you write down that cheque.

Location

It is no secret, that the tax rates of property or house largely depends on the location that you are buying it at. Few states and municipalities have higher tax rates as compared to others. Thus, a quick check of the location that you want to buy the house in would help you save considerably on taxes.

Places such as Hawaii, Louisiana, Delaware and Alabama have the lowest tax rates for real estate in the country. Ranging between 0.28% to 0.53%, they can be great options to buy your second home. And on the other hand, places such as Illinois, New Jersey, Wisconsin have the highest tax rates in the country.

Buying a property outside the country is a different equation altogether. Unlike normal classifications such real estate taxes, you might have to pay a one-time fee.

Future Taxes

Should you pick a place and property smartly, the payoff can be quite satisfying. A good house in a good locality or upcoming locality will fetch you much better prices during selling. However, in hind sight do not forget the additional cost that they bring along with them.

While buying at lower prices and selling at higher prices means a lot of profit for you, being aware of the tax implication is also important. As the property value increases significantly, the taxes that you are eligible to pay would also increase considerably.

There is also a possibility that the White House decides to revisit the property taxes once every few years. If there is an increase in such prices, it would only increase the tax burden on you.

Interest on Mortgage

If you are planning to use the second property as a second home, there are some additional benefits to have had. However, these are possible only if you use the property as a second home and not rent the place out.

In such cases, the interest that you pay on your mortgage is deductible and behaves pretty much like the interest on the first house or property. Before 2018, taxpayers had the option to write off the entire interest amount that they paid if they had secured debts of up to $1.1 million on both the properties combines together. The amount is also valid if you choose to upgrade or improve the house in different ways.

The rules had been tweaked a bit where earlier the limit was set at $750,000. This can be a good and smart way of saving a substantial amount in taxes. It is quite common to rent out your second place. But you cannot avail the above benefits if you choose to do so. If you are looking to saves taxes, this method fares better results.

Whether it is your first property or second, if you have the option to save money on taxes, there isn’t any reason why you should not. The above tips are not only easy to follow but implement as well. If you are an NRI and are planning to buy your second home, these should help you save some money on taxes.