[NRI Only] Income Tax Slab for FY 2020-21 (AY 2021-22) – SBNRI

Tax Slab for NRIs 2021-22: 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 the Income Tax Slab for NRIs for AY 2021-22.

Income Tax for NRIs: All you need to know about NRI income tax
Income Tax for NRIs

Income tax filing for NRIs

Are NRIs required to file Income Tax Returns in India? This is a very common question asked by NRIs. Whether an NRI or resident Indian, any individual whose annual income exceeds Rs. 2, 50,000 is required to file an income tax return in India.  

Also Read: Income Tax e-filing: Top 10 NRI Income Tax Filing Benefits

Tax Slab for NRIs for AY 2021-22

Here are new income tax slabs for NRIs (Non-Resident Indians) for AY (Assessment Year) 2021-22/ AY 22-23: 

Income Tax SlabRate
Up to Rs. 2.50 lakhNil
Above Rs. 2.50 lakh to Rs. 5.00 lakh5% of (taxable income – Rs. 2.50 lakh); in case, taxable income is up to Rs. 5 lakh, the tax payable shall be nil on account of Tax Relief under Section 87A
Above Rs. 5 lakh to Rs. 7.5 lakhRs. 12,500 + 10% of (total income – Rs. 5 lakh)
Above Rs. 7.5 lakh to Rs. 10 lakh Rs. 37, 500  + 15% of (total income – Rs. 7.5 lakh)
Above Rs. 10 lakh to Rs. 12.50 lakhRs. 75,000 + 20% of (total income – Rs. 10 lakh)
Above Rs. 12.50 lakh to Rs. 15 lakhRs. 125,000 + 25% of (total income – Rs. 12,50,000)
Above Rs. 15 lakh Rs. 187, 500 + 30% of (total income – Rs. 15,00,000)
Surcharge (subject to Marginal Relief)– 10% of income tax for taxable income above Rs. 50 lakh
– 15% of income tax for taxable income above Rs. 1 cr
– 25% of income tax for taxable income above Rs. 2 cr
– 37% of income tax for taxable income above Rs. 5 cr
NRI income tax slab rates AY 2021-22

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). 

Tax Sab for NRIs: Taxable income of NRIs in 2021

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:

ParticularsRORRNORNR
Income received or considered to be received in IndiaTaxableTaxableTaxable
Income earned or accrued in IndiaTaxableTaxableTaxable
Income that accrues outside India from:
– Business controlled in India or profession established in India
– Other income


Taxable

Taxable


Taxable

Nontaxable


Nontaxable

Nontaxable
Residential status and taxability in India

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

Income from business and profession

Any income earned by NRIs from a business established or controlled in India is taxable to the NRI. 

Tax Slab for NRIs: 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 GainsTax LiableTax Deducted at Source (TDS)
Short TermAs per Tax Slab30%
Long Term20%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:

ParticularsDeductions 
Section 80CThe 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 80EInterest paid on an education loan
Section 80GDonations for social service activities
Section 80TTANRIs can claim a deduction up to Rs. 10,000 on income from interest on a savings bank account
House property income of NRIsNRIs can claim deductions on income from house property in India, the property tax paid, and interest on home loan
Deductions available for NRIs

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. 

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. 

NRI Taxation in India: 5 Major Things solved by SBNRI Tax Expert

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.

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Tax Slab for NRIs: FAQs

Do NRIs need to pay advance tax?

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. 

Is there any income tax for NRI in India?

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.  

What is the income tax rate for NRIs?

NRI income tax rates are mentioned in the first table along with the NRI income tax slabs.

When should an NRI file an income tax return in India? 

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. 

Is an NRI subject to capital gains tax if he sells his house property in India? 

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%.  

Can NRI claim TDS refund?

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. 

Is TDS applicable to NRIs?

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. 

How can NRI avoid 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. 

Can NRI claim deductions under Section 24?

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. 

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