Non-Resident Individuals i.e., NRIs tend to get confused about the Income Tax provisions applicable to them under Income Tax Act, 1961. They have many questions such as, under which section NRIs income is taxable in India, do NRIs need to file returns in India, Is any deduction available to NRIs, and so on. Today, through this article we made a humble attempt to give such people a better clarity by answering the most frequently asked question regarding tax implications on NRIs in India.
So, without further ado. Let’s get started.
Happy reading!
● Who is considered a Non-Residential Individual in India for taxability purposes?
If an individual assessee doesn’t satisfy any one of the following basic conditions then he is considered a Non-Resident Individual (NRI) assessee in India for the relevant previous year and liable to be taxed accordingly.
I. He stays in India for 182 days or more in the relevant previous year, or
II. Stay in India for 60 days or more in the relevant previous year and 365 days or more in the last four previous years.
To know more about How to determine the residential status of an Individual? Read our detailed article here.
● Which section of Income Tax Act says that NRI income is taxable in India?
Section 9(1) of the Income Tax Act dealt with the taxability of an NRI income. As per the same, income earned or accrued in India or deemed to accrue or arise in India, is liable to be taxable in the hands of a Non-Resident. Although, any global income earned by an NRI in another country shall be liable to tax as per the law prevailing in that country and the Double Taxation Avoidance Agreement (DTAA) if any signed with India.
● Do NRIs need to file a return of Income Tax in India?
Yes, all Individuals whose Gross Total Income before claiming any deductions exceeds Rupees 2,50,000/- are liable to file an Income Tax return under Income Tax Act. Therefore, it doesn’t matter what is your status whether resident or non-resident, if you exceed the said limit you are required to file a return of Income Tax in India.
● What is the due date to file an Income Tax Return as an NRI?
As per the Income Tax Act, all individuals, whether resident or non-resident need to file an Income Tax Return on or before 31st July of the relevant assessment year. Although, if your accounts need to be audited then you need to file an Income Tax return on or before 30th September of the relevant assessment year.
Please note that these due dates can be extended by CBDT by issuing the official notification.
● Which tax slab rate applies to an NRI?
The tax slab rates applicable to an NRI under the old tax regime (for Assessment Year 2023-24), are given as follows:-
Taxable Income | Income Tax Rate (AY 2023-24) |
Up to Rs. 2,50,000 | |
Rs. 2,50,001 – Rs. 5,00,000 | 5% |
Rs. 5,00,001 – Rs. 10,00,000 | 20% |
Above Rs. 10,00,000 | 30% |
An individual is a resident or non-resident can also opt for a new tax regime under section 115BAC, in that case following rates shall apply:-
| Taxable Income | Income Tax Rate (AY 2023-24) Under the new tax regime |
| Up to Rs. 2,50,000 | |
| Rs. 2,50,001 – Rs. 5,00,000 | 5% |
| Rs. 5,00,001 to Rs. 7,50,000 | 10% |
| Rs. 7,50,001 to Rs. 10,00,000 | 15% |
| Rs. 10,00,000 to Rs. 12,50,000 | 20% |
| Rs. 12,50,001 to Rs. 15,00,000 | 25% |
| Above Rs. 15,00,000 | 30% |
Please note that an individual opting for a new tax regime needs to forgo certain tax deductions and exemptions available to him.
- Is a rebate under section 87A of the Income Tax Act is allowed to an NRI?
No, the rebate under section 87A of the maximum amount of Rupees. 12,500/- is not allowed to Non-Resident Individuals (NRIs). Although, they are liable to pay Surcharge and Health & Education cess on their tax liability.
- Do NRIs have to pay advance tax under Income Tax Act, 1961?
Yes, if NRI tax liability exceeds the limit of Rupees 10,000 in a financial year, then he is mandatorily required to pay advance tax. In case he fails to do so then the interest under section 234B and section 234C shall be levied.
To know more about advance tax liability, read our detailed article by clicking here.
- Is TDS deducted while making payments to a person who has the status of NRI?
Yes, TDS is deducted while making payments to an NRI. The person making the payment to a Non-Resident Individual is liable to deduct TDS under Income Tax Act. Also, that person is required to file Form 15CA and Form 15CB (a certificate issued by a Chartered Accountant).
To know everything about Form 15CA and 15CB click here.
- Which income is considered taxable for an NRI under various heads?
The income taxable in the hands of an NRI under various heads is explained as below:-
Income Under Salary – As an NRI, your salary income is taxed if you have received it in your account maintained in banks located in India or someone else received it on your behalf in India. Also, in case you received it outside India but have earned it by rendering services in India then also it shall be taxable in your hands as per the Income Tax act.
Income Under House Property – An NRI is liable to be taxed in India for Income from a house property that is situated in India. Also, he is allowed to take the standard deduction of 30%, deduction of interest amount paid on a home loan, deduction of principal amount repayment on such loan, and stamp or registration fees paid.
Please note any resident paying rental to an NRI is liable to deduct TDS at the rate of 30% and is also required to file Form 15CA and Form 15CB.
Know more about the TDS on Rental Income (please link to the page) and the applicability of Form 15CA and Form 15CB (please link to the page).
Income Under Other Sources – The Interest income earned by an NRI on the fixed deposits and savings accounts held in Indian Banks is taxable in India. Although, interest earned or received on NRE and FCNR accounts is tax-free but the interest on the NRO account is fully taxable under Income Tax Act.
Income Under PGBP – As per the Income Tax Act, any income earned by an NRI from a business connection in India is taxable in his hands in India.
Income Under Capital Gains – Long Term Capital Gains (LTCG) or Short Term Capital Gains (STCG) arising on the transfer of capital assets situated in India shall be taxable in the hands of an NRI in India. Also, the capital gains arising from the investments made in India on shares and securities shall also be taxable in India.
- Is an NRI allowed to claim the deductions on his taxable income?
Yes, an NRI is allowed to claim certain deductions on his taxable income while filing the return, which are given as follows:-
- Deduction under Section 80C (Payment made in respect of only a few of investments and expenses is allowed to claim)
- Deduction under Section 80D
- Deduction under Section 80E
- Deduction under Section 80G
- Deduction under Section 80TTA
To know more about the deductions available to Non-Resident Individuals (NRI) click here.
- What tax exemptions are available to an NRI?
Non-Resident Individuals (NRIs) assessees can claim the tax exemptions available on the sale of Long Term Capital Assets under section 54, section 54EC, and section 54F of the Income Tax Act.
To know more about these capital gain tax exemptions click here.
- Double Taxation Avoidance Agreement (DTAA)?
Yes, an NRI can avoid the double taxation on his income by taking the benefit available under the Double Taxation Avoidance Agreement (DTAA) signed between India and other countries.
Under section 90, an assessee can either claim tax relief under the exemption method where his income is taxed in only one country and exempted in another or take advantage of the tax credit method in which if income is taxed in both countries the tax credit can be claimed in the country of residence. Which method of relief applies will depend on the article provisions explained in DTAA.
Also, as per section 90 of the Income Tax Act, an assessee has an option to be taxed either as per the rate given under DTAA or as per the tax rate provisions applicable under Income Tax Act, whichever is more favorable to him.
We hope that most of your questions regarding tax implications on NRI got answered in this article, in case you have any further questions or need any assistance then please reach out to us. Our team of experts is always ready to help you.
