The Indian income tax system has seen some significant changes in recent times, and the introduction of the New Tax Regime is one such development. As much as this move is appreciated by Indian residents, NRIs are still confused and are unclear whether they are eligible for the new tax regime. In this blog, we will answer this question “Can NRI opt for new tax regime”? We will also explore the implications, benefits, and drawbacks of the new tax regime to help NRIs make informed decisions about their tax planning strategies.
Can NRI Opt for New Tax Regime?
Yes, NRIs have the option to choose the New Tax Regime in India. As per the New Tax Regime announced in the Union Budget 2023-24:
- The income tax slabs applicable to NRIs are the same as compared to those for resident Indians.
- Both NRIs and residents are exempted from filing income tax returns if their total income for the year falls below the basic exemption limit of Rs. 3,00,000.
- Also, income up to Rs. 3,00,000 is free from income tax.
Are NRIs Eligible for Tax Rebate?
Tax Rebate refers to a refund provided to taxpayers when the taxes they have paid surpass their actual tax liability. For instance, if a taxpayer’s tax liability is Rs. 20,000, but the government has collected taxes amounting to Rs. 45,000, the taxpayer becomes eligible for a rebate or a refund for the excess amount.
As announced in the Union Budget 2023-24, there is a rebate available for incomes up to Rs. 7 lakh, which means individuals earning this amount are not liable to pay any income tax.
However, the rebate on full tax for income up to Rs. 7 lakh is applicable to residents, and NRIs will not be able to avail of this rebate.
Are NRIs Eligible for Other Exemptions and Deductions?
Although the new tax regime offers lower tax rates as compared to the old tax regime, NRIs are not eligible for certain exemptions and deductions like 80C, 80D, 80TTB, HRA that are available in the existing tax regime. However, if NRIs continue to pay taxes under the existing tax regime (old tax regime), they can avail deductions and exemptions.
NRI Tax Slab Rates
Given below is the table for the NRI Income Tax Slabs rates under the new tax regime as announced in the Union Budget 2023-24:
| Income Tax Slab | Income Tax Rate |
|---|---|
| Up to ₹ 2,50,000 | Nil |
| ₹2,50,001 – ₹ 5,00,000 | 5% above ₹2,50,000 |
| ₹5,00,001 – ₹ 7,50,000 | ₹12,500 + 10% above ₹5,00,000 |
| ₹7,50,001 – ₹ 10,00,000 | ₹37,500 + 15% above ₹7,50,000 |
| ₹10,00,001 – ₹ 12,50,000 | ₹75,000 + 20% above ₹10,00,000 |
| ₹12,50,001 – ₹ 15,00,000 | ₹1,25,000 + 25% above ₹12,50,000 |
| Above ₹ 15,00,000 | ₹1,87,500 + 30% above ₹15,00,000 |
Definition of NRI
According to the Section 6 of the Income Tax Act, 1961, the individuals who do not meet the conditions given below will be considered a Non-Resident for that specific previous year:
- If the individual spends 182 days or more in India during the previous year, or
- If the individual spends 60 days or more in India during the previous year and a total of 365 days or more during the four years immediately preceding the previous year.
Do NRIs have to Pay Taxes in India?
NRIs do not have to pay taxes in India for income earned abroad. However, NRIs need to pay tax for the income earned, accumulated, or deemed to be earned in India. Any income earned by an NRI from a country other than India is not subject to taxation in India.
NRI Taxable Income in India
NRIs are exempt from taxation on their foreign earnings; however, they are required to pay taxes on the following income sources in India:
- Salary for services rendered in India
- Income from residential property
- Capital gains or dividends from Indian shares
- Any investments in India
- Income from other sources in India
Calculate your TDS Refund with SBNRI’s TDS Refund Calculator
A TDS refund is the process of reclaiming the excess tax deducted at source by the payer if the actual tax liability of the taxpayer is lower than the TDS deducted. This situation typically arises when the income tax calculated on the total income is less than the TDS already deducted. To claim a TDS refund, taxpayers need to file an income tax return (ITR). The Income Tax Department processes the ITR and verifies the details. If the tax department finds that the TDS paid is more than the actual tax liability, the excess amount is refunded to the taxpayer.
You can easily find out how much tax refund you can get by calculating your TDS Refund from this TDS Refund Calculator.
Access SBNRI’s Exclusive NRI Taxation Guide
NRIs and OCIs can now access SBNRI’s exclusive NRI Taxation Guide covering in-depth information about DTAA, Gift Tax, Rental Income Tax, ITR Filing, Types of ITR Forms for NRIs, Capital Gain Tax, Income Tax, and more. The report will help you understand India taxation on mutual funds, other asset classes and how you can comply with the regulations.
Access NRI Taxation report here
Contact SBNRI
Due to a complicated tax system, understanding tax slabs for NRIs and other tax laws can be confusing and NRIs may miss claiming deductions and other benefits. At SBNRI, we understand this struggle. You can download SBNRI App to connect with our NRI Tax Experts and get end-to-end assistance related to NRI tax filing. SBNRI will also help you get a lower TDS Certificate.
You can also click on the button below to ask any questions. Visit our blog and YouTube Channel for more details.
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