Income Tax for NRIs is quite a complex and confusing aspect of financial management. However, with the advent of technology and online tools, calculating taxes has become more accessible and convenient. One such tool that has gained popularity among NRIs is the NRI Income Tax Calculator. In this blog, we will explore functionality and benefits of the NRI Income Tax Calculator, shedding light on how it can help NRIs effectively manage their tax obligations.
What is NRI Income Tax Calculator?
The NRI Income Tax Calculator is an online tool designed to assist NRIs in evaluating their tax obligations based on their income, as outlined in the Union Budget 2023-24. For those falling within the taxable income bracket, a specific portion of their net annual income must be paid as taxes. These taxes can be settled either through tax deduction at source during the monthly salary disbursement or via the income tax returns portal managed by the Central Board of Direct Taxes (CBDT).
How to Use NRI Income Tax Calculator?
Here are the steps to use the income tax calculator effectively:
- Select the assessment year for which you wish to calculate your taxes from the drop-down menu. If you are looking for FY 2023-24, then the AY will be 2024-25.
- Choose the appropriate age category, as tax liability in India varies based on age groups.
- Then, choose one from the following: Male / Female / Senior Citizen.
- After that, you need to select ‘NRI’ from the drop-down menu of the residential status option.
- Enter your taxable salary that is income from salary after standard deduction of Rs.50000.
- In addition to the taxable salary, provide details of other income sources, including income (Profit) from business or profession, income from house property, income from capital gains, income from other sources, etc.
- Then, enter the details of the eligible deductions.
- Click on ‘Calculate’ to obtain your tax liability.
Benefits of Using Income Tax Calculator for NRIs
Using an income tax calculator streamlines the process of estimating your taxes and ensures you consider all potential tax-saving opportunities. The greatest advantage is that NRIs can use this calculator at any point during the financial year.
Given below are the benefits of using the income tax calculator:
- User-friendly interface
- Accessible 24/7
- Streamlines tax calculation
- Assists in identifying deduction possibilities
- Calculates potential tax liability in advance
Determining NRI Status
The Foreign Exchange Management Act (FEMA) has provided guidelines to determine the residential status of an individual. According to the Indian Income Tax Law, an individual will be classified as a resident Indian for a particular year if they meet any of the following criteria:
1. The individual has resided in India for a minimum of 182 days during the financial year.
OR
2. The individual has resided in India for at least 60 days in the year and for a minimum of 365 days in the preceding four years.
If an individual satisfies either one or both of these conditions, they will be considered a resident. If none of the conditions are met, the individual will be categorized as a Non-Resident Indian (NRI).
Is NRI Income Taxable?
If you have the status of ‘NRI’, any income earned or accrued in India will be subject to taxation in India.
Examples of income earned or accumulated in India include:
- Salary received within India or for services provided in India
- Income from a property located in India
- Capital gains from the transfer of assets situated in India
- Income from fixed deposits or interest on a savings bank account.
All these types of income are taxable for an NRI.
Income that is earned outside of India, however, is not subject to taxation in India.
NRI Taxation in India: New Rules
The following points outline the new rules for NRI taxation in India:
- As per the Finance Act of 2020, Indian citizens who earn over Rs 15 lakh from sources within India will be considered residents of India, provided they are not obligated to pay taxes in any other country.
- If an individual’s total income (excluding income from foreign sources) is up to Rs 15 lakh, the 60-day criterion is extended to 182 days. Additionally, if an Indian citizen is leaving India for employment outside the country, the 60-day condition is extended to 182 days.
Tax on NRI Income
Provided below is a comprehensive overview of taxable income for NRIs in India:
Income from Salary
- If an NRI receives a salary in India, it becomes subject to taxation in India. Therefore, any salary earned by an NRI for services rendered within India is taxable.
Income from House Property and Loans
- Income generated from a vacant or rented house property in India is taxable according to the prevailing rates.
- The income tax regulations state that any capital gains resulting from the lease, sale, or rent of a property in India are taxable.
- Similar to Indian residents, NRIs can claim a deduction of up to 30% on their home loan in India. Additionally, deductions for principal repayment, registration fees, and stamp duty under Section 80C are also applicable to NRIs.
- If a tenant pays rent to an NRI property owner, a Tax Deducted at Source (TDS) of 30% must be deducted before transferring the funds to the NRI’s account. The person making the payment to the NRI is required to file Form 15CA/15CB online with the Income Tax Department.
Income from Capital Gains
- Capital gains arising from long-term or short-term securities in India are subject to taxation.
- Capital gains on shares held in Indian companies are also taxable.
- The transfer of an asset in India resulting in capital gains is subject to taxation.
Income from Investments
- NRIs who invest in assets in India are taxed at a rate of 20%. If Tax Deducted at Source (TDS) has been deducted on the investment income, filing returns is not mandatory. Certain investment assets in India qualify for special treatment, as listed below:
- Central government securities
- Shares in Indian companies
- Deposits
- Debentures (for publicly listed companies)
Other Sources
Income sourced from India, such as interest earned on fixed deposits and savings accounts, is taxable in India. Interest received on NRO (Non-Resident Ordinary) accounts is fully taxable, while interest received on NRE (Non-Resident External) and FCNR (Foreign Currency Non-Resident) accounts is exempt from tax.
NRI Income Tax Slab Rates
Given below is the table for the latest Income Tax Slabs rates for the FY 2023-2024:
A- Existing Tax Regime
| 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 – ₹10,00,000 | ₹12,500 + 20% above ₹5,00,000 |
| Above ₹10,00,000 | ₹1,12,500 + 30% above ₹10,00,000 |
B- New Tax Regime
| 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 |
Can NRIs Avail any Tax Deductions?
Yes. NRIs, similar to resident Indians, have the opportunity to claim various deductions and exemptions from their income in India. The deductions that NRIs are eligible for include:
a. Under Section 80C
- Premiums paid for LIC (Life Insurance Corporation) policies
- Tuition fees for education
- Repayment of principal on home loans
- Investments in ULIPs (Unit Linked Insurance Plans)
- Investments in ELSS (Equity Linked Savings Schemes)
b. Under Section 80D
- Medical insurance premiums
c. Under Section 80E
- Interest paid on education loans
d. Under Section 80G
- Donations made to eligible charitable organizations
e. Under Section 80TTA
- Under Section 80TTA, NRIs can claim a deduction on income from interest earned on savings bank accounts.
While computing your income tax return, you may need to enter these exemptions into NRI income tax calculator.
Do NRIs Need to File ITR in India?
If the income of an NRI surpasses Rs 2,50,000, it is necessary for them to submit an income tax return. Nevertheless, if the overall income falls below the taxable threshold of Rs. 2.5 lakh, there is no requirement to file an ITR in India.
Last Date to File an Income Tax Return in India?
Unless extended by the government, July 31st is the deadline for NRIs in India to submit their income tax returns.
Contact SBNRI
Whether NRI tax rules or criteria to determine NRI status keep changing each year. Due to a complicated tax system, understanding tax rules for NRIs 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.
