If an NRI receives any kind of salary which is to be paid directly into an Indian account it is subject to the taxation laws that are used in India Taxable income of NRI’s in India can be judged by following ways :
Taxable Income can be Judged by Judging the residential status of a person in India?
Any person is considered to be an Indian resident only if:
- When the person has stayed in India for 182 days or more during one financial year.
- When a person has lived in India for 60 days in the previous year and lived for 365 days in the last 4 years of his stay.
Only a person who is the resident of India is thus liable to pay the Income tax under the Income Tax act of 1961.
Special Condition: If a person is an Indian citizen who is working overseas or is a member of an Indian shipping company then only the first condition is to be fulfilled by the person. An NRI is a person who fails to meet any of these given conditions.
Thus according to the Foreign Exchange Management Act and the Income Tax Act, 1961, a NRI can should taxes under specific conditions as it is listed below:
- Taxable income in a financial year in India which is above Rs.2 lakh (exemption limit)
- Long-term or the short-term capital gains that are earned from the sale of any kind of property
Taxable Income for an NRI in India, are:
- Income from Salary: When a person has received any salary in India or when someone who does the work on your behalf then the income is taxable i.e. if an NRI receives any kind of salary directly into an Indian account it is subject to the taxation laws that are used in India, the income received is taxed according to the slab rate. In case an individual is a Government employee then the income from the services that are rendered outside India is thus taxable, however, Income of Diplomats, ambassadors is also tax-free and it is fully exempted from tax.
- Income From House Property: A tenant which is paying any kind of rent to an NRI owner, the TDS is thus deducted at 30%, however the income can be received into an Indian account or the account of the NRI’s country of residence. Whereas, a person who is paying a remittance to a Non Resident has to submit form 15CA which has to be submitted online.
- Income from other sources: Incomes from the interest from fixed deposits and the savings account which are held in an Indian bank account are however taxable in India for an NRI whereas the interest on NRE and the FCNR account is tax free and the interest that is earned on a NRO account is fully taxable in India.
- Income From Business and Profession: Any income, which is earned by an NRI from any business that is controlled in India, it is is fully taxable under the slab rates.
- Income From Capital Gain: Income from capital gain or the transfer of capital asset that are situated in India would be taxable in India under the IT act of 1961. Whereas, if you sell any housing property and also earn a long-term gain a TDS at 20% is deducted by the buyer. However, an individual is also allowed to claim the capital gains exemption by investing in a house property as per sec 54 or by investing in capital gains bond as per section 54EC.
However some of the deductions that are available to NRIs are :
|Section 80C||NRIs can thus avail of the following deductions under section 80 C
|Section 80D||Premium that is paid as a health insurance policy|
|Section 80G||Donations on the social service activities|
|House property income for NRIs||NRIs can also avail of deductions for the Income from House Property in India, property tax and also interest income on the home loans|
|Section 80E||Interest that is earned on an education loan|
|Section 80TTA||Up to Rs.10,000 can also be claimed as a deduction on interest income on the savings bank accounts|
Deductions which are Unavailable to the NRIs:
NRIs cannot avail of the following deductions which are available under the IT Act, 1961
- Investment which is made under RGESS under section 80CCG
- Differently-abled which are defined under Section 80U, Section 80DD and Section 80DDB
- Investments which are unavailable to the NRIs are listed below:
- Senior Citizen Savings Scheme
- National Savings Certificates
- Post Office 5 Year Deposit Scheme
- Public Provident Fund
The income tax rules that are applicable for NRIs (Non Resident Indians) which differ from that of the resident Indians. It is thus important to note that the NRIs should pay taxes for either the capital gains or for the income which they earn in India.