Income tax for Non Residents in India is not very complex but few rules really frustrate NRIs… Let’s check everything that you want to know about India Tax For NRI.
An Indian is considered as a non-resident (NRI) when he/she has stayed for less than 182 days of the current financial year in India or if the person has been in India for less than 60 days in the current financial year and has been in India for less than 365 days in the last 4 years.
NRIs are usually working abroad and so their main source of income is in their resident country. But they might also earn income in India. It could be interest, dividends, rent or even salary if they are abroad on an assignment for their company. It is important that such income is accounted for and tax returns are filed for the same.
Taxes for NRI in India
Let us look at the different types of income that an NRI can receive in India and the taxation rules around them.
Income received from the property as rent or as sale proceeds
If a tenant occupies the NRI’s property, the tenant deducts TDS at 30% of the rental income before paying the rent to the NRI. The rent is added to the NRI’s total income in India which will be taxed as per the income slab under which it falls. Municipal taxes, Standard deduction at 30%, deduction for interest and the principal amount of loan if any on the property should be considered for deduction. If the NRI has two properties, one will be considered as deemed let out property and the NRI will have to pay tax on it.
An NRI who earns capital gains by selling a house property is liable to pay tax. Long-term capital gains are subject to a tax of 20%. Short-term capital gains are taxed at 30%. The gains are considered short-term if the house is sold within two years of purchase.
An exemption in tax payable is allowed if-
- The NRI invests in a house property as per Section 54 within one year before the date of transfer or 2 years after the date of transfer or complete construction of a house within 3 years after the date of transfer of the capital asset
- The NRI invests in capital gain bonds as per Section 54EC within 6 months of the date of transfer.
Bonus received in India while working abroad with a salary abroad
If you are transferred abroad for work and get a salary there but receive a bonus in India, the bonus is taxable in India under the Income Tax Act of India. But if DTAA is applicable and you prove that you are a tax resident of the country where you are working by getting a tax residency certificate there, you can claim a refund of the tax paid on the bonus in India. The bonus will then be taxable in the country of residence.
Salary received in India while working on a ship in international waters for more than 182 days
A person working on a ship in international waters for more than 182 days is considered an NRI, but the salary is received in India and therefore it is taxable in India. (In 2017 there was some change in this but again in 2019 there were cases reported that IT department is asking to pay tax. If you have some update – please share)
If you are a software professional who has been sent to the US for a project. And if your remuneration consists of a stipend in the US and a salary in India, then the salary in India is considered as income received in India and therefore you have to file the appropriate tax returns for it and pay tax if required.
If seafarers’ (merchant navy) salary is directly received in India – it is taxable in India.
Interest income in NRO account
A Non-Resident Indian can open an NRO account with a bank in India. Interest on the NRO account is taxable, it will be added to the total income and taxed as per the income tax slab applicable.
Capital gains received from assets like Mutual Fundss and Stocks
If an NRI earns capital gains from MFs and direct stocks, then tax is applicable. Here is an overview of the tax applicable –
|Asset||Tax Rate on Short-term Gains||Tax Rate on Long-Term Gains|
|Direct Equity||15%||10% (if the gains are more than Rs. 1,00,000)|
|Equity MFs||15%||10% (if the gains are more than Rs. 1,00,000)|
|Non-Equity MFs||Added to total income and taxed as per income slab||Listed funds – 20% (with indexation)|
Unlisted funds -10% (w/o indexation)
Income from Business or Profession in India
Income earned by an NRI from a business or profession that is controlled or set up in India is taxable in India.
Some incomes that are exempt from tax –
- Gifts received from relatives irrespective of the value in monetary terms and, gifts up to the value of Rs. 50,000 received from a non-relative, beyond that, the gift amount is added to the total income and taxed as per the applicable tax rate. Read – NRI Gift Tax India
- Assets received by NRIs by way of inheritance are exempt from tax.
- Interest received in NRE and FCNR accounts is tax-free.
To summarise, income that has accrued or arisen or is deemed to have accrued or arisen in India for an NRI is taxable in India. So if you are an NRI, calculate the income received in India. If it is in the range of taxable income, file your tax returns and pay the tax due within the due date.
If you have any questions on Taxes For NRI in India – add in the comment section.