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The taxation system in India is an essential component of nation’s economy. Tax on Individual’s income depends on the source of such Income and your residential status in India. If you reside and work abroad, the NRI income tax you will pay depend upon your residential status of the year. The foreign exchange management Act (FEMA) laid down that a civilian of origin of India can be referred to as NRI if he/she spends a certain number of days abroad and subsequently, a comparative period of absence is maintained in India. By default there is no tax on foreign income of resident Indian or an income that an NRI earns abroad is exempted from tax. NRI Tax filing India - ITR for NRI or NRI income tax is easy process with Tax Advisory.

This article is beneficial for NRI Indians who are living outside and have an income from India through sale of property or by other means.

Determine your Residential status

Check here: - Whether you are NRI or not?

Prior to amendment, ‘Non-resident Indian’ is an individual who is a citizen of India or a person of Indian origin and who is not a resident of India. Thus, in order to determine whether an individual is a non-resident Indian or not, his residential status is required to be determined under section 6. As per section 6 of the income tax, an individual is said to be non-resident in India and an individual is deemed to be resident in India in any previous year if he satisfies any of the following conditions:

• If he is India for a period of 182 days or more during the previous year; or
  • If he is in India for a period of 60 days or more during the previous year and 365 days or more during 4 years immediately preceding the previous year. 

However, after amendment, a dual condition has been set for determining of the residential status for such Indian citizens visiting India. Under section 6(1), an individual, being a person of Indian origin and who comes on a visit to India during the previous year will be considered as a resident in India, if:

• You stayed in India for a total period of 120 days or more during the previous year AND for 365 days or more during the 4 years immediately preceding the relevant previous year; AND
• Your total Income other than income from foreign sources exceeds Rs. 15,00,000 and also they are not liable pay tax in any other country.

However, if the total income does not exceed Rs. 15,00,000, the said individual would be a resident in India, only if you stayed in India for a total period of 182 days or more during the previous year.

Note: - A person shall be deemed to be if Indian origin if he, or either of his parents or any of his grand-parents, was born in undivided India.

Taxable incomes for NRIs

NRI should file an NRI Tax filing India (non resident tax return) in India if they have taxable income in India. There are various categories of taxable income:

1. Salary received for services provided in India.
2. Income from house property (standard deduction of 30% applies).
3. Revenue from fixed deposit.
4. Capital gain earned on the transfer of assets located in India.
5. Income from business in India.
6. Interest on saving accounts.

Further, losses of a particular financial year are allowed to be carried forward for being set-off against income of future financial years only when the return of income for the year of loss has been accordingly filed.

NRI income tax rules

Income tax rules for NRI returning to India (NRI status rules) are as follows:

• Income tax for NRI in India is based only on the income irrespective of any gender, age or other specification.
• All the earnings NRIs are levied incognizance of threshold value for TDS.
• If your income is liable to clauses under section 115G of the IT act there is no need to file ITR.
• No nominal deductions are applicable on investment income except under specific condition.

ITR for NRI – not required

An NRI (non-resident Indian) is not required to file income tax return in India if the specified conditions are satisfied.

1. If your total income in the financial year should consist of only investment income.
2. If your income is arises from long term capital gains which are exempt from tax.

However in either case, income tax (non resident Indian income tax) should have been deducted from the income at source.

NRI tax in India – Exemptions

The sources of income which are exempted from NRI Tax filing India are as follows

1. Dividends earned on the government issued notified bonds and savings certificate.
2. Dividends earned from shares of domestic Indian companies.
3. Interest earned on NRE/FCNR accounts.
4. Long term capital gains from listed equity shares and equity-oriented mutual funds.
5. Capital gains are exempted via section 54, 54F, and section 54C.

                                  All exemptions written above are subject to the tax laws prevalent at the time.

Note: - If you are NRI and earning foreign income there is no tax on foreign income and NRI is not required to file NRI Tax filing India

Tax deductions for NRIs

 Here are some deductions that are allowed for NRIs or some are not, and all these are listed below.

Deductions allowed

Section 80C:-

1. LIC premium
2. Tuition fees
3. Principal repayment of home loans
4. Unit Linked Insurance Plan(ULIP)
5. Equity Linked Tax Saving Scheme(ELSS)

Section 80D:- 

• Medical insurance

Section 80E:-

• Interest paid on education loan

Section 80G:-

• Payment made in the form of eligible donations

Section 80TTA:-

• Interest on saving Bank Account

Deductions not allowed for NRIs

Section 80C:-

• Investment in public provident fund
• Investment in national saving certificate(NSC)
• Post office 5 year Deposit scheme.
• Senior citizen savings scheme.

Section 80CCG:- Investment in Rajiv Gandhi equity saving scheme (RGESS).

Section 80DD:- Deduction for maintenance including medical treatment of dependent handicapped as defined under the section.

Section 80DDB:- Deduction for medical treatment of dependent handicapped.

Section 80U:- Deduction allowed to a taxpayer who himself suffers from disability.

DTAA benefit

NRIs who are working in other countries can face double taxation, DTAA helps to avoid paying double taxes on income earned in both their country of residence and India. The Double Taxation Avoidance Agreement or DTAA is a tax treaty signed between India and another country so that taxpayers can avoid paying double taxes on their income earned from source country as well as the residence country. By exemption method you will be taxed in only one country and exempted in another.

Delayed filing of ITR attracts penal interest at the rate of 1% per month on the balance tax payable.  In addition, if you don’t file ITR within a period of one year from the end of the applicable financial year you have to pay penalty of Rs. 5000. So for avoiding any kind of penalty and availing exemptions you should file your ITR before due date and for your assistance we the team of Tax Advisoryis here for you. Tax Advisory is India’s leading legal service provider. You just need to visit at www.taxadvisory.in and contact us directly on 9193555055.  

Frequently asked Questions (FAQ’s)

What is the full form of NRI?

Non Resident Indian

Is the residential status of a person relevant for determining the taxability of the income his hands?

Yes, the residential status of a person earning income is very much relevant for determining the taxability of such income in his hands.

Taxability of any income in the hands of a person depends on the following two things:

1. Residential status of the person as per the income-tax law(Indian income tax); and
2. Nature of income earned by him.

Do NRI’s have to pay taxes in India?

Yes, NRIs have to pay taxes in India. First you need to determine your residential status (NRI status) and after this you need to check that whether your income is taxable in India or not.

Resident Individuals: - Your global income is taxable in India i.e. income earned whether in India or outside India is taxable.

Non-Resident Indians: - Only income earned or accrued in India or deemed to be so is taxable in India. Therefore, your income from any country besides India is not taxable in India.

Should I be present in India at the time of filing of my NRI Tax filing India?

You can file your ITR (NRI taxation) from anywhere in the world. You are not required to physically present to file & verify your income tax returns. You can e-file your ITR from anywhere.

I am an NRI. Will I be subject to capital gain tax if I sell a flat that I own in India?

Yes, you will be liable for capital gain tax in India upon sale of your flat. Further, the purchaser himself must deduct taxes on the quantum of gains you make. The rate of tax deduction for a long term asset would be 20% while taxes at slab rates would be deducted at source if the asset is a short term asset.

I am an NRI, am I required to pay Advance Tax?

If your tax liability is Rs. 10000 or more in a financial year, then you are required to pay advance tax. And if you fail to pay advance tax as per the due dates given by the government, then you have to pay interest under section 234B and section 234C.

Is there any tax on foreign income of Resident Indian?

Income earned and received outside India is not taxable in India. However, any income earned or accrued or received in India is taxable as per the income tax slab rate. Foreign income taxable in India or tax on foreign income India is a myth.

What is income tax rate for NRI?

Income tax return form for NRI (non-resident tax rates) or Income tax slab rate for NRIs is same as slab rate for individuals. However NRI do not get slab benefit for senior and super senior citizen.

By Surya Arora

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