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:

  1. He/she is in India for at least 182 days in that year, OR
  2. 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

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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

Tax Rate
Up to 2.5 Lakhs

Nil

2.5 Lakhs to 5 Lakhs 

5%
5 Lakhs to 7.5 Lakhs

10%

7.5 Lakhs to 10 Lakhs

15%

10 Lakhs to 12.5 Lakhs

20%
12.5 Lakhs to 15 Lakhs

25%

15 Lakhs and above

30%


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.

New vs Old Tax Regime: Which is better for NRIs Taxpayers (Budget 2023)

New vs Old Tax Regime: Which is better for NRIs Taxpayers (Budget 2023)

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Many changes have been proposed to the new income tax slab in Union Budget 2023. The basic exemption limit has been increased from Rs. 2.5 lakh to Rs. 3 lakh and the tax rebate has been hiked on income up to Rs. 7 lakh against Rs. 5 lakh earlier. However, the old tax slabs regime is still in effect. Hence, taxpayers can choose between the two regimes - New vs Old Tax Regime - when paying their taxes. So, which tax regime should NRI taxpayers choose after the announcement of union budget 2023 for NRIs?

What NRIs Expect from Budget 2023?

What NRIs Expect from Budget 2023?

391 views

Non-Resident Indians face additional complexity of India’s income tax system; income tax rules for NRIs and residents differ in certain ways. Moreover, NRI investment in India is subject to stringent compliance requirements set by the RBI. Hence, Indians living away from their home country have a lot of expectations from the Union Budget 2023 for NRIs, such as termination of excessive TDS across asset classes, online KYC and NRI Demat account opening, helpline number to resolve NRI taxation and investment queries, etc. Here is what NRIs expect from the budget 2023.

Form 27Q – TDS Return on Payment to NRI

Form 27Q – TDS Return on Payment to NRI

488 views

Form 27Q is a TDS return/ statement that includes the details of TDS deducted on non-salary payments made for a Non-Resident Indian (NRI) and foreigner, for example TDS on sale of property by NRI. The resident Indian making payment to the NRI needs to submit Form 27Q at every quarter before the due date.

Income Tax Rules for Indian Seafarers/ Merchant Navy

Income Tax Rules for Indian Seafarers/ Merchant Navy

30,220 views

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.

Gift from USA to India: Taxation and Exemptions

19,491 views

India being the land of festivities has a constant inflow and outflow of gifts. A gift from USA to India or gifts from India to USA complements the emotional quotient of the people in these two countries who are staying apart but keep on sending happiness in boxes to each other at a magical frequency. Now, these boxes are metaphorical! Well, some are literal too. But most of these gift exchanges happen online in the form of bank transfers, real estate, shares etc. In this article, we will discuss the angles around gifts to India from USA and Indian gifts to USA focusing on the taxation and exemptions provided under the NRI Gift Tax Rules.

TDS on Sale of Property by NRI in India [New Rates for 2022 – 2023]

TDS on Sale of Property by NRI in India [New Rates for 2022 – 2023]

71,422 views

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.

PAN Aadhaar Linking for NRI: Is it Mandatory? (New Deadline 31 March 2023)

PAN Aadhaar Linking for NRI: Is it Mandatory? (New Deadline 31 March 2023)

45,971 views

PAN Aadhaar Linking for an NRI: There is a notification under the Income Tax Act that says: “Link you PAN with Aadhaar before 31st March 2021 else the PAN shall become inoperative” Now, NRIs are worried about this penalty and have constantly been asking about PAN Aadhaar Linking. Since, most of them don’t have an Aadhaar card, this doubt becomes more and more legit! Let’s take a look at the summary of some of the sections in the Income Tax Act and create a sequence that will enable us to understand whether linking of the PAN Card with Aadhaar Card is mandatory for an NRI or not.

What are the uses of a PAN Card for NRIs?

14,237 views

Today, Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) are spread across the globe. According to a report by the United Nations, India had the largest diaspora population in the world with 18 million people living outside India till 2020. A PAN (Permanent Account Number) Card is mandatory not only for resident Indians but also for NRIs who wish to invest in India or have any Indian income. Let’s understand the uses of a PAN card for NRIs and OCIs.

US Tax on Indian Mutual Funds

US Tax on Indian Mutual Funds

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Non-Resident Indians or NRIs can invest in mutual funds in India via an NRE or NRO account at any bank in India. However, only few fund houses allow mutual fund investment online from NRIs based out of the US and Canada, while some others accept investment in an offline mode with a declaration the investor was present in India at the time of his/ her first investment. Capital gains from investment in Indian mutual funds is taxed in the US. Rules with regard to US tax on Indian mutual funds are complex.