With the increased globalization, Indian’s are no more confined to work in India. Indian’s love working at onsite opportunities. However, when an Indian goes to onsite, i.e. outside India, earns some income in India, such income is still taxable. NRI’s should go through the various types of income, which is taxable and which are exempted in India and need to pay income tax on taxable income in India. Who is an NRI for Indian income tax Act? Which are the incomes that are taxable to NRI in India? How to consider such incomes from income tax act?. I have compiled the list of incomes that are taxable to NRI’s in India.
Who is a Non Resident Indian (NRI)?
In simple terms, if an Indian goes out of India for long term, he/she would be termed as NRI. However, who is an NRI for Indian income tax Act? An individual is considered to be a resident of India for a financial year if he satisfies any one of the following conditions:
- If he spends at least six months (to be exact 182 days) in India during the financial year.
- If he/she is in India for 2 months (60days) in the previous year but has spent one whole year in the last four years.
- If an individual fails to satisfy one of these above mentioned conditions, he is an NRI.
What is taxable income in India for NRI?
Don’t think that there is no income tax for NRI in India. If you are an NRI, the income that is accrued or received in India, is taxable in India. However, the income of diplomats and ambassadors is free from these rules.
Salary received or accrued in India, or salary for services rendered in India, income from house property located in India, capital gains on transfer of assets in India, income from fixed deposits or savings bank account are all examples of taxable income of NRIs.
5 Incomes that are Taxable to NRI in India
1) Income from salary
NRI Salary taxation in India is nothing different from others. If you or some other person on your behalf receives your salary in India, it is taxable in India. For example, if you are an NRI and you receive your salary in an Indian account directly, it is treated as income as per Indian taxation law.
If you receive any salary in lieu of any services that are rendered in India, it will be taxed in India, no matter whether you have received it directly in a foreign account. Many individuals would get confused about NRI salary taxation in India and think that it may not be taxable even if it is received in India.
2) Income from house property
Income from any house property that is situated in India is taxable in India. Even if the house is lying vacant, it is treated as deemed to be let out and taxed. He / she is eligible to claim the standard deduction of 30%, deduct property taxes and interest on the home, if taken. The NRI can also claim deductions on the repayment of home loan principal under Sec 80C.
One important point to be noted is when the tenant is paying rent to the NRI; he has to deduct TDS @ 30%. The NRI can receive rent in his Indian bank account or foreign bank account; however, that does not affect this rule.
3) Income from other sources
Income received in the form of interest from fixed deposits and saving bank account held in India is taxable. Interest received on NRO account is fully taxable. However, for NRE and FCNR, there is no income tax for NRI in India. It’s tax free.
4) Income from business and profession
Any income earned by the means of any business that is run is India and received by NRI is taxable.
5) Income from capital gains
Any capital gain that is rising due to transfer of capital asset that is situated in India would be taxable in India only. Capital gains on investments in shares/securities would also be taxable in India.
If an NRI sells a house property and earns long term capital gain, the buyer of the house has to deduct TDS @ 20%. However, similar to the resident of India, an NRI can also claim exemption on capital gain by investing in a house property according to the section 54 or can also invest in capital gain bonds as per section 54EC.
Some Special Provisions for NRI’s regarding taxation
There are few Indian assets, in which a NRI can invest and the income so earned from it is taxed @ 20%. TDS is also deducted on this income. If this special investment income is the only income of NRI during the financial year, he need not file the Indian tax return.
List of investments that qualify for special treatment
If a NRI acquires the following assets by paying foreign currency and earns income out of it, it qualifies for special treatment:
- Shares in a public or private Indian company
- Debentures issued by a publicly listed company
- Deposits with banks and public companies
- Any security of the central government
- Other assets of the central government specified for this purpose in the official gazette
Conclusion: This list would be helpful for paying income tax and filing income tax returns by NRI in India. Instead of avoiding tax and ignoring while filing income tax returns, better to consider them and take exemptions wherever you can and pay balance tax and be peaceful.
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Incomes that are Taxable to NRI in India
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