NRI Income Tax Slab Rates 2023-24: 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 while understanding about NRI Income Tax Slab rates for AY 2023-24.
Old tax regime slab rates for NRIs for FY 2022-23 (AY-23-24) will remain the same as for last financial year (FY 2021-22). However, there are some changes in slab rates as announced the FM Nirmala Sitharaman in her Union Budget 2023 speech.
Income tax filing for NRIs in India
Are NRIs required to file Income Tax Returns in India? This is a very common question asked by NRIs. An NRI whose annual income exceeds Rs. 2, 50,000 is required to file an income tax return in India.
You must note that rules to determine the residential status of an individuals change every year. Hence, it is important to be aware of new rules for NRI taxation in India.
NRI Income Tax Slab Rates for AY 2023-24 (FY 2022-23) – New Tax Regime & Old Tax Regime
NRIs can choose between the existing tax regime and the new tax regime with lower rate of taxation (Under Section 115BAC of the Income Tax Act). NRI income tax slab rates for old and new regimes for financial year 2022-23 are as under.
New and Old Tax Regime Tax Slab Rates for FY 2022-23 (AY 23-24)
|Income Tax Slab||Old Regime Slab Rates for FY 22-23 (AY 23-24)||New Regime Slab Rates for FY 22-23 (AY 23-24)|
|Up to Rs. 2.50 lakh||Nil||Nil|
|Rs. 2,50,000 -Rs. 5,00,000||5%||5%|
|Above Rs. 5 lakh to Rs. 6 lakh||Rs. 12,500 + 20%||Rs. 12,500 + 10%|
|Above Rs. 6 lakh to Rs. 7.50 lakh||Rs. 12,500 + 20%||Rs. 12,500 + 10%|
|Rs. 7.50,000 to Rs. 9,00,000||Rs. 12,500 + 20%||Rs. 37,500 + 15%|
|Rs. 9,00,000 to Rs. 10,00,000||Rs. 12,500 + 20%||Rs. 37,500 + 15%|
|Rs. 10,00,000-Rs. 12,00,000||Rs. 1,12,500 + 30%||Rs. 75,000 + 20%|
|Rs. 12,00,000-Rs. 12,50,000||Rs. 1,12,500 + 30%||Rs. 75,000 + 20%|
|Rs. 12,50,000-Rs. 15,00,000||Rs. 1,12,500 + 30%||Rs. 1,25,000 + 25%|
|Above Rs. 15,00,000||Rs. 1,12,500 + 30%||Rs. 1,87,500 + 30%|
- Income tax exemption limit for NRI taxpayers is up to Rs. 2,50,000.
- NRIs opting for the new tax regime with lower rates will not be eligible for certain exemptions and deductions (like 80C, 80D, 80TTB, HRA).
- If they continue to pay taxes under the existing tax regime, NRIs can avail rebate and exemptions.
- NRIs can avail the new tax regime in India but they can’t claim the rebate on full tax for income up to Rs. 7 lakh. Only residents can claim the rebate on it.
Can NRI Opt for New Tax Regime?
Yes, NRIs (Non-resident Indians) can opt for the New tax Regime in India, which raises the threshold for basic exemption to Rs. 3,00,000. But, NRIs are not eligible to receive the complete tax rebate for income up to Rs. 7,00,000, a benefit reserved for residents. Also, NRIs who choose the new tax regime will not qualify for specific exemptions and deductions (such as 80C, 80D, 80TTB, HRA).
Surcharge on Income Earned by NRIs
Non-residents earning income above the specified limit will have to pay additional charge known as surcharge:
- 10% of income tax for taxable income above Rs. 50 lakh to Rs. 1 cr
- 15% of income tax for taxable income above Rs. 1 cr to Rs. 2 cr
- 25% of income tax for taxable income above Rs. 2 cr to Rs. 5 cr
- 37% of income tax for taxable income above Rs. 5 cr
Note: Maximum surcharge on income earned out of dividend or income under provision 111A, 112A, and 115AD is 15%
NRIs are liable to pay taxes as and when their income falls under the jurisdiction of the Income Tax Act of 1961. The details about income tax for NRIs and the method of dealing with them fall under the category of NRI taxation. NRI taxation covers all the aspects of income tax, property tax and wealth tax. However, the focal point of taxation lies on the income tax.
Also Read: 5 Ways to save on the tax NRIs have to pay
Income Tax for NRIs
Before discussing the Non-Resident Indian income tax, let’s understand who is an NRI under the Income-tax Law.
Determining NRI Residential Status
The Foreign Exchange Management Act (FEMA) has issued clear guidelines to ascertain the residential status of an individual. As per the Indian Income Tax Law, an individual will be treated as a resident Indian for a year if he/she satisfies any of the following conditions:
- He/ she has lived in India for a period of at least 182 days during the financial year. Or
- He/ she has lived in India for a period of 60 days or more in the year and for a period of at least 365 days or more in the preceding four years.
However, if an Indian citizen leaves India in any previous year as a crew member of an Indian merchant ship or for the purpose of employment, the period of 60 days mentioned in the second point shall be substituted with 182 days.
If the individual satisfies any one or both the conditions, he/she is considered a resident. If he/she satisfies no conditions, he/she will become a Non-Resident Indian (NRI).
NRI Tax Slab in India: Taxable income of NRIs
If you reside and work abroad, your tax liability as an NRI will depend on your residential status for the year. Residential status of an individual is divided into three categories – Resident and Ordinarily Resident (ROR), Resident but Not Ordinarily Resident (RNOR) and Non-Resident (NR). The scope of taxation in India based on the residential status of an Individual would be as under:
|Income received or considered to be received in India||Taxable||Taxable||Taxable|
|Income earned or accrued in India||Taxable||Taxable||Taxable|
|Income that accrues outside India from:|
– Business controlled in India or profession established in India
– Other income
The income tax for NRIs is levied on the following income:
Salary received for services provided in India
Salary or income received by an NRI for the services provided in India shall be taxable, irrespective of the place of receipt. Salary of an Indian citizen paid by the Government of India for the services rendered outside India will be considered as Indian income and taxed even if the status of the individual is Non-Resident.
House Property Income
- Rental income from property owned in India by an NRI is taxable in the same manner as the resident.
- Capital gains generated from the sale of a property, rental income, etc. in India are subject to tax.
- NRI can claim a standard deduction of 30% in India. Under Section 80C, NRIs can also claim deductions for principal repayment, registration charges and stamp duty. They can also claim tax deductions up to Rs. 1.5 lakh on interest paid on a home loan during a financial year.
- The tenant who makes rental payments to NRI will be responsible for TDS deduction at 30% under Section 195. He/she will need to fill the form 15CA and submit it online to the income tax department.
Capital Gains Income
- Capital gains or income from the sale of listed short-term/ long-term securities, mutual funds are taxable.
- Capital gains on shares held in India are subject to tax.
- Capital assets like house property, securities, shares, gold etc. of Indian origin are taxable in India.
- Capital gains upon the transfer of any capital asset situated in India are taxable.
Income from other Sources
- The interest income accrued from fixed deposits and savings bank accounts held by an NRI in Indian bank accounts is taxable in India.
- Interest on an NRO account is fully taxable. Interest earned on NRE and FCNR accounts is tax-free in India.
Income from Business and Profession
Any income earned by NRIs from a business established or controlled in India is taxable to the NRI.
NRI Income Tax Slab Rates: TDS Rate on Sale of Property
The income tax slab for NRIs explains how much taxes are applicable for a certain bracket of income. However, there are some aspects like the TDS Rate on sale of property that often pops up as a doubt in the minds of NRIs. Here is a quick view on the TDS Rate on sale of property for NRIs:
|Nature of Gains||Tax Liable||Tax Deducted at Source (TDS)|
|Short Term||As per Tax Slab||30%|
|Long Term||20%||20% (plus surcharge and cess) with indexation|
Note: Minimum Holding Period for Long Term Gains is 2 years
Deductions available to NRIs
Similar to resident Indians, NRIs can also claim various deductions and exemptions from their income in India. The following table shows the deductions and exemptions on Non-Resident Indian Income Tax:
|Section 80C||The following deductions are available under Section 80C|
– Investment in ULIPs
– Premium payment of a life insurance policy
– Investment in ELSS
– Principal repayment of a home loan in India
– Payment of tuition fees of children
|Section 80D||Premium paid towards a health insurance policy|
|Section 80E||Interest paid on an education loan|
|Section 80G||Donations for social service activities|
|Section 80TTA||NRIs can claim a deduction up to Rs. 10,000 on income from interest on a savings bank account|
|House property income of NRIs||NRIs can claim deductions on income from house property in India, the property tax paid, and interest on home loan|
Deduction Unavailable to NRIs
NRIs are not entitled to avail the following deductions under the Income Tax Act, 1961:
- Investment under RGESS (Rajiv Gandhi Equity Savings Scheme) under Section 80CCG
- Deductions for the differently-abled under Section 80U, Section 80DD and Section 80DDB
- Investments which are not available for NRIs as listed below:
- National Savings Certificate (NSC)
- Public Provident Fund (PPF)
- Senior Citizen Savings Scheme
- Post Office 5-year Deposit Scheme
Last date to File Income Tax Return in India
For NRIs, 31st July of the assessment year is the last date to file Income Tax Return in India.
How to File ITR for NRI AY 2023-24
Outlined below are the necessary steps to file their income tax returns for NRI AY 2023-24
- Determine Your Residential Status
The initial step in filing income tax returns for NRIs involves determining their tax residency status. This determination is based on the provisions outlined in Section 6 of the Income Tax Act, 1961.
- Reconcile Income and Taxes Using Form 26AS
NRIs, as per tax treaties, may be eligible for specific benefits and can claim refunds if Tax Deducted at Source (TDS) has been deducted from their income. To facilitate this, it is crucial for NRIs to report their TDS credit and advance tax details in Form 26AS.
- Calculate Your Taxable Income
NRIs are liable to pay taxes in India on various types of income, including interest earned on NRO (Non-Resident Ordinary) accounts, capital gains or dividends from Indian shares, and rental income from property. Furthermore, eligible deductions under Section 80C can be applied to reduce the taxable income.
- Determine Tax Liability
Tax liability for NRIs is determined by considering the applicable tax slab rates for NRIs, with a basic exemption limit of Rs 2.5 lakh applying to all NRIs before factoring in deductions or exemptions.
- Claim DTAA Benefit
Under the Double Tax Avoidance Agreement (DTAA), NRIs can avoid being taxed twice on the same income. The DTAA enables income to be exempt from taxation in one country or taxed at a reduced rate in the individual’s home country.
- Verify IT Returns
After completing the process of filing the income tax return form, it is essential to verify the return within a 30-day time frame. NRIs can conveniently e-verify their IT returns from abroad through net banking, eliminating the need for a one-time password (OTP).
Double Taxation Avoidance Agreement (DTAA)
India has entered into the Double Taxation Avoidance Agreement (DTAA) with more than 90 countries across the world. Whereby NRIs have to pay tax in either of the countries. In other words, NRIs can avoid getting taxed on the same income twice in the country of their residence and India by applying for relief under DTAA between the two countries. There are two ways to claim tax relief – exemption method and tax credit method. As per the exemption method, the income of NRIs is taxed in one country and exempted in another. As per the tax credit method, the income is taxed in both countries, the exemption can be claimed in the country of residence. NRIs currently living in one of these countries are exempt from double taxation.
Due to a complicated tax system, understanding tax slab 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.
NRI Income Tax Slab Rates: FAQs
If their tax liability exceeds Rs. 10,000 in a financial year, NRIs have to pay advance tax. Under Section 234B and Section 234C, interest will be applicable if you don’t pay your advance tax.
An NRI’s income which is earned or accrued in India is taxable in India. The income earned outside India by an NRI is not taxable in India. Interest earned on NRE and FCNR savings and fixed deposit accounts is tax-free in India. However, interest earned on an NRO account is taxable.
NRI income tax rates are mentioned in the first table along with the NRI income tax slabs.
Like resident taxpayers, an NRI must file his/her return of income in India if his/ her Indian income exceeds Rs. 2.5 lakh for the financial year. The last date for income tax filing for NRIs is 31st July of the assessment year.
Yes, an NRI will be liable to pay capital gains tax in India upon the sale of his flat. The buyer must deduct taxes on the quantum of gains made by an NRI. The tax deduction rate for a long-term asset would be 20%.
If an NRI files Income Tax Return (ITR) after the termination of the financial year in India, they can claim on the deducted TDS. NRI will need to compute his/ her income and tax liability as per the existing slab rates to claim a refund on the TDS.
Interest earned on NRE and FCNR accounts is tax-free in India. Hence there is no TDS. However, interest earned on an NRO account is taxable and will be subject to a TDS of 30%. Other incomes like capital gains, fees for professional services, rental income, etc. may also be liable to TDS.
An NRI can reduce the TDS liability on sale of his/ her property. The NRI needs to file an application in Form 13 with the Income Tax Department for issuance of certificate for lower or Nil deduction of TDS.
NRIs can get tax deductions if they have some taxable income in India. They can claim deductions on the repayment of principal and interest components from the taxable income u/s 24, 80C and 80EE of the Income Tax Act.
Yes new tax regime is applicable to NRIs. The new tax regime allows the basic exemption to Rs. 3,00,000. However, NRIs can’t claim the rebate on full tax for income up to Rs. 7 lakh.
Section 80C enables NRIs to lower their taxable income by a maximum deduction of ₹ 1.5 lakh. This deduction can be achieved by making tax-saving investments, such as paying life insurance premiums, expenses like school tuition fees. However, if NRI taxpayers choose the new tax regime, they are not permitted to claim this deduction.