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The income tax regulations that apply to non-resident Indians differ from the laws and rules that apply to resident Indians. Non-resident Indians are required to pay taxes on all income and capital gains earned in India. The income tax for NRI differs from that for resident Indians. It is crucial to know that NRIs are required to pay taxes on capital gains or income earned in India.

Checking Residential Status

There are two parts to when an individual is considered an Indian resident.

  • If a person’s total Indian income exceeds INR 15 lakhs in a fiscal year and he or she remains for more than 120 days in the same fiscal year.
  • An NRI is a resident of India if they are an Indian citizen with a total income (other than from foreign sources) of more than INR 15 lakhs. They are not subject to taxation in any other nation.

Filing Income Tax for NRIs

NRIs must pay tax on income earned or derived in India. NRIs must also pay tax on income perceived to accrue or originate in India. In India, money received or presumed to be received is taxed.

  1. Determine your residency status: The first step is to determine your residency status. This must be decided in relation to a fiscal year. However, if you have recently relocated overseas, it is a little more complicated. The same thing happens if you have recently returned to India. The residence status is established in accordance with Section 6 of the Income Tax Act of 1961. The amount of days you spend in India is critical. An NRI must spend at least 182 days outside of India. Otherwise, one is considered a resident.
  2. Determine your taxable income: You must determine your taxable income. We must comprehend the concept of total gross revenue. It refers to total earnings before taxes. If your entire gross income is more than Rs 2.5 lakhs, then in that scenario, you will be required to pay taxes in India. This money might come from a variety of sources. It might be in the shape of a raise in pay. Capital gains from the selling of stocks and mutual funds might be included. The bracket also includes interest on NRO deposits and rental revenue. NRIs, on the other hand, can profit from tax treaties. If 195 TDS is deducted from their income, NRIs can also claim a refund. To do so, you must balance the TDS credit and advance tax as shown on Form 26AS.

However, filing returns is required for both of the aforementioned. The gross revenue is unimportant. NRIs can also claim a tax deduction of up to Rs 1.5 lakhs under Section 80c of the Income Tax Act according to the NRI income tax slab rates. They cannot, however, invest in some securities, such as the Public Provident Fund (PFF). You must disclose your assets and liabilities in India if your income in India exceeds Rs 50 lakhs.

  1. Claim double taxation treaty benefit: To better understand how to submit an income tax return for NRI, let us examine the Double Taxation Avoidance Agreement (DTAA). The DTAA allows an NRI to avoid paying tax on the same income twice. According to the DTAA, income may be excluded from a tax deduction in one nation or taxed at a reduced rate in the home country. Assume you have already paid taxes in India. You can then claim a tax credit in your own country. The credit is available on the same income tax paid.
  2. Check IT returns: After filing IT returns, you must verify them within 120 days. They are not valid otherwise.

Taxable Income for Non-Resident Indians

According to the Foreign Exchange Management Act and the Income Tax Act of 1961, a non-resident Indian (NRI) can pay taxes under the following conditions:

In India, taxable income in a fiscal year exceeds Rs.2 lakh (exemption limit)

Capital gains are made through the sale of any property, whether long-term or short-term.

The table below contains information about NRIs’ taxable income.

Invest in elss funds
  1. Income Tax from House Property or Home Loan

The income from a house is taxed at the current rates. In India, capital gains produced through the rent, sale, or lease of an asset are taxed under income tax laws. An NRI can claim a 30% discount on his or her house loan in India. An NRI can also claim a deduction for principal repayment, registration fees, and stamp duty under Section 80C. If a renter pays rent to his owner, who is an NRI, the former might deduct 30% and file Form 15CA.

  1. Salary

Any money earned in India, or even received on behalf of an NRI, is subject to taxation. In other words, if an NRI earns a wage for services rendered in India, it is subject to taxation.

  1. Investment

Short-term and long-term capital gains and income from securities are taxed. Gains on shares held in India are taxed. In India, capital gains on the transfer of an asset are taxed.

  1. Third Source Incomes

The interest income earned on savings bank accounts and fixed deposits maintained by an NRI in India is taxed.

  1. Investments

NRIs are eligible for a tax break on investment income. If an NRI invests in assets in India, he gets taxed at a rate of 20%. Nonetheless, if TDS has been deducted from the invested income, he or she does not need to submit returns. The following investments are eligible for preferential treatment:

  • Securities issued by the central government
  • Shares in Indian corporations
  • Debentures Deposits (for publicly listed companies)

Income Tax Deductions

Available
  • Section 80C: An NRI can avail of the following deductions under this

Tuition payments for youngsters Ulips

Payment of a life insurance policy premium

Principal repayments on a house loan under ELSS

  • Section 80D: A health insurance policy’s premium was paid.
  • Section 80G: Donations for charitable purposes.
  • House Property: NRIs can deduct income from house property in India, property tax, and interest income on home loans.
  • Section 80E: Earned interest on a student loan.
  • Section 80TTA: Interest income on savings bank accounts can be deducted up to Rs.10,000.
Not Available
  • Section 80CCG investment under RGESS
  • Sections 80U, 80DD, and 80DDB provide for differently-abled individuals.
  • The following investments are not available to NRIs:
  • Senior Citizen Savings Plan
  • Certificates of Deposit (NSCs)
  • 5 Year Post Office Deposit Scheme
  • PPF

FAQs

Q1. What is ITR form for NRI?

NRIs often submit their taxes using ITR-2. Any modifications will be revealed only once the Central Board of Direct Taxes (CBDT) publishes all tax filing forms. You can declare both of your properties while submitting your ITR.

Q2. Do I need to file my Income Tax Return in India?

Any individual whose income is above Rs.2,50,000, whether an NRI or not, is required to submit an income tax return in India.

Q3. Should an NRI pay advance tax?

If your tax due in a fiscal year exceeds Rs 10,000, you must pay advance tax. When you fail to pay your advance tax, you will be charged interest under Sections 234B and 234C.

Q4. Is my income from business taxable?

Any money made by an NRI from a business controlled or established in India is taxed.

Q5. When do I not need to file an income tax return?

When an NRI invests in certain Indian assets, he is subject to a 20% tax. If the NRI’s sole income during the fiscal year is the special investment income, and TDS has been deducted from it, the NRI is not obliged to file an income tax return.

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