10th Year Celebration - 'Let's Make A Plan' Offer for NRIs

Tax Rates for NRI on Indian Income & Investments 2018 – 2019

Let’s check Tax Implications on Different Sources of Income for NRIs in India – also check tax rates for NRIs.

Some NRIs do earn income in India as well.

If this income exceeds the basic exemption limit, NRIs have to file income tax returns. Even if the tax is paid or deducted, tax returns should be filed.

You can also get RNOR Guide from end of this post – which can help NRI reduce tax.

tax rates for nri in indian income

Tax Rate For NRIs on Indian Income

Income Tax Rate AY 2019-20 | FY 2018-19 – Individuals less than 60 years
Taxable incomeTax Rate
Up to Rs. 2,50,000Nil
Rs. 2,50,000 to Rs. 5,00,0005 %
Rs. 5,00,000 to Rs. 10,00,00020%
Above Rs. 10,00,00030%

 

Let us look at different income avenues for NRIs and the taxation rules regarding the same –

Income from Salary

You might have become an NRI in the middle of a financial year. In such a situation, you might have earned salary in India for part of the financial year. You have to pay income tax as per the income tax slab that is applicable to you for the total income earned in India.

ReadHow Change in Residential Status Impact Different Accounts & Investments

Income from Interest in Resident Accounts

You might have earned interest on amount in savings accounts and fixed deposits before you became an NRI. Under Section 80TTA, deduction up to Rs. 10,000 is allowed on interest income from bank savings accounts.

The interest earned in Fixed deposits is added to the total income and taxed as per income tax slab applicable.

*It is important to close all bank accounts that are residential when you become an NRI.

Income from Interest earned in NRO, NRE and FCNR accounts.

Interest on NRE and FCNR account is tax-free.

Interest on NRO account is taxable. It will be added to the total income and taxed as per income tax slab applicable.

Tax Rates for NRI on Indian Income

Check – Investment Options of NRIs

Income from rent

NRI owns a property and gives it on rent to a tenant.

The tenant deducts TDS at 30% of the rental income before paying the rent to the NRI.

The rent received is added to the total income which is liable to tax as per the applicable slab rates.

The following deductions should be considered –

  • Municipal taxes paid,
  • standard deduction of 30% on taxable value
  • deduction for interest on loan taken for buying, constructing or repair of home
  • Repayment of principal amount of home loan up to Rs. 1,50,000

If you have two properties, one will be considered as deemed let out property and you will have to pay tax on it.

The rent will have to be deposited in NRO account of NRI landlord. This money cannot be credited in NRE account as long as a tenant is also an NRI.

wiseNRI

Income from Real Estate capital gains

An NRI who sells a house property and earns capital gains is liable to pay tax it’s same as resident Indian.

BUT for NRIs Long-term capital gains are subject to a TDS of 20%. Short-term capital gains are subject to a TDS of 30%. (U/S 195) The gains are considered short-term if the house is sold within two years of purchase.

You can get an exemption if

  • You invest 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

OR

  • You invest in capital gain bonds as per Section 54EC within 6 months of date of transfer.

In the case of NRI TDS is deducted on the total Sale Value of the property (not just gains) – even if the property value is less than 50 Lakh. If there’s not gain, NRIs can claim tax refund later.

Read – NRI Mutual Fund Taxation In India

Income from capital gains in other assets

Income from capital gains earned from other assets like stocks, mutual funds will be taxed. Long term – 10% tax, without indexation, is applicable for capital gains from all direct equity and equity mutual funds, if the gains are more than Rs. 1,00,000.

Short-term capital gains are  taxed at 15%

Long Term Capital Gains on mutual funds other than equity funds are taxed at 20% with indexation for listed funds and 10% without indexation for non-listed funds.

Short Term Capital Gains on non-equity mutual funds are taxed at 30%.

Receipt of Gifts

Gifts received from relatives as defined in the Income Tax Regulations are exempt from tax.

Gifts received from non-relatives up to the value of Rs. 50,000 are exempt from tax. Beyond that, the gift value is added to the total income and taxed as per applicable income tax slab. (Check tax & other issues – Gift by NRI to Resident Indian or Vice Versa)

If you are an NRI, calculate the income received in India, and if it is above the exemption limit, do file your tax returns within the due date.

Feel free to ask queries or if you have any practical experience regarding taxation – must share in the comment section.

About the Author

Hemant Beniwal is a CERTIFIED FINANCIAL PLANNER and his Company Ark Primary Advisors Pvt Ltd is registered as an Investment Adviser with SEBI. Hemant is also a member of the Financial Planning Association, U.S.A and registered as a life planner with Kinder Institute of Life Planning, U.S.A. He started his Financial Planning Practice in 2009 & is among the first generation of financial planners in India. He also authored Bestseller book "Financial Life Planning".

  • Seetharama says:

    Explain what is tax implication on gains from INHERITED agricultural land

    • Hemant Beniwal says:

      Hi Seetharama,
      Agriculture land is not considered as Capital Asset – if it’s out of municipal boundary. I will suggest you have a word with a CA.

  • Ralph says:

    Dear Hemant,

    In the following situation NRI does not need to file a return:

    If Indian income is below taxable limit
    and
    If relevant TDS has been done at the applicable rate and assesee is either not eligible or not desirous of applying for a refund

  • Rahul says:

    NRI selling property in India..is TDs rate for NRI 20%? So on 90 lakh proceeds will 18 lakh be TDS?

    • Hi Rahul,

      Yes, Long Term TDS on sale of property 20.6%. NRI in case falls under the lower slab can request and apply for low or no TDS – talk to your CA.
      Buyer should have TAN. Normal transaction not possible when buyer/seller is an NRI.

  • Binayak says:

    From ICICI prulife insurence ( pension schme i invested in 2008 . maturity on 2018, and the pension strated from sept 2018. how much tds % cut

  • Ankur Bansal says:

    You have mentioned that it is important to close all resident accounts when you become nri.

    I have few savings and a pp account in India. I have been living in US for more than a year.

    Do I need to close them? Where should I park the amount available in those accounts? What happens to FDs?

  • Ramesh says:

    NRI person is INCOME TAX PAYEBLE OR NOT

  • Sumit says:

    Can my company transfer a part of my salary to NRE account to avoid high taxation in a foreign country?

    • They can but I am not sure if you will be able to save tax due to Double Taxation Avoidance Agreements DTAA.

  • Kamal says:

    I am a Irish citizen of Indian origin. I am selling property in India for 50 lakh rupees. What will be the capital gain tax

  • Anushree Jain says:

    If my FD savings interest income is less that 2.5l, do I fall in no tax slab?

    • Anuj says:

      Hi Anushree,

      If you fall within 2.5 lac limit, it is not mandatory to file the return.
      But if TDS is deducted on your FD, you can claim refund by filing return. You can also submit 15G form to bank for not deducting TDS on FD interest as your income is within basic exemption limit

  • TukaiN says:

    Hi,
    As a house wife I am staying with my husband in UAE last 6 year, additionally my visa is sponsored (Dependent Visa) on my husband job visa.
    As I know any Indian leaving outside INDIA more than 182 days in financial year become NRI. Now the question is,
    * House wife can able to open a NRE account in INDIA?
    If yes, then please find the below requested question,
    * Currently I am doing some handicraft work and earn some cash money irregular base. Currently I don’t have any bank account In UAE. Now If, I am planning to send money through authorize exchange center in my NRE account, then any income tax risk waiting for me when I will be back to INDIA.
    * Currently my husband have job visa and I have dependent visa. Is it possible in India tax system, my NRI money will start to calculate as my husband income, because of my visa status? Additionally future earned interest will start calculating as a clubbing income of my husband and it increases my husband tax liability.
    Or
    India tax system believe, both party NRE account money is an individual assets and both party are, not able to claim others money.
    Example:-
    (If I am eligible to open a NRE account)
    My INDIA NRE account :- I have 1,000,000 (10 lakhs) and later when comeback to India taxable Interest gain yearly 6% base 60,000 (60 thousand),
    In my husband INDIA NRE account :- have 4,000,000 (40 lakhs) and later when comeback to India taxable Interest gain yearly 6% base 240,000 (2 lakhs 40 thousand)
    Husband Clubbing income :- Any chance India tax system start calculating this money my Husband Clubbing income (240,000+60,000) = 300,000 (3 lakhs)
    Or
    Both party incomes are separate and in my money, there is no legal ownership of my husband. So my taxable income is 60,000 (60 thousand) and my husband taxable income is 240,000 (2 lakhs 40 thousand)

    Thanks,

  • Qayyum says:

    Helo
    I am NRI, my annual rental income is 480k.
    How much percentage of tax I am liable to pay.
    My tenant is saying he will deduct 30% TDS
    How much I can claim back?

    • Hi Qayyum,
      If you don’t have any other income – you can simply file tax in India & take refund.

  • Chiman says:

    How the gratuity earned outside India is taxed on return to India

    • Raghav says:

      Hi. Chiman,

      Your retirement money, which is earned and directly received outside India and then subsequently repatriated to India, will not be taxable in India.

  • Thyagarajan says:

    I may return to India in June 2020. In that year, will my foregin salary be treated as resident indian income?

    • Raghav says:

      Hi. Thyagarajan,

      If you qualify as a Non-Resident Status than this Income is taxable globally but can take advantage of DTAA.

  • Tulip says:

    How DTAA apply to NRI

  • Satu says:

    i am NRI having NRI Investment in stocks , once i come to india andd become NRO , will there will be Tax on profit on tax , other than capital gains tax

  • Basti Prabhakar Shenoy says:

    What’s the deduction for seniors

    • Raghav says:

      Hi. Basti,

      For Senior Citizens
      Up to 3 lakhs – Nil.
      3 lakhs to 5 lakhs – 5%.
      5 lakhs to 10 lakhs – 20%
      Above 10 lakhs – 30%.

      for more details, about deduction and all you can visit Income Tax of India Website.

  • Ankur says:

    For NRIs, interest from NRE and FCNR accounts are tax-free, do they have to be declared as exempted income in filing of returns and added to total income. Or they dont have to be included at all? If they have to be part of total income, how do you determine the value of FCNR deposits as the amounts are no in Indian Rupees?

  • Vinod says:

    Whether pension from LIC is taxable???

  • Akshay says:

    Hi. Ankur,

    Yes, you have to declare the Income while filing the ITR and can take the deduction for the same.

  • Prasann says:

    I am NRI planning to return back to India and have a full-time job there. Now when I do return back I would obviously be returning back with my finances, so would there be any taxes levied on me for bringing in these funds?

    • Hi Prasann,
      No tax will be levied in India but still, have a word with a good CA for a smooth process.

  • CHANDER SINGH says:

    basic info useful ! Thanks

  • Raman says:

    i would like to know about the income tax deduction

    • Anmol says:

      Hi Raman,

      You avail all the tax deductions available to an individual in India.
      For more information about this please visit to the site of Income-tax department of India.

  • Anil says:

    am an NRI and need to fill ITR in India wanted to know process for the same

    • Anmol says:

      Hi. Anil

      You can fill through the online process of the Income-tax Department or through a CA.

  • Sunny says:

    What documents I have to submit with income tax form as Iam NRI

  • Mohit says:

    i live in bahrain and i deposit my salary in my india account so india govt cut any taxes which i deposit in india

    • Anmol says:

      Hi. Mohit,

      In this case, you don’t have to pay any tax in India but your salary is taxable in Bahrain.

  • P.K.DEY says:

    I am an NRI having earned an below taxable limit interest in my savings account in India where tds has been deducted. To claim that tds if I wish to file ITR which form i should use?

    • Anmol says:

      Hi P.K.

      Consult a good CA about this TDS refund.

  • kaushik says:

    US citizen residing in India for more than 5 years, what is tax implication in India for income in USA

  • Uday Rodrigues says:

    Sir, Many NRI’s are investing in P2P lending platforms. What about the tax on earned income ?

    • Anmol says:

      Hi. Uday

      You have to disclose the interest earned from the P2P lending under the head income from other sources.

  • Dr.Maria says:

    Hi, I am a NRI. I would like to sell a property in India purchased 10 yrs ago for 55 lacs I was told about 22% tax. Is the tax recently increased by Govt? If I invest in capital gains can I avoid the tax? How many years the money will be locked in capital gain.

    • Anmol says:

      Hi Maria,

      LTCG Tax rate is 20% with indexation. Yes, you can save tax by investing in Capital gain bonds with a lockin period of 5 years.

  • Neeraj says:

    I am NRI. I have purchased under construction flat in 2017 Dec construction started in 2015 in Pune. Builder sent demand latter with 12% GST. Should I pay 12% GST?

    • Anmol says:

      Hi. Neeraj,

      I think a CA can help you with this issue.

  • >