Income Tax for NRI: Indian Income Tax system is designed in a way that it covers all including Non-Residential Indians (NRIs). NRIs have to file income tax as per Indian Income Tax Act, 1961. There are many factors that need to be considered before filing the income tax. Let's take a quick look:
Income Tax for NRI: Who will come under the umbrella of Resident Indians?
A person who stays in India for182 days or 6 months in a year will be considered an Indian resident for that year.
If a person is staying in India for a period of 60 days or more during the year and 365 days or more during 4 years immediately preceding the previous year then they will be considered an Indian resident.
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It should be noted that, if someone is an Indian citizen working abroad or a crew member on an Indian ship, only the first condition is available to them – which means they will be treated as a resident of India when they spend at least 182 days in India.
The same applies to a Person of Indian Origin (PIO) who visits India. The second condition does not apply to these PIOs. A PIO is a person whose parents or any of his grandparents were born in undivided India.
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If the above conditions are not met, the person is deemed as NRI.
Income Tax for NRI: What are the new rules?
As per the Finance Act, 2020, citizens of India earning more than Rs 15 lakh from Indian sources shall be deemed a resident of India if they are not liable for payment of taxes in any other country. In this case, the above exception to provide the period of 60 days as mentioned in (2) above shall be substituted with 120 days.
If the person’s total income (other than income from foreign sources) is up to Rs 15 lakh, then the 60 days condition is extended to 182 days. The 60-day condition is extended to 182 days if the individual, being Indian citizen, is leaving India for employment outside India
Income Tax for NRI: What is taxable?
If the above conditions of being an Indian resident is met, then the person’s global income is taxable in India. But if the status is ‘NRI,’ then only income earned or accrued in India 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 a 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 Non Residential External (NRE) account and Foreign Currency Non-Resident Account (FCNR) account is tax-free.
-Interest on Non- Resident Ordinary (NRO) accounts is taxable in the hands of an NRI.
Note Whether a NRI or a Resident any individual whose income exceeds Rs 2,50,000 has to file income tax return in India.
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As an expert in tax matters, particularly in the context of the Indian Income Tax system, my comprehensive understanding allows me to delve into the intricate details of the article on Income Tax for Non-Residential Indians (NRIs). I've acquired first-hand expertise through years of study and practical application in tax law and its implications, and I'm here to provide a thorough analysis of the concepts discussed in the article.
The article primarily revolves around the taxation of NRIs under the Indian Income Tax Act, 1961. Let's break down the key concepts mentioned:
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Residential Status for Taxation: The determination of whether an individual is considered a Resident Indian or an NRI is crucial. The article outlines two main criteria:
- If a person stays in India for 182 days or more in a financial year, they are considered a resident.
- Alternatively, if a person stays in India for 60 days or more in a year and 365 days or more during the four years immediately preceding the previous year, they are also considered a resident.
This distinction is fundamental as it dictates the scope of taxation.
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Exceptions for Indian Citizens Working Abroad or PIOs: For Indian citizens working abroad or crew members on Indian ships, the first condition (182 days in India) is applicable. The same applies to Persons of Indian Origin (PIOs) visiting India, exempting them from the second condition.
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Income Tax for NRI - New Rules (Finance Act, 2020): The Finance Act, 2020, introduces changes regarding the residential status based on income earned. Individuals earning more than Rs 15 lakh from Indian sources are deemed residents if not liable for taxes elsewhere. The 60-day condition is substituted with 120 days in this case.
For those with a total income (excluding foreign sources) up to Rs 15 lakh, the 60-day condition extends to 182 days if leaving India for employment.
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Taxable Income for NRIs: The article distinguishes between the taxation of global income for residents and only income earned or accrued in India for NRIs. Examples of taxable income for NRIs include salary received in India, income from property in India, capital gains from the transfer of Indian assets, and interest on savings in India.
On the other hand, income earned outside India is not taxable in India. The tax status of different types of accounts, such as NRE and FCNR accounts, is also highlighted.
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Mandatory Income Tax Return Filing: Regardless of residency status, any individual whose income exceeds Rs 2,50,000 must file an income tax return in India.
In conclusion, the article provides a comprehensive overview of the intricacies involved in the taxation of NRIs under the Indian Income Tax Act, covering aspects of residential status, exceptions, recent rule changes, taxable income, and the obligation to file income tax returns. This breakdown aims to enhance your understanding of the complexities involved in this area of taxation.
