CA Goutam Jain 

CA Goutam JainFirstly let me explain the process of determination of taxability of any Foreign National OR NRI via simple diagram- NRI Tax

 Section 5 of Income Tax Act says resident global income ( both earned in India & foreign) is taxable in India however the Non- Resident’s only income which is received in India OR accrues or arises or deemed to accrue or arise in India is taxable.

Now who is Resident and who is Non Resident? Section 6 of Income Tax Act determines residential Status on the basis of No. of days stay during the year in India. Sometimes according to the domestic law of countries an Individual become Resident of two or more countries than tie breaker rule as per DTAA need to apply to determine eventual Resident Country.

Hence once a person determined to be Non-Resident in India as discussed above; his following income will be taxable in India-

(a) Income received or deemed to be received in India or

(b) Income accrues or arises or deemed to accrue or arise to him in India

Now the term income received in India can be taken straight however what is Income accrues or arises or deemed to accrue or arise to him is defined in Section 9 if Income tax Act as follow-

Income When deemed to accrue or arise in India
Business Income Nat profit earned in India when business connection is in India or source of income is in India
Capital Gain/House Property Income When Capital asset situate in India
Dividend When Paid by an Indian company
Interest When Payable by-
Government of India
a person who is a resident except where moneys borrowed used for business outside India
a person who is a non-resident where moneys borrowed used for business in India
Royalty & fees for technical services When Payable by-
Government of India
a person who is a resident except where its utilized used for business outside India
a person who is a non-resident where its utilized for business in India
Salaries When Paid for service rendered in India
paid by the Government to a citizen of India for service outside India

 Briefly now it clear that what income earned by Non Resident is taxable in India however what is tax rate is yet to find out. Income is generally taxed at slab rate in case of Individual and 40% for foreign Company however Income Tax Act specified lower tax rates for income like capital gain etc.

Here it worth to note that double tax avoidance agreements (DTAA) or tax treaty entered with countries overwrite the Income tax Act hence if particular income is taxable in Income tax Act is exempt under DTAA or taxable at lower rate than the same will be followed.

(Author is Partner of G Y & Company -B-101, Purav Heights, Mugbhat Lane , Girgoan , Mumbai-04. Author can be reached at goutamjain@gyco.in)

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0 responses to “Taxation of Foreign National OR NRIs in India”

  1. Ramesh says:

    Sir
    I Earned income from house propriety in India, Income received out side India i am also NRI what tax

  2. Bhavyesh Shah says:

    please tell me that if i am out side India continuous for 2 year then what is the tax applicability in India?? is it taxable?? whatever will be answer please give me expatiation for your answer.

    Thank you in advance

  3. Hari Ram Nagpal says:

    Great – really Helpful

  4. sridhara says:

    Ironically Section 9 is silent of tax-ability of Interest Income received from Banks and Companies.

  5. Priyanshi says:

    Even after clearing my CA, i was not cleared with these topics. Now i can say my concepts are crystal clear.

  6. Shreya says:

    Superb article. Cleared all my doubts.

  7. Robin says:

    Nice article
    Do you handle NRI Client. I need your professional assistence with respect to Indian tax laws.

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