If you belong to the “salaried” bracket, then you cannot be far away from ‘tax’. It is part and parcel of your life – for Indians, who reside in India and those who choose be NRIs. The latter are in a complex space – for they have to deal with two taxation regimes – in India, and in the country in which they have found employment.
Like any other Indian citizen, NRIs are taxed, so also they can enjoy the rebates and deductions provided for under Section 80 of the Income Tax Act. In this scenario, there are options for tax deductions for NRIs in areas like – student loans, charitable donations etc.
When is an NRI liable to pay tax in India?
The term NRI is applicable when a person is present in India for less than 60 days during the relevant tax year. When a citizen of India, residing outside India or an Indian citizen has left India for employment, he can be termed a Non-Resident if his or her total stay in India is less than 182 days in the relevant tax year. Essentially, NRIs are subject to pay taxes as per Indian laws. What is pertinent, is that these are based on a “source rule”, which points to the fact that only income that accrues in India is taxed in India.
All people, who have an income exceeding ₹2.5 lakh are required to file taxes. Point to be noted is that – NRIs can benefit from filing their returns especially, if they want to claim a refund or they suffers a loss, which they may want to carry forward.
Some thumb rules
The taxable income for NRIs, typically, should fall under the following conditions, when:
- Salary received in India or salary for service provided in/from India. Here, the NRI is taxed according to the tax bracket they would fit into.
- Income from a house property (rented or lying vacant) in India. Tax will be applicable as per prevailing rates. If the property is rented the tenant has to deduct 30% as TDS before making a payment to the NRI.
- Capital gains on transfer of assets situated in India. What is taxable in India are – capital gains on investments in the country in shares or securities.
- Sale of a house property to give you capital gains, then the buyer will deduct TDS at 20% for long-term gain and at 30% for short-term gain.
- Income from FD (Fixed Deposits) or interest on Savings Bank Account
- Interest on NRO account is taxable for an NRI. Taxes will be deducted by the bank at 30%.
- Any income earned by an NRI from a business controlled or set up in India is taxable.
- Gifts crossing ₹50K per annum received in India from a non-relative is taxable.
Incomes not taxable in India
- Income which is earned outside India is not taxable in India.
- Interest earned on an NRE account and FCNR account is tax-free.