NRI Tax and ITR : Which Income of NRI is taxable in India and How ?
Are you looking for exclusive details on Non resident Indians or NRIs, Tax on NRIs, Which income of NRIs is taxable and related queries. You have landed at the perfect place to get answer to all your queries.
Keep reading further to grab all these details…
One of my friends got a good job opportunity and recently moved abroad, but he was worried about his tax compliance in India for the year.
Which of his income is taxable in India ? Does he need to pay Income tax in India ? Does he need to file his Income tax return in India ? These were the questions he was concerned about like many Indians normally are once they move out of India.
So,here we are with the answers to the above queries that many of you might be thinking over …
Now,whether an Individual is liable to tax is determined by his residential status.
Residential status of an Individual is the key factor for determining the taxability of Income in India.
Following incomes are taxable in India based on your residential status :
- For Resident Indians : Your Global Income is taxable in India i.e.income earned anywhere in India or outside India.
- For Non Resident Indians : Income earned or accrued in India,for services rendered in India.
Hence,NRIs or Non Resident Indians are taxed on income earned in India during a particular financial year.
Who is a Resident Indian and a Non Resident Indian?
As per the Income Tax act 1961,a person is a Resident of India if :
- He has stayed 182 days or more in India in the current financial year or
- He stayed in India for 60 days or more in the previous financial year and 365 days or more in the preceding 4 years (The 4 years shall be counted from the year before the financial year which is into consideration).
So,if you satisfy any of the above conditions,then you become an Ordinary Resident.In case you don’t satisfy them, then you shall be considered as a Non Resident Indian.
So,if you are a Non resident,you are liable to pay tax on the income that you earn in India.The income that you earn outside India i.e.your foreign income is not taxable in India provided you maintain your NRI status.
As a Non Resident Indian,you are liable to pay taxes :
- If Taxable income in India during a financial year exceeds the Basic exemption limit of Rs.2.5 lakhs.
- If you have Short term Capital Gain (STCG) or Long term Capital Gain(LTCG) from sale of property in India.
Income Tax slab rates for NRI or Non Resident Indians :
|INCOME SLABS||TAX RATES|
|Taxable Income < Rs.250000||NIL|
|Taxable Income > Rs.250000 but < Rs.500000||10% of Amount by which Taxable Income > Rs.250000|
|Taxable Income > Rs.500000 but < Rs.1000000||Rs.25000 + 20% of amount by which Taxable Income > Rs.500000|
|Taxable Income > Rs.1000000||Rs.125000 + 30% of amount by which Taxable Income > Rs.1000000|
There is no difference in Tax slab rates for Senior and Super Senior NRIs unlike resident individuals.The tax slabs remain same for Non residents irrespective of their age.
However,Tax is deducted at source or TDS is applicable on payment to NRIs at a flat rate irrespective of income tax slab, in case of most of the investment incomes earned by NRIs.
To have a look at TDS rates you can refer our blog post Section 195 : TDS Rates on NRI payments
Do NRIs have to pay advance tax in India ?
Yes,NRIs are required to pay advance tax if their tax liability during a financial year exceeds Rs.10000 just like a Resident Indian.Interest under Section 234 B and 234 C is also applicable to NRIs if advance tax is not paid on time.
When NRI is required to file ITR in India?
This is the most common query that Non residents generally have.Filing of ITR is mandatory for NRIs where the :
- Total taxable income during a financial year exceeds the basic exemption limit of Rs.2.5 lakhs.
- If you have Short term Capital Gain (STCG) or Long term Capital Gain(LTCG) from sale of assets or investments in India even if your income is below basic exemption limit.
- If you want to claim any tax refund, in case excess TDS has been deducted.
- If you want to carry forward and set off any losses against gains.
Few exceptions :
NRI is not required to file Income tax return or ITR if :
- Taxable income consists of Investment income only like interest and/or Capital gains provided TDS has been deducted on the same.
- Taxable income consists of income from specified investments only(as given below).
- Long term Capital gain is on sale of equity shares or equity mutual funds in India.
However,if you want to claim refund or carry forward your losses,you will be required to file your ITR before due date.
What is Due date of Income tax return or ITR filing for NRI ?
The due date for filing ITR in case of Non resident Indians or NRIs is same as that of Resident Indians which is 31 st July of the relevant assessment year.
*Relevant assessment year refers to the immediately succeeding financial year.
Example : If we are filing the Income tax return for F.Y.2015-16 (on the income earned during FY 2015-16),the relevant assessment year shall be 2016-17.
This is normal due date of filing ITR. However,the government can extend the prescribed due dates as and when required by giving prior notifications.
A must read : 10 Documents required to file your ITR in India !
Which income of NRI is taxable in India ?
Here,we have discussed all possible sources of income by which a Non Resident Indian or NRI can earn in India and the tax implications thereon.
1. Salary Income :
If you are a Non Resident Indian or NRI and you receive any salary in India or even if someone receives it on your behalf.You will be liable to pay tax on such salary as per the Income tax slab rates.
Now,Income from salary will arise in India if you render services in India.In simple words,if you get salary for rendering services in India,such income comes under the purview of The Indian Income tax.So,you will be taxed for services provided in India.
Exceptions : Also,if you are a Government of India employee and a citizen of India and you render service outside India, the salary you receive in such a case shall be taxable in India.
However,Salary of Diplomats,ambassadors is not taxable.
2. Income from House Property/Assets :
Rental income is the most common source of income of NRIs in India.A large number of NRIs rent out their properties in India and receive income in the form of monthly rent.
So,any such income that arises from a property in India,is taxable in the hands of NRI. This forms part of the Total taxable Income in India and is taxed as per Income tax slab rates.An NRI is also allowed to claim standard deduction of 30% from rental income.
NRIs can also claim deductions on home loan taken for purchase or construction house like
- Tax deduction under section 80 C for repayment of home loan
- Interest on home loan under section 24 of Income tax act.
- Stamp duty
- Registration charges
Another,important point to be noted here is that, when a tenant pays rent to his NRI landlord, the tenant needs to deduct TDS @ 30% and submit form 15 CA online to the Income tax department.It does not matter whether you as an NRI receive such rental income in your account in India or in the bank account of the country where you stay.The same shall be subject to tax in India,if it arises from property situated in India.
3. Income from Business/Profession :
As an NRI,any income that you earn from a business that is controlled or setup in India,that accrues in India shall also become your taxable income in India.So,if you are getting some income through any business in India,the same shall be taxed in India.
Any income from a profession set up in India where services are provided in India or income accrues in India,the same shall be taxable in India.
4. Capital Gains :
Any Capital gain arising from transfer of capital assets in India shall become taxable in India. Simply stated, Capital gains arising from transfer of assets,shares,short term or long term investments in India shall be liable to tax in India.
But,NRIs can enjoy special provision related to investment income.If an NRI invests in certain specified investments in India,he shall be taxed at 20%.These specified investments are :
- Central Government Securities.
- Shares in Indian companies.
- Debentures by public listed companies( not private companies).
- Deposits with banks and public companies.
So,if an NRI has income only from these investments and TDS has been deducted on the same,ITR is not required to be filed.In case you want to claim tax refund,you will anyways need to file your ITR.
You may also like our post : How can NRI invest in mutual funds in India ?
5. Income from other sources :
Interest Income earned on Fixed deposits and Indian Saving bank account during the year,shall be taxable in India.However,interest earned in NRE Account and FCNR Account is exempt from tax.But,interest earned in your NRO account shall be taxable.
For complete details on NRE/NRO Accounts you can refer : NRE Account vs NRO Account – Facts you need to know
Basically,as a Non Resident Indian,you have to sum up all the various incomes that either originated in India or have been received in India.
Being an NRI,you can avail the benefit of DTAA or Double Taxation Avoidance Agreement and avoid paying taxes on the same income twice. You need to be aware of the DTAA of your residing country with India.This will help you to either get an exemption on already taxed income or you will be entitled to relief in one of the countries.
As an NRI, make sure you account for all your income earned in India,include them in your Income tax return for the financial year and pay the taxes as applicable.
As an NRI, looking for investing your money in India you must go through 7 Best Investments for NRIs in India !
Feel free to share your valuable feedback in the comment section below !
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