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Time of India
4 days ago
- Business
- Time of India
Which ITR form you should use to file your income tax return depends on your income sources and taxpayer category: Here's how to pick right
Choosing the right ITR form is the first and most crucial step, as a wrong form can lead to defective returns, penalties, or refund delays. The Income Tax Department has notified the updated forms for Assessment Year 2025-26 . Here's a quick guide to help you identify the correct form based on your income type and tax situation . ITR 1 (Sahaj) For salaried individuals with simple income YOU CAN USE THIS IF You are a resident individual (not HUF or NRI/RNOR). Your total income is less than or equal to Rs.50 lakh. Your income includes: Salary or pension. One house property (no carry-forward loss). Interest or other sources (excluding lottery/racehorses). Agricultural income up to Rs.5,000. Capital gains up to Rs.1.25 lakh from shares/mutual funds (Section 112A, new from FY 2024-25). No carry-forward loss allowed. You cannot use this if: You're a director in a company. Hold ESOP/unlisted shares. Profit from virtual digital assets (crypto). Have foreign assets or income. Own more than one house. Have business or professional income. Have capital losses to carry forward. New for this year Live Events You can now declare up to Rs.1.25 lakh in LTCG from shares or equity mutual funds in ITR 1 without needing ITR 2 or ITR 3. ITR 2 For investors, NRIs, and those with capital gains or multiple properties YOU CAN USE THIS IF You are an individual or HUF. Your income includes: Salary/pension. Income from multiple house properties. Capital gains (any amount). Foreign income or assets. Agricultural income > Rs.5,000. You're an RNOR/NRI. You're a director or hold unlisted shares. You have clubbing of income (spouse's income). You cannot use this if: You have income from business or profession. New feature: The Excel utility now supports filing revised returns under Section 139(8A). ITR 3 For business owners, freelancers, and partners in firms YOU MUST USE THIS IF You are an individual or HUF with: Income from business or profession (proprietorship). You are a partner in a firm (not an LLP). Income includes capital gains (any amount or with carry-forward loss). You hold unlisted equity shares. Income/loss from futures & options. You also earn salary, rent, or other income along with business income. Use this if you cannot file ITR 1, ITR 2, or ITR 4 due to your income mix. If you're opting out of the new tax regime, Form 10-IEA confirmation is required ITR 4 (Sugam) For small businesses and professionals under presumptive tax YOU CAN USE THIS IF You are a resident individual, HUF, or partnership firm (not LLP). Your total income is less than or equal to Rs.50 lakh. You earn from: Presumptives (Section 44AD or 44AE). Presumptiven (Section 44ADA). One house property. Salary/pension. Other sources (excluding lottery/racehorses). LTCG under Section 112A: Rs.1.25 lakh (no carry-forward loss). You cannot use this if: Income is > Rs.50 lakh. You have foreign assets or income. You are an RNOR or NRI. You're a company director or hold unlisted equity. Your business turnover is > Rs.2 crore. You have capital losses to carry forward. Freelancer tip Use ITR 4 only if you're under presumptive taxation (44ADA). Otherwise, file using ITR 3. ITR 5 For LLPs, AOPs, co-operative societies, and others You can use this if you are: A partnership firm (excluding proprietorships). An LLP. Association of Persons (AOP). Body of Individuals (BOI). Estate of a deceased or insolvent person. Business trust or investment fund. Certain cooperative societies or trusts (not filing ITR 7). You cannot use this if: You are an individual, HUF, or company. You are a trust required to file ITR 7. Note If you opt out of the new tax regime, submit Form 10-IEA Don't forget... If you've received ESOPs or hold startup shares not listed on stock exchanges, you own unlisted equity even if you haven't sold it. This disqualifies you from using ITR 1 or ITR 4. Even if your salary is under Rs.50 lakh, having capital gains above Rs. 1.25 lakh or owning more than one property requires ITR 2. Using ITR 1 here can lead to a defective return notice. Only ITR 2 or ITR 3 lets you carry forward capital losses to offset future gains. If you use ITR 1/4, these losses lapse, potentially costing you thousands in future tax savings. If you've returned to India recently after living abroad, you may be an RNOR, not a regular resident. You are an RNOR if you were an NRI in nine out of the last 10 years or stayed in India for 729 days or less in the last seven years. If you're a freelancer, small business owner, or professional with modest income, you can opt for presumptive taxation to simplify filing. Under this, you declare a fixed percentage of your total receipts as income. There's no need to maintain detailed books or get audited. Use this only if your turnover is within limits (Rs.2 crore for business, Rs.50 lakh for profession). If you're salaried and traded in F&O, you must file ITR 3. F&O income is treated as business income, not capital gains, even if it's just a side activity.
Mint
28-05-2025
- Business
- Mint
How you can save tax on buying a mobile phone, laptop or leasing a car
MUMBAI : Most employees have transitioned to the new regime for lower tax rates without investments, but at the cost of tax benefits like meal cards. However, the new regime still allows employers to reimburse the cost of mobile phones, laptops, or car leases if they are used for official purposes. Some companies allow you to buy these devices after 12 months of use. This is one hidden benefit that you can unlock as an employee in the new regime. How does it work? A phone or a laptop can be structured as a tripartite agreement between the employer, employee, and a leasing company. The company buys the phone and rents it to the employer. The employer allows an employee to use it (for official or work purposes). After 1 or 2 years, the employer sells the phone or laptop to you at a discount, according to Vardhan Koshal, founder of asset leasing company Tortoise. Also Read: How to get taxpayers to spend their tax savings The device leasing process begins with the leasing company reaching out to a corporate client—let's say, ABC Ltd—with a proposal to offer a device leasing programme for its employees 'The leasing firm evaluates the financial credibility of the corporate client, not the individual employees. Once approved, a rental agreement is signed between the leasing company and the corporate entity," according to Tarun Soni, founder and chief executive of asset leasing company Astrafin. This arrangement means the employer holds the financial liability, not the employees, according to Soni. After the agreement is signed, the employer nominates employees who will receive the devices. The leasing company procures and provides these devices. While the employees use the devices, they are not responsible for the lease in a legal or financial sense. Instead, the lease amount is deducted from the employees' pre-tax salary, reducing their taxable income. 'For example, if an employee earns ₹1 lakh per month and leases a device for ₹10,000 monthly, their income tax is calculated on ₹90,000 instead of ₹1 lakh," Soni explained. Also Read: Golden tax window for NRIs: What RNOR means and how to use it This mechanism can lead to significant tax savings. For someone in the 30% tax bracket, the savings would be ₹3,000 per month, or ₹36,000 annually. 'Even after paying the lease amount, the employee experiences a net financial benefit because of the tax savings," Soni added. The lease structure treats the device expense similarly to a reimbursement since the phone is used only for official purposes. Once the lease term—typically 12 months—concludes, the device remains the property of the leasing company. Technically, the contract requires the device to be returned, but in practice, it's often sold to the employee. 'Companies like Tortoise may act as intermediaries in these resale transactions, and the resale value is usually nominal—around 2–7% of the original price," Soni added. Although this price cannot be predetermined in the lease contract, it is validated through market quotations or valuation certificates to ensure fairness. If a device costs ₹1.1 lakh and the employee pays ₹10,000 per month over 12 months (totalling ₹1.2 lakh), they save ₹36,000 through tax benefits. As Soni breaks it down, 'Their effective outflow is ₹84,000 (at a 30% tax bracket). If they choose to purchase the device at the end of the lease for, say, ₹6,000, their total cost becomes ₹90,000—still a ₹20,000 benefit over an outright purchase." Also Read: Capital gains on equities: Here's all you need to know when filing tax returns this year An additional advantage unique to mobile device leasing is the ability to claim input tax credit (ITC) on the goods and services tax (GST) paid. 'Unlike car leasing, which doesn't qualify for ITC under the GST law, mobile phone leasing allows employers to claim ITC. This can even be passed on to the employee, reducing their effective cost further." Given that mobile phones are extensively used for business, often 70–80% or more, classifying them as business expenses is both practical and defensible from a compliance standpoint. Unlike car leasing, which is often reserved for top-tier executives due to its high cost and limited availability, mobile phone or laptop leasing offers a more inclusive and scalable solution for companies. 'Device leasing can cater to a much wider employee base, making it accessible to the broader workforce rather than just a select few," Soni said.
Mint
21-05-2025
- Business
- Mint
Golden tax window for NRIs: What RNOR means and how to use it
Picture this, you're a non-resident Indian (NRI), who's decided to return to India for good. Here's the good news, before you transition into a full-fledged resident for tax purposes, there exists a golden window that can help you save significantly on taxes. It's called the RNOR status— resident but not ordinarily resident. During this phase, your foreign income isn't taxed in India, explained Ankur Choudhary, co-founder & CEO, Belong - NRI Savings & Investments. Mint breaks down what RNOR means, how to claim it, and the smartest ways to manage your money during this tax-friendly phase. Also read: Will my foreign salary be taxable in India? What is RNOR? RNOR is an intermediate tax status under India's income-tax, designed for individuals who return to India after a long stint abroad. 'The RNOR status acts as a buffer, a soft landing if you will, allowing returning NRIs to resettle without the burden of immediate global taxation," said Mukund Lahoty, co-founder, Turtle Financial Services. Raj Ahuja of Turtle Finance said, 'RNOR bridges the gap between a non-resident and a full resident. While the individual is a resident for the purposes of stay in India, their global income, typically from foreign pensions, bank interest, or capital gains, is not taxed unless it is received or accrued in India or from a business controlled from India." Also read: Here's how NRIs can save up to 18% GST on insurance premiums Who qualifies as an RNOR? There are two key conditions under which a returning Indian can qualify as an RNOR: 'You'll be an RNOR if you were a non-resident in nine out of the 10 preceding financial years, or if you've spent less than 729 days in India over the past seven years. If either condition is met, you're RNOR," explained Lahoty. Take Mr Sharma, for instance—a data analyst who moved back to India in October 2024 after working in the UK for seven years. Over the past seven years, he visited India only during vacations, with a cumulative stay of just 680 days. While his stay in FY 2024–25 makes him a resident under Indian tax law, his lower cumulative stay qualifies him for RNOR status. There's also an additional rule that applies to high-income individuals, flagged by CA Laxmi Ahirwar, director at P.R. Bhuta & Co. 'If your total income in India exceeds ₹15 lakh during the financial year, and you are not liable to pay tax in any other country, you may be deemed a resident, even if your physical presence in India is below the usual thresholds," she said. 'However, such individuals will still be classified as RNORs, not full residents. This rule is aimed at ultra-HNIs who shift base to low-tax jurisdictions." Also read: How NRIs can use UPI for instant, no-fee transactions abroad Consider the case of Mr Singh, an Indian citizen working in Dubai. In FY 2024–25, he spends only 50 days in India, which normally makes him a non-resident. However, he earns ₹18 lakh from rental income and dividends in India, and since the UAE does not levy income tax, he pays no tax there. Under the special clause, he is treated as a deemed resident due to his high Indian income and tax-free status abroad. But because he has been a non-resident for nine out of the previous 10 years, he still qualifies as an RNOR. 'This change came in with the Finance Act of 2020, mainly to address edge cases, where someone is mis-using the rule by living in India but still trying to claim NRI status to avoid tax on global income" said Choudhary. How to claim RNOR status To claim RNOR status, individuals must declare it in their income tax return under the appropriate subsection of Section 6(6) of the Income Tax Act. Supporting documents are crucial: these include a detailed travel history for the past ten years, showing the number of days spent in India each year, along with copies of passport pages bearing entry and exit stamps. Ahirwar stressed on the importance of accuracy here, noting that incorrect day counts can result in misclassification and unintended tax exposure. Even individuals with dual residency may still be able to claim RNOR status and avail benefits under the Double Taxation Avoidance Agreement (DTAA). According to Ahirwar, if a person is deemed a resident in India under Section 6(1A) but also meets residency rules abroad, tie-breaker provisions under the DTAA can be invoked to treat them as non-resident in India for treaty purposes. 'In such cases, obtaining a tax residency certificate (TRC) from the foreign jurisdiction becomes essential to secure treaty relief," she explained. Tax benefits of RNOR According to Ajay Vaswani, chartered accountant and NRI tax advisor, 'The RNOR window is like a golden hour for tax planning. You can repatriate income, sell foreign investments, and restructure your asset base, without having to pay Indian tax on foreign income." During this window, it is also advisable to convert non-resident external (NRE) or foreign currency non-resident (FCNR) accounts to resident foreign currency (RFC) accounts. 'Interest earned in RFC accounts is tax-exempt for RNORs, unlike when you become an ordinary resident," Vaswani explained. RNORs are also exempt from filing Schedule FA (foreign assets) and disclosures under the Black Money Act, reliefs not available to ordinary residents. 'In most cases, if the foreign income is not taxable in India, Schedule FA may not be required" said Vaswani. RNORs can also access benefits under DTAA by using Form 67 to claim foreign tax credits. This is particularly useful if any part of your foreign income is taxed both abroad and in India due to remittance or source-based taxation. Common mistakes to avoid One of the most frequent pitfalls is miscounting the number of days spent in India. A small error can change your status from RNOR to resident and ordinarily resident (ROR), triggering taxation on your global income. 'A returning executive once ended up staying a few days extra and unknowingly lost RNOR benefits. The reassessment added a ₹12 lakh tax liability," recounts Vaswani. RNORs are not required to disclose foreign assets or foreign income in Schedule FA of their Indian tax return. However, this comes with the responsibility of accurately tracking day counts in India. As CA Pankaj R. Bhuta said, 'Even a few days can change your residential status." Under Section 9 of the General Clauses Act, 1897, exclude the first day and include the last while calculating stay in India—errors here can wrongly shift RNORs to ROR status, making their global income taxable. Another key rule: Once you become RNOR, you cannot operate NRE or FCNR accounts. 'These must be re-designated to RFC accounts," Bhuta said. He also reminded that RNORs should file ITR-2 or ITR-3, depending on income sources. Clarifying a common confusion, Bhuta said, 'RNOR is a temporary tax status; Overseas Citizenship of India (OCI) is a permanent legal status." An OCI holder can be an RNOR, but not all RNORs are OCI cardholders. Taxability for OCI holders depends on their physical presence in India, not the OCI card itself. Form 67 must be filed in time, before the ITR filing deadline, to claim foreign tax credits. A delay can result in the denial of DTAA benefits, even if taxes were paid abroad. Also, if you've been operating NRE or FCNR accounts, notify your bank upon acquiring RNOR status. These accounts should be re-designated to RFC status to remain compliant and continue earning tax-free interest. Also read: This NRI couple in Melbourne is looking to move back for family and higher affordability Final thoughts Finally, CA Bhuta offers two key planning strategies for NRIs preparing to return to India. 'It is smart to plan your return towards the end of a financial year, say in February or March," he suggested. 'This timing could allow you to enjoy RNOR status for up to two additional tax years." He also advised maintaining detailed records of foreign bank accounts and income sources before relocating. 'Keeping a clear audit trail simplifies tax filing and helps avoid complications during the RNOR phase," Bhuta added. In short, the RNOR status can offer significant tax relief—but only when approached with careful planning, documentation, and a firm understanding of legal provisions. Disclaimer: The examples of Mr Sharma and Mr Singh are hypothetical and intended for illustrative purposes only.
Mint
28-04-2025
- Business
- Mint
What is the eligibility for becoming an RNOR?
I am originally from Abu Dhabi, and I came to India in April 2025 after my company transferred me to its Indian subsidiary. I will earn my salary from the Indian unit. At the same time, I have requested that the parent company pay me part of my salary in Abu Dhabi since it is tax-free there. Do I have to show the salary I will receive in Abu Dhabi in the Indian tax return? Are there any other compliances that I have to take care of? -Name withheld on request Assuming that you will reside in India for work for more than 182 days in the current fiscal year (i.e. April 2025 to March 2026), you will become a resident under the Indian tax laws. Further, if you have been a non-resident in India in nine out of the 10 preceding fiscal years or have been in India for 729 days or less during the seven preceding fiscal years, then you will qualify for specific category of resident but not ordinarily resident (RNOR) within the concept of residence. Assuming you haven't stayed in India anytime before, you will be able to satisfy both these conditions in your case, and accordingly you will become RNOR for the 2025-26. As an RNOR, all incomes earned outside India are not taxable in the country except those derived from any business controlled in India or any profession set up in India. In your case, you will be earning the salary income from the Indian company as well as from the UAE parent company for the services you will render in India on account of your employment with the Indian company. Since you will be exercising your employment in India, the salary income will be considered to have accrued or arisen in India and will not be treated as income earned outside India. Therefore, the salary income received from the parent company will also be taxable in India, and you will have to offer it to tax in India in your income tax return corresponding to 2025-26. The Indian subsidiary would also be under an obligation to deduct tax at source (TDS) on the foreign portion of the salary that you will receive in the UAE. You will retain your RNOR status until you complete 730 days of stay in India in any of the seven preceding fiscal years. If you are likely to travel outside India during holidays, you may qualify as RNOR even for the subsequent two fiscal years, i.e. 2026-27 and 2027-28, since your cumulative stay in India would not exceed 729 days until 31 March 2027. Till the time you remain an RNOR, you are not required to disclose any of your foreign assets (such as overseas bank accounts, overseas financial interests, etc.) in your Indian income tax return under Schedule FA. Harshal Bhuta is a partner at P. R. Bhuta & Co. Chartered Accountants. First Published: 28 Apr 2025, 02:05 PM IST
