What is Section 54 and Section 54F for NRIs?

On the FAFSA, the Foreign-Earned Income Exclusion (FEIE) refers to income earned abroad that was excluded from U.S. taxable income through Form 2555. Although this income is not taxed in the U.S., FAFSA requires you to add it back when computing your eligibility for federal student aid, since it still reflects money available to your household. 

Yes, U.S citizens and green card holders are taxed on their worldwide income, regardless of where they reside. If you earn income abroad, you are required to report it on your U.S. tax return. However, tools like Foreign Tax Credit (Form 1116) or the Foreign Earned Income Exclusion (Form 2555) can help in avoiding double taxation. 

The IRS receives information through:

• International tax treaties and information-sharing agreements between countries
• Foreign bank account reporting (FBAR) and FATCA rules (Form 8938)
• Information from U.S. banks, employers, and investment companies having their ties overseas. If you don't report foreign income, the IRS may still know about it from these sources. 

When you are asked about the foreign earned income exclusion, for example, on FAFSA or tax forms, you must mention whether you claimed the FEIE on your U.S. tax return by filing IRS Form 2555. If you excluded part of your income, report it honestly, even if it was not taxed in the U.S.

Some examples of foreign income include:

• Salary or wages from a job overseas
• Income acquired from self-employment abroad
• Dividends or interest from foreign investments
• Rental income received from a property situated in another country

Generally, all of these must be reported to the IRS. 

Some disadvantages of claiming the FEIE are as follows:

• You cannot claim the Foreign Tax Credit on the income you exclude
• It may lower your eligibility for specific U.S. tax deductions or credits
• Excluded income still has to be reported for things like FAFSA, which can affect student aid. 

Yes, NRIs can claim exemption under Section 54 on long-term capital gains from selling a residential property by reinvesting in another residential property.

Section 54F for NRIs provides exemption on capital gains from selling any long-term asset (like land or shares) if invested in a house property. 

Yes, there is a limit to reinvesting the capital gains. If you are planning to buy a new property, then you must buy it within 2 years. On the other hand, if you are planning to construct a property, then the construction must be done within three years or invest 1 year prior to the sale. 

Yes, you can invest in bonds instead of property under section 54EC. You are allowed to invest up to Rs. 50 lakhs in REC/NHAI bonds within six months. 

If you don't use the capital gains before filing ITR, you need to deposit the amount in a Capital Gains Account Scheme (CGAS) to stay eligible for the exemption.

If you sell the new property within three years, then the exemption will be withdrawn and taxed in that year. 

No, a person must not hold more than one house apart from the new residential property they are purchasing or constructing at the time of transfer or sale of the original assets to claim the exemption.

Yes, these exceptions are allowed under both the old and new tax regimes. 

NRIs living in Bahrain must file income tax returns in India for the following reasons.          

• You want to claim tax refunds. 
• You want to carry your losses forward. 
• You want to submit a filed ITR submission to any financial institution or authority. 
• You want to avoid any notices from the income tax authorities and comply with the NRI tax requirements. 

Additionally, NRIs, please note that even if you are not eligible to file an income tax return, filing it anyway is recommended. You must do it to keep your financial and tax records clean and in place. It also ensures compliance with the Indian Income Tax Department in the long run. 

For many NRIs, the due date for filing ITR is July 31 of the assessment year. However, if your return is subject to an audit, the due date may be 31st October. Just know that late filing attracts.            

• Late fees under Section 234F. 
• Interest under section 234A, 234B, and 234C. 

No, Bahrain does not impose any personal income tax on its individuals. 

No, India and Bahrain do not have a full double taxation avoidance agreement. 

Yes, we help you reclaim excess TDS deducted, obtain lower TDS certificates, and process your refunds. 

Non-compliance with filing the Indian income tax might result in. 

• Getting an income tax notice from the income tax department. 
• Loss of refund eligibility. 
• Additional penalties due to non-compliance and interest. 
• Issues in the property sale or repatriation
• Non-compliance with NRI taxation also complies with future compliance and scrutiny.