A digital signature is an electronic form of your signature used for authenticating the identity and integrity of a digital document or message you share. These days a lot of documentation is executed online and a digital signature certificate help to establish the identity of the sender. There are several benefits of a digital signature certificate for NRIs, including income tax e-filing.
NRI Income Tax
A Non-Resident Indian (NRI) has to pay and not pay certain taxes. It can be confusing while sorting the various taxation aspects to the right column. Before we get into the details of NRI Income Tax, it is essential that we understand the actual definition of NRI as per the Income Tax Act, 1961.
Definition of NRI as per Income Tax Act, 1961
Income tax doesn’t provide any direct definition for Non Resident Indians (NRIs) but it lays down certain criterias to certify citizens as residents of India:
According to Income Tax regulations, a citizen will be a resident of India in the previous year, if:
- He/she is in India for at least 182 days in that year, OR
- If the individual was not in India for at least 182 days in the previous year but he/she was in India for at least 365 days during the last 4 years to that year and at least 60 days during that year
Case 1: Consider you were in India for 207 days in 2019, then you are a resident of India for 2019.
Case 2: Say, you were in India for 70 days in 2019, then you fail the first criteria! But you were in India during the entire time span of 2014-2018. Then you are a resident of India in spite of not being in the country for at least 182 days in 2019.
The individuals not satisfying the two cases mentioned above will be treated as Non-Resident Indians (NRIs) according to the Income Tax Regulations.
There has been an amendment in the definition of NRI as per IT Act which is already in effect from 1st of April 2020, let’s understand that as well:
Amendment in the Definition of NRI as per Income Tax
The Income Tax Act amendment of 2020 is for NRIs whose taxable income in India exceeds Rs. 15 Lakhs, The amended criteria are as follows:
- If the individual is in India for at least 120 days (compared to the previous 182 days threshold) in the previous year, then
- We calculate whether he/she was in India for at least 365 days during the last 4 years to that year
If the criteria is satisfied, they become Residents.
Now, the Residential Status of an Individual defines what taxes will they pay in India. NRI Income Tax is deducted on the basis of your income. Let’s understand this:
- If you are an Indian Resident, then your global income is taxable in India
- If you are a Non-Resident Indian (NRI), then only the income generated in India is taxable
DTAA (Double Tax Avoidance Agreement): Avoid Paying double taxes
DTAA (Double Tax Avoidance Agreement) is a treaty between countries to avoid paying double taxes. If you have already paid the taxes in India then you don’t need to pay taxes in your country of residence. There can be a difference in tax slabs though. Under such conditions, you pay the residual taxes in your country of residence. For example: If you had to pay 20% tax in the USA and the same income was taxed at 15% in India in the form of TDS defined under DTAA with the USA, then you have to pay the remaining 5% tax in the USA. Also, people generating income from countries in the Gulf region where no income taxes are applicable, don’t have to pay any taxes in India.
There are various documents required to avail the benefits under DTAA, which are:
- Self-declaration cum indemnity format
- Self-attested PAN card copy
- Self-attested visa and passport copy
- PIO proof copy (if applicable)
- Tax Residency Certificate (TRC)
Note: According to the Finance Act 2013, an individual will not be entitled to claim any benefit of relief under Double Taxation Avoidance Agreement unless he or she provides a Tax Residency Certificate to the deductor. To receive a Tax Residency Certificate, an application has to be made in Form 10FA (Application for Certificate of residence for the purposes of an agreement under section 90 and 90A of the Income-tax Act, 1961) to the income tax authorities. Once the application is successfully processed, the certificate will be issued in Form 10FB.
NRI Income Tax Slab Rates
Income Tax Slab Rates for NRI are diversifications based on income amount of the individual. NRI Tax Slab simply dictates what percentage of the total income of the NRI must be offered as tax. Below is the table for the NRI Income Tax Slab Rates:
Income Tax Slab
|Up to 2.5 Lakhs||
2.5 Lakhs to 5 Lakhs
|5 Lakhs to 7.5 Lakhs||
7.5 Lakhs to 10 Lakhs
10 Lakhs to 12.5 Lakhs
|12.5 Lakhs to 15 Lakhs||
|15 Lakhs and above||
NRI Income Tax: An Overview
What we have discussed so far is the basis of NRI Income Tax. What follows this is how different mediums of incomes for an NRI are taxed. What is the taxation on investments in various asset classes? It all integrates together to form the entire concept of NRI Income Tax.
In this category, you will find various articles and FAQs revolving around NRI Income Tax that will conclusively answer all your doubts and queries concerning NRI Income Tax.
To offer some relief for individuals who have not filed ITR returns In India, the last date for income tax filing for FY 202-21 (The assessment Year 2021-22) has been extended till 31st Dec 2021. Generally, the due date of ITR filing is July 31 for non-audit-business individuals and 31 October for audited-business assessees. Like resident Indians, it is important for people with NRI status as well as OCI and PIO cardholders to file their income tax in India. Non-filing of ITR may result in several penalties and lots of inconveniences. Some of the serious consequences of not filing ITR in India for NRIs/ PIOs/ OCIs are described here.
NRIs usually have earnings in India in the form of dividends, pension, salary, and housing or commercial property. If their Indian income exceeds the exemption amount, NRIs should file their income tax return (ITR) for income earned/ collected in India. Generally, NRIs are confident about disclosing their Indian income at the time of income tax filing, but many NRIs and expatriates are still confused about revealing their overseas accounts in the tax return in India. But do NRIs need to disclose foreign bank account information in tax returns?
Aadhaar card for NRIs: Aadhaar card is an essential document for every citizen in India. Issued by the Unique Identification Authority of India (UIDAI), Aadhaar is a centralised system of identification via a 12-digit random number that is linked to the biometric data of an Individual. Aadhaar number is very important for availing services in India. Every resident Indian, irrespective of age and gender, needs to apply for the Aadhaar number. However, we will discuss the need for an Aadhaar card for NRIs and the procedure to avail it.
NRIs can invest in the Indian stock market by purchasing shares through the Portfolio Investment Scheme (PIS) of the RBI. NRI investors can also invest in government securities, debentures, listed non-convertible debentures, etc. on repatriation or non-repatriation basis.NRI investment in India’s equity shares, mutual funds, etc. is subject to the restrictions/ conditions under the Foreign Exchange Management Act (FEMA). Dividend income and the capital gains earned by NRIs from shares listed in India and equity oriented schemes of mutual funds are taxed in India. NRI capital gains tax on shares depends upon the type of instrument and the period for which they are held before the sale.
A seafarer, merchant navy worker or mariner is a person who travels on a boat or ship on the sea. Seafarers hold a variety of ranks and professions, each of the crew members executes unique responsibilities. A seafarer navigates water bone vessels or assists as a crew member in the operation or maintenance of a ship. Seafarers receive remuneration in the form of salary from a ship owner or company. Income tax rules for Indian seafarers will depend on their residential status. However, there is no specific provision of income tax exemption for Indian seafarers.
Properties sold in India by NRIs are liable for taxation and TDS is required to be deducted under the Indian income tax laws. An NRI who wants to sell the property situated in India has to pay tax on capital gains. In this article, we will discuss the applicability of TDS on sale of property by NRI in India.
The residential status of an individual, as to whether he/she is a resident Indian or a non-resident (NR) or not ordinarily resident depends on the period of a person’s stay in India during the previous year or years preceding the previous year. However, in view of the Covid-19 pandemic and the consequent overstay of an individual who had visited India before 22nd March 2020, the Central Board of Direct Taxes has issued a circular on 3rd March 2021 to determine the NRI Status for Financial Year 2020-21. CBDT clarified that the overstay of NRIs due to the Covid-19 pandemic restrictions shall not be taken into account for the purpose of determining the residential status under Section 6 of the Income Tax Act, 1961. The board clarified that income tax will not be levied on Non-Resident Indians (NRIs) who have exceeded the mandated residency limit.
New TDS/ TCS rules for NRIs: In the Union Budget 2021 speech, Finance Minister Nirmala Sitharaman announced new provisions related to TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) for taxpayers. These new TDS/TCS rules will be effective from 1st July 2021.
The taxation system in India is an integral part of the country’s economy. Several taxes are levied on the products and services availed by the citizens of India. These taxes are used to finance social projects, and to improve the products and services used by consumers. There are several taxes for people residing in India and non-residents as well, such as Goods and Service Tax (GST), income tax, property tax, and taxes deducted at source, etc. In this article, we will decode the importance of income tax for NRIs in India.