Phoenix Auditing

NRI Taxation

  1. How to determine Residential Status?
  2. What income is taxable in India for an NRI?
  3. Is Income earned abroad by NRI taxable?
  4. Do NRIs need to file Income Tax return in India?
  5. When is the last date to file return in India?
  6. Do NRIs have to pay Advance Tax?
  7. Taxable Income for an NRI
  8. Deductions under 80C for NRIs
  1. How to determine Residential Status?

You are considered an Indian resident for a financial year:

  • When you are in India for at least 6 months (182 days to be exact) during the financial year
  • You are in India for 2 months (60 days) for the year in the previous year and have lived for one whole year (365 days) in the last four years

If you are an Indian citizen working abroad or a member of a crew on an Indian ship, only the first condition is available to you – which means you are a resident when you spend at least 182 days in India.

The same is applicable to a Person of Indian Origin (PIO) who is on a visit to India. The second condition is not applicable to these individuals. A PIO is a person whose parents, or any of his grandparents were born in undivided India.  

You are an NRI if you do not meet any of the above conditions

  •  What income is taxable in India for an NRI?

 If you are a NON RESIDENT INDIAN, simply put –

  • Any income that is ‘earned’ in India is taxable for you in India.
  • Your Income outside of India is not taxable in India.
  • Is Income earned abroad by NRI taxable?

 If your status is ‘resident,’ your global income is taxable in India. If your status is ‘NRI,’ your income which is earned or accrued in India only is taxable in India.

Salary received in India or salary for service provided in India, income from a house property situated in India, capital gains on transfer of asset situated in India, income from fixed deposits or interest on savings bank account are all examples of income earned or accrued in India. These incomes are taxable for an NRI.

Income which is earned outside India is not taxable in India. Interest earned on an NRE account and FCNR account is tax-free. Interest on NRO account is taxable for an NRI.

  • Do NRIs need to file Income Tax return in India?

NRI or not, any individual whose income exceeds Rs.2,50,000 is required to file an income tax return in India.  

  • When is the last date to file return in India?

July 31st is the last date to file income tax return in India for NRIs.

  • Do NRIs have to pay Advance Tax?

If your tax liability exceeds Rs 10,000 in a financial year, you are required to pay advance tax. Interest under Section 234B and Section 234C is applicable when you don’t pay your advance tax.

  • Taxable Income for an NRI
  • Income from salary

Income from salary will be considered to arise in India if your services are rendered in India. So even though you may be an NRI, but if your salary is paid towards services provided by you in India, it shall be taxed in India immaterial of where you are receiving the income

  • Income from House property

Income from a property which is situated in India is taxable for an NRI. The calculation of such income shall be in the same manner as for a resident. This property may be rented out or lying vacant.

  • Rental payments to an NRI

A tenant who pays rent to an NRI owner must remember to deduct TDS at 30%. The income can be received to an account in India or the NRI’s account in the country he is currently residing.

  • Income from other sources

Interest income from fixed deposits and savings accounts held in Indian bank accounts is taxable in India. Interest on NRE and FCNR account is tax-free. Interest on NRO account is fully taxable.

  • Income from Business and Profession

Any income earned by an NRI from a business controlled or set up in India is taxable to the NRI.

  • Income from Capital Gains

Any capital gain on transfer of capital asset which is situated in India shall be taxable in India. Capital gains on investments in India in shares, securities shall also be taxable in India.

  • Investment Income

When an NRI invests in certain Indian assets, he is taxed at 20%. If the special investment income is the only income the NRI has during the financial year, and TDS has been deducted on that, then such an NRI is not required to file an income tax return.

  • Deductions under 80C for NRIs
  • Life insurance premium payment
  • Children’s tuition fee payment
  • Principal repayments on loan for the purchase of a house property
  • Unit-linked insurance plan (ULIPS)
  • Investments in ELSS

Note: The above investments should be made in India.