December 30, 2022
Shreeja Ray

Income Tax for NRI

Non-resident Indians are subject to different income tax laws and regulations than resident Indians are. All income and capital gains earned in India must be taxed by non-resident Indians. NRIs pay a different income tax than local Indians do. It is essential to be aware that NRIs must pay taxes on income or capital gains derived from India.

Verifying Residential Status

When someone is regarded as an Indian resident, there are two factors at play.

1. If someone makes more than INR 15 lakhs in total income in a fiscal year and stays for more than 120 days within that fiscal year, they are subject to this tax.

2. If a person is an Indian citizen and has total annual income of more than INR 15 lakhs (excluding income from overseas sources), they are considered to be an NRI. In no other country are they subject to taxation.

NRI income tax filing

On income generated or derived in India, NRIs are required to pay tax. On income deemed to accrue or originate in India, NRIs must also pay tax. India taxes money that is received or assumed to be received.

1. Determine your residency status as a first step. A fiscal year must be considered when making this decision. It becomes slightly more challenging if you recently moved abroad. The same thing takes place if you just got back from India. As per Section 6 of the Income Tax Act of 1961, the residency status is determined. The number of days you stay in India is quite important. A minimum of 182 days must be spent outside of India for an NRI. If not, someone is regarded as a resident.

2. Your taxable income must be calculated. Total gross income is a notion that we must understand. Total earnings before taxes are meant. You will be compelled to pay taxes in India if your total gross income exceeds Rs 2.5 lakhs in that case. This money could originate from a number of places. It can take the form of a pay increase. The sale of stocks and mutual funds may result in capital gains. The bracket also includes rental income and interest on NRO deposits. Contrarily, NRIs can benefit from tax treaties. NRIs may also request a refund if 195 TDS is withheld from their pay.

Special provision for investment income

NRIs are subject to a 20% income tax when they invest in specific Indian assets. If the NRI's special investment income is their only source of income for the whole fiscal year and TDS has been withheld, they are exempt from filing an income tax return.

What investments are eligible for special consideration?

1. Income from the following foreign currency-purchased Indian assets:

2. Shares of a private or public Indian corporation

3. Money held in a bank or publicly traded company

4. Any Central Government security

5. Other central government assets listed in the official gazette for this purpose.

When determining investment income, there is no deduction permitted under Section 80.

Disbursements under Section 80C

The majority of Section 80 deductions are also available to NRIs. A maximum deduction from an individual's gross total income under Section 80C is allowed for FY 2020–21 of up to Rs 1.5 lakh.

The deductions permitted to NRIs under Section 80C include:

Payment of the life insurance premium:

The policy must be in the name of the NRI, their spouse, or any children (who may be dependent/independent, minor/major, married/unmarried, or unmarried). Less than 10% of the amount insured must be paid in premiums.

Payment of children's tuition fees:

Fees for the full-time education of any two children paid to any school, college, university, or other educational institution located in India.

Unit-Linked Insurance Plans :

ULIPs are offered with life insurance coverage and are tax deductible under Section 80C. It also includes contributions to other unit-linked insurance plans offered by UTI as well as the unit-linked insurance plan of the LIC mutual fund, such as Dhanraksha 1989.

Investments in ELSS:

ELSS has become the most popular choice in recent years because it enables you to deduct expenses under Section 80C up to Rs 1.5 lakh, provides taxpayers with the EEE (Exempt-Exempt-Exempt) benefit, and provides a great opportunity to profit because these funds invest primarily and diversifiedly in the equity market.


ITR form for NRI: What is it?

NRIs frequently use ITR-2 to submit their taxes. Any changes won't be made public until after all tax filing forms have been published by the Central Board of Direct Taxes (CBDT). Both of your properties may be listed when submitting your ITR.

Does India require that I file an income tax return?

Any person, whether an NRI or not, whose income above Rs. 2,50,000 is required to file an income tax return in India.

Should an NRI make an advance tax payment?

You must pay advance tax if your yearly tax obligation exceeds Rs 10,000. Interest under Sections 234B and 234C will be assessed if you don't pay your advance tax.


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