Income Tax for NRI - Complete Guide

Table of Content

1. Who is an NRI?

2. Income tax rules for NRIs

Individuals residing in the country are required to pay various types of taxes such as service tax, property tax, indirect tax, and most importantly, income tax. Non-Resident Indians (NRIs), on the other hand, fall under the category of NRI taxation. This covers aspects of wealth tax, property tax, and the main focal point – income tax.

Who is an NRI?

Citizens, who leave India for the purpose of overseas employment or as part of a crew on an Indian ship and have a physical presence of 182 days or more in the country in a specified year, are known as NRIs. NRIs need to know about the various rules, income tax rates, and tax exemptions available to them.

Income tax rules for NRIs

It is important to note that only income earned by an NRI in India is liable for tax. This could include income earned through property rental, interest on term deposits, and returns on investments in mutual funds or shares, among others. In an event that the income earned exceeds the basic exemption as per the Income Tax Act, 1961, the NRI is required to pay tax according to the income tax slab he/she falls under.

Following are four income tax regulations you may keep in mind if you are an NRI.

• Income taxed in India

  Long-term gains, as well as short-term gains from investments or sale of assets, is taxed in India. Besides, income received from rent is also taxed, subject to a standard deduction of 30% of the rent (minus municipal taxes).

  NRIs do not have to pay taxes in case they gain control of assets received through inheritance. However, recurring gains from such assets such as rental income is taxable.

• Deductions and exemptions

  As an NRI, you may avail of numerous deductions to reduce your tax liability. You may enjoy exemption under Section 80C towards tuition fee payment, life insurance premiums, and investment in Unit Linked Insurance Plans, among others. You may also avail of deduction under numerous other sections of the Income Tax Act, namely Section 80D, 80E, 80G, 80E, and Section 80TTA.

• Documentation

  Previously, you were liable to pay 20% or the effective rate, whichever of the two is higher if you were unable to furnish your Permanent Account Number (PAN) details. However, according to the new rules, you need not necessarily provide PAN details. You may submit the paperwork required under the latest provision.

• Rules upon return to India

  In case you come back to the home country, i.e. India and become an Ordinary Resident Indian, it is necessary for you to disclose overseas income as well as overseas assets while filing tax returns for that particular year. Failure to do so attracts punitive action under the Undisclosed Foreign Income and Assets Bill, 2015.

  You may keep the aforementioned points in mind while filing your income tax. You also need to be aware of income tax slab 2018 19 and rates in order to be a well-informed taxpayer.

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