Taxation of Non-Resident Indians [NRI]

DETERMINATION OF NRI STATUS

When a assessee is not meeting the following conditions then he is considered as NRI:

(a) If he is in India during the relevant previous year for a period amounting in all or in aggregate to 182 days or more.

OR

(b) If he was in India for a period or periods amounting in all to 365 days or more during the four years preceding the relevant previous year

AND

he was in India for a period or periods amounting in all to 60 days or more in that relevant previous year.

The above conditions do not apply to Indian citizen working outside India or a member of crew of Indian Ship.

COMPUTATION OF INCOME

Computation of Total Income of Mr. X

Sources Of Income

File ITR 1 For NRIs having Income From Salary

Documents For Filing ITR 1

1. PAN Card

2. Aadhaar Card, if any

3. Passport Details

4. Form 16 Received By Employer

5. Bank Account Details [Copy of Cancelled Cheque]

6. User ID and Password of Income Tax Website [www.incometaxindiaefiling.gov.in]. You don’t have it? Don’t worry we’ll assist you for same.

INCOME FROM BUSINESS OR PROFESSION

Profit or gains earned by NRI shall be taxable in India and tax slab rates are applicable on the same income. (ITR 3 will be applicable)

INCOME FROM HOUSE PROPERTY

Income from house property arises when property of NRI is situated in India. In general parity house property arises in the following two cases

A deduction of 30% is allowed along with benefit of housing loan and property tax is given from the income of house property.

INCOME FROM OTHER SOURCES

Interest Income of NRI from saving bank interest, fixed deposits, time deposits earned from bank accounts maintained in India are taxable.

Please note interest on NRE account is tax-free but interest on NRO account is fully taxable.

INCOME FROM CAPITAL GAIN

Where a capital asset [house property, shares, investments, debentures, etc.] is held by NRI in India shall be taxable in India.

However, following assets are not included in the income of a NRI under capital gains:

1. Shares held by NRI in a public or private company in India.

2. Debentures issued by public and listed company.

3. Securities issued by Central Government.

4. Deposits with banks and public companies.

5. Other assets notified in official gazette.

For the above assets, tax rate shall be 20%.

DEDUCTIONS AND EXEMPTION FROM GROSS TOTAL INCOME OF NRI

SECTION 80C

Maximum deduction of Rs. 1,50,000 is allowed on Gross Total Income. Deduction is like benefit given in Indian Tax Laws which will reduce the burden of tax.  Invest in following assets/securities to claim benefit under this section:

1. Principal repayment of housing loan

2. Tuition Fees of maximum two children

3. Premium on Life Insurance Policies

4. Investment in ELSS

5. Term deposit of not less than five years.

SECTION 80D

Deduction in respect of health/medical premium paid. Maximum deduction allowed is Rs. 25,000 in case of self, spouse and children (dependent). Also please note that the limit of Rs 50,000 in case of Senior citizen will not be allowed for Non Resident Individual. For Senior citizen also maximum deduction allowed will be Rs 25,000 only.

SECTION 80E

This section is dedicated to provide deduction where NRI has taken education loan. The deduction allowed shall be the interest paid on education loan taken and the deduction shall be allowed for maximum of 8 financial years.

SECTION 80TTA

The relief of this section is also extended to NRI’s where a total deduction of Rs. 10,000 is allowed on the interest earned from saving bank accounts maintained by NRI.

Note: The newly inserted section 80TTB by Finance Act, 2019 will not be applicable for Non Resident Individuals

SECTION 80G

Deduction under this section is allowed when NRI has given donations to various funds. It is advised to keep in record receipt of donations.

(Republished with Amendments)