Who is an NRI?
An NRI (Non-Resident Indian) is a citizen of India, who holds an Indian passport and has temporarily migrated to another country for six months or more for education, employment, residence or any other purpose. As per [Section 2(30)] defines NRI as a person who is not a resident.
The Income tax department India classifies an individual to be a non-resident in the following conditions.
- An Individual reside outside of India for 182 days/ more during the relevant previous year.
- An individual not presence in India for 60 days or more during a year earlier.
- If a person not presence in India for a combined total of 365 days or more during the previous four years preceding that last year.
Taxability of any Person, in any Country, is dependent on his Residential Status. As per the Indian Income Tax Laws Global Income of a Resident is Taxable in India. However in respect of a Non-Resident only that Income, which is deemed to have been received in India by or on his behalf and income that accrues or arises or is deemed to accrue or to arise in India, is Taxable in India.
NRI Taxation in India
Paying percentage from earning as taxes to your country for contributing towards the nation’s functioning and development. Income Tax in India is levied on all sources of revenue other than agricultural income. Income taxes are admissible on all the residents who earn their income in India. If you are an NRI (Non-Residential Indian), you are only liable to pay taxes on the income that is made in India. Thus, the Indian Income tax rules for the Non-Residents differ from that of the resident citizens.
Therefore, the Income which has been accruing or arising in India from any source of Income during the Previous Year is Taxable in India in the hands of an NRI. Income earned in India and deposited in any Account in India in is Taxable in India. For example Rent of any Property located in India, Income from any Investment in India. The Income Tax Act,1961 also anticipates certain deeming provisions under Section 9. As per the deeming provisions following Incomes will be consider to accrue or arise in India, even though they may accrue or arise out of India.
What can a Non-Resident be taxed on while in India?
The earnings made at overseas do not come under the Indian Income Tax acts. Hence, an NRI cannot be taxed for this. Non-Resident earnings while outside India is completely tax-free considering that he do maintain the non-resident status. In case any income or capital gains arise from within Indian Shores, then an NRI is liable to pay tax.
Tax incidence in case of NRI’s
Taxable income for Non-Resident include:
- Income received on your behalf or earned from your salary in India is taxable.
Property and Assets
- As per the Income Tax rules, any capital gain or income that assessee generate from the sale or rent or lease of a valued property an asset based in India will be taxed.
Securities and Investments
- Capital Gain or Income from long-term/ short-term investments are liable to be taxed.
|Nature of Income||Non-resident|
|Income which accrues or arises in India.||Taxable|
|Income from deemed to accrues or arise in India.||Taxable|
|Income which is received in India.||Taxable|
|Income which is considered to be earned in India.||Taxable|
|Income accruing in abroad from a business controlled from India or a profession set up in India.||Not Taxable.|
|Income which has no relation with India.||Not Taxable.|
As per Income Tax Act,1961 and FEMA (Foreign Exchange Management Act), assessee qualifies to pay taxes in case you fulfill either of the following conditions.
Your taxable income in India during a particular financial year is more than the exemption limit of Rs 2 lakh.
You have earned short-term or long term capital gains from the sale of any investment or property, even if the gains are less than the exemption limit.
Tax not chargeable in the hands of an NRI
|10(4)(i)||Interest on bonds or securities notified before 01-06-2002 by the Central Government including premium on redemption of such bonds.||NRI|
|10(4)(ii)||Interest on money standing to the credit in a Non-resident (External) account in India.||Person resident outside India (FEMA Act)|
|10(6)(ii)||Remuneration from Foreign Diplomats or Consulate and their staff (Subject to conditions).||Individual.|
|10(6)(vi)||Remuneration from the non-Indian citizen as an employee of a foreign enterprise for services provided by him during his stay in India.
||(not being a citizen of India) Individual – Salaried Employee|
|10(6)(viii)||Salary received by an NRI, for services provided in connection with his employment on a foreign ship if his total stay in India does not exceed 90 days in the previous year.||Individual Salaried Employee.
(NRI who is not a citizen of India)
|10(6)(xi)||Salary accepted from an Individual who is not a citizen of India. As an employee of the Government of a foreign state during his stay in India in connection with his training in any Government Office/Statutory Undertaking, etc.|| (not being
a citizen of India) Individual – Salaried Employee
|10(6B)||Tax paid by Government or Indian concern under terms of agreement entered into before 1-6-2002 by Central Government with Government of foreign State or international organization on income derived from Government or Indian concern, other than income by way of salary, royalty or fees for technical services||NRI|
|10(6BB)||Tax reward by an Indian company, engaged in the business of operation of aircraft, who has acquired an aircraft or its engine on the lease, under an approved (by Central Government) agreement entered into between 31-3 1997 and 1-4-1999, or after 31-3-2007, on lease rental/income.||Government of foreign State or foreign enterprise.|
|10(8A)||Foreign income & remuneration received by the consultant (agreement relating to his engagement must be approved) out of funds made available to an international organization (agency) under a technical assistance grant agreement between that company and the Government of a foreign State (Subject to certain conditions).||Individual, being
Presumptive taxation schemes for non-residents
|44B read with 172||Income from shipping business shall be computed on the presumptive basis (Subject to certain conditions).||NRI engaged in shipping business|
|44BB||Income of an NRI involved in the business of providing services/ facilities in connection. Presumptive basis (Subject to certain conditions).||Non-resident involved in activities connected with an exploration of mineral oils.|
|44BBA||Income of an NRI involved in the business of operation of aircraft shall be computed on the presumptive basis (Subject to certain conditions).||NRI engaged in the business of operating of aircraft.|
Other provisions applicable to non-residents
|44C||Deduction for Head Office Expenditure||NRI|
|44DA||Deduction of expenditure from royalty & FTS received under an agreement made after 31-03-2003 which is effectively connected to the PE of non-resident in India||NRI|
|47(viia)||Transfer of capital assets / GDR [referred to in section 115AC(1)] outside India by one non-resident to another non-resident shall not be treated as ‘transfer’ (Subject to certain conditions).||NRI|
|47(viib)||Gains from any transfer of a capital asset, being a Government security carrying a periodic payment of interest, made outside Indian (through an intermediary dealing in settlement of securities) by a non-resident to another non-resident shall not be treated as ‘transfer’ (Subject to certain conditions). (Inserted by the Finance (No. 2) Act, 2014.||NRI|
|First, Proviso to 48||Capital gain computation when shares or debentures in an Indian Company is transferred which were acquired in foreign currency. (Subject to certain conditions).||NRI|
|90||A non-resident can apply either provisions of the Act or the relevant DTAA (India has entered into with counterpart foreign country), whichever is more beneficial.||NRI|
|192||If total taxable income is less than maximum amount which is not chargeable to tax (Rs. 2,50,000) no tax shall be deducted at source.||NRI|
|245N||A non-resident applicant can apply before Authority for determination of tax liability that may arise out of a business carried out in India (Subject to certain conditions).||NRI|