A person who is not a resident of India is considered to be a non-resident of India (NRI). You are a resident if your stay in India for a given financial year is : 182 days or more or 60 days or more and 365 days or more in the 4 immediately preceding previous years. In case you do not satisfy either of the above conditions, you will be considered an NRI.
NRI or not, any individual whose income exceeds exemption limit as specified is required to file an income tax return in India or has income earned by way of capital gain.
31 st July is the last date to file income tax return in India without penalty. Return can be filed till 31 st March of next year will penalty going upto Rs 10,000.
The liability to file return of income is governed by different set of parameters laid down in the Income Tax Act 1961.
Currently, Refunds can be credited only to a bank account located in India.
For a Non-Resident, a valid email id will be sufficient to register. All the relevant verification
PINs and intimations will be shared to such email id.
Interest income from fixed deposits and savings accounts held in Indian bank accounts is taxable in India. Interest on NRE and FCNR account is tax-free. Interest on NRO account is fully taxable.
Any income earned by an NRI from a business controlled or set up in India is taxable to the NRI.
Any capital gain on transfer of capital asset which is situated in India shall be taxable in India. Capital gains on investments in India in shares, securities shall also be taxable in India. However, certain provisions are there, compliance of which exemption can be claimed.
Most of the deductions under Section 80 are also available to NRIs. For FY 2017-18, a maximum deduction of up to Rs 1.5 Lakhs is allowed under Section 80C from gross total income for an individual.
Some Investments under Section 80C:
- Investment in PPF is not allowed (NRIs are not allowed to open new PPF accounts, however, PPF accounts which are opened while they are a resident are allowed to be maintained)
- Investments in NSCs
- Post office 5-year deposit scheme
Senior citizen savings scheme
Long term capital gains are taxed at 20%. Do note that long-term capital gains earned by NRIs are subject to a TDS of 20%.
NRIs are allowed to claim exemptions under Section 54, Section 54 EC, and Section 54F on long-term capital gains. Therefore, an NRI can take benefit of the exemptions from capital gains at the time of filing a return and claim a refund of TDS deducted on Capital Gains.
Exemption under Section 54 is available on long-term capital gains on sale of a house property. Exemption under Section 54F is available on sale of any asset other than a house property.
NRIs can avoid double taxation (meaning: getting taxed on the same income twice in the country of residence and India) by seeking relief from DTAA between the two countries.
Under DTAA, there are two methods to claim tax relief – exemption method and tax credit method.
By exemption method, NRIs are taxed in only one country and exempted in another. In tax credit method, where the income is taxed in both countries, tax relief can be claimed in the country of residence.
Since you are an NRI, only the income that accrues to you in India will be taxable. You would not be taxed on your global income. Accordingly, you will have to pay taxes in India on the rental income from the flat situated in India. However, you will not be liable to pay any taxes on the salary income that you receive from the USA.
An NRI in receipt of income in India is taxable in India on such income i.e. India as a source state has the right to tax such income. However, the country of which such NRI is a resident will also have a right to tax such income as it is the residence state. In the process, the NRI will end up getting taxed twice on the same income.
To overcome this, India has entered into DTAAs with various countries which help eliminate such double taxation by allowing the taxpayer to claim credit for foreign taxes paid while filing their return of income in the home country.
Generally, the prescribed income tax rate for an NRI’s income is the maximum tax rate at which relevant Income is taxable in India. However, in the majority of the cases of NRIs, the actual tax liability is lower than the TDS. However, the higher deduction of tax so made is generally not claimed as a refund by filing ROI. Whenever a person’s actual tax liability as per the provisions of the Act is lower than the TDS, he may apply for Tax Exemption Certificate (TEC) from the Indian Income Tax Department
Normally the Exemption Certificate is issued within 10-30 Days.
NRI who has obtained Exemption Certificate needs to submit it to the Payer of the income, who will follow the certificate and not deduct tax or may deduct at a lower rate as given.
NRI returning India for good should be aware of the various aspects of Foreign Exchange Regulations Act (FEMA) and Banking regulations in order to rearrange his financial affairs in India. He should also inform those related to his residential status according to income tax act i.e. inform the banker and the companies concerned regarding the change of status from Non resident to Resident.
Yes, NRI can purchase shares or convertible debenture of an Indian Company through stock exchanges, under the portfolio investment scheme on repatriation and /or non repatriation basis.
Yes, clients can have two separate trading accounts based on NRE & NRO.
In case of NRI, if the shares sold were held on repatriation basis, the sale proceeds (net of taxes) may be credited to his NRE / FCNR (B) / NRO accounts of the NRI, whereas sale proceeds of non repatriable investment can be credited only to NRO accounts
The 3 types of rupee accounts that can be maintained by NRIs are:
- NRE – Non Resident (External) Rupee Account
- NRO – Non Resident (Ordinary) Rupee Account
- FCNR – Foreign Currency Non Resident (Bank) Account
Interest earned from NRE account is tax exempted; whereas, interest earned from NRO account will be taxable.
Different taxable incomes for NRI individuals in India are :-
- Income accrued/earned in India
- Income deemed to be received or received in India
- Income deemed to be accrued in India
Yes, Funds can be repatriated from NRO A/c only upto the specified limit complying with the provisions of FEMA and Required Documentation which includes Form 15CA and 15CB i.e. Income Tax Form and Certificate of a Practising CA.
No, NRI needs to inform the bank immediately on obtaining NRI Status. Bank will convert regular saving account into NRO A/c with all details same.
No, as per FEMA rules NRI cannot buy Agriculture Land. At the same time, NRI can get it through inheritance from his family members.
Yes, the buyer is required to deduct tax @ 1% and pay it to government through return cum challan if the sum consideration payable for purchase of property is above Rs 50 Lacs.
Yes, you will need to open an NRO account for this purpose. The gift from your father cannot be credited to your NRE account. Also, he can be the second holder in this NRO account.
TDS will be deducted on the interest earned from NRO account @30% plus applicable cess and surcharge. The TDS rate is 31.2% on interest upto Rs 5 million. The entire NRO interest is subject to TDS without any exempted threshold.
Only way to claim refund is to file tax returns within the time limit specified.
Yes, The Tax Officer has the rights to issue notice asking for all Foreign Income and Assets. Going forward he can ask details for Income upto Last 6 Years and further more if there are reasons.
Contact us now