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

 

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.

Income Tax for NRI Returning to India: The Ultimate Guide 2021

Income Tax for NRI Returning to India: The Ultimate Guide 2021

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Time and again, NRIs who are planning to return to India have wondered what will happen once they move back. What about their bank accounts, their investments in India and abroad and the associated taxation changes? Income Tax for NRI Returning to India involves the change in their Residential Status, instruments of taxation and much more. There are various factors that need to be taken care of. In this ultimate guide, we will consider every major category where change happens for an NRI returning to India. Let’s first have a look at the categories, their highlights and the changes that need to be considered in the table below. Post that, let’s understand every category one by one.

What are the uses of a PAN Card for NRIs?

What are the uses of a PAN Card for NRIs?

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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.

NRI Tax: Top 10 Mistakes made by NRIs while Filing ITR in India

NRI Tax: Top 10 Mistakes made by NRIs while Filing ITR in India

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Income Tax for NRI has always been a puzzling subject. We receive numerous queries every day where the doubts of NRIs concerning NRI Tax are evident. Understanding the fundamentals of Income Tax for NRI: When to file the Income Tax Returns (ITR), How to file it? What are the requirements? What are the common mistakes one should avoid? and much more is essential for a seamless ITR filing experience for an NRI. Addressing the fundamentals is necessary to eliminate complexities. In this article, we will take a look at the top 10 mistakes made by NRIs while filing their ITR in India.

Union Budget 2021-22: No Double Taxation for NRIs

Union Budget 2021-22: No Double Taxation for NRIs

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While presenting the Union Budget 2021-22, Finance Minister Nirmala Sitharaman has proposed the abolition of double taxation on income accrued by NRIs in their foreign retirement accounts outside India. It will provide big relief to Non-Resident Indians (NRIs) who are facing hardship of double taxation.

Moving Back to America: What to Take Care of?

Moving Back to America: What to Take Care of?

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With the recent shift in the US Government from Trump to Biden, NRIs stranded in India are optimistic about moving back to America. With over 800,000 Indian nationals in the green card backlog in the US, Joe Biden has made reforms in green cards an election agenda. With Biden as the president of the US, NRIs are looking forward to better news. In this article, let’s discuss what impact your overstay in India might have had concerning your tax implications and prepare a brief checklist for the same.

Nirmala Sitharaman Briefing Highlights: All 12 Measures including Credit Guarantee, EPFO Subsidy & Tax Relief for Homebuyers

Nirmala Sitharaman Briefing Highlights: All 12 Measures including Credit Guarantee, EPFO Subsidy & Tax Relief for Homebuyers

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Announcing a new set of stimulus measures dubbed as Stimulus 2.0, Finance Minister Nirmala Sitharaman on Thursday, 12th November said the Indian economy is witnessing a strong recovery after a long and strict lockdown. Addressing a press conference to announce more stimulus measures to boost growth, she said macro-economic indicators are pointing towards recovery.

Section 80TTA for NRI: Claim Rs. 10,000 on NRI Savings Account

Section 80TTA for NRI: Claim Rs. 10,000 on NRI Savings Account

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Did you know that you can claim a deduction on the interest earned on your NRI Savings Bank Account up to a maximum of Rs.10,000 just like Resident Indians under section 80TTA? The bank accounts for Resident Indians and NRIs are different. We have already understood the concept of Non-Residents and their bank Accounts and know that an NRI can only have a Non-Resident External (NRE) or a Non-Resident Ordinary (NRO) Savings Account in India. The third type, Foreign Currency Non-Resident Bank Account [FCNR(B)] is a deposit only account. The interest that you earn on an NRE Savings Account is tax-free in India. So, the only savings account we are left with is the NRO Savings Account.

TDS Return Forms for NRI: 24Q, 26Q, 27Q, 27EQ

TDS Return Forms for NRI: 24Q, 26Q, 27Q, 27EQ

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TDS Return Forms for NRI: Tax Deducted at Source or TDS is an advance tax collected mostly at the source of income according to the Indian Taxation Code with its rules and regulations controlled and governed under the Income Tax Act, 1961 by the Central Board of Direct Taxes (CBDT). The provisions of TDS are implemented on the earnings of individuals and businesses by the government to generate revenues.

GST Registration Process for NRI

GST Registration Process for NRI

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If you have a business that involves importing goods or services from abroad or managing a business for a Non-Resident Indian (NRI) or are an NRI yourself planning to do any business in India, then this article is for you. Here, we are going to discuss the relevant topics revolving around the GST Registration Process for NRI in India.

TDS Rate Chart for FY 2020-21: NRI TDS Rates

TDS Rate Chart for FY 2020-21: NRI TDS Rates

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TDS stands for Tax Deducted at Source. Find the table of revised TDS Rates for Residents as well as Non-Resident Indians (NRIs) in India post the Union Budget of 2020 in this article. TDS is either deducted at source by the companies through which you invest your money in India, while the returns are received calculated on stipulated TDS Rates, or by institutions providing salaries to you or directly by people paying the income to you and it needs to be deposited within a stipulated time to the government.