About Indian Income Tax Implications for NRIs

About Indian Income Tax Implications for NRIs

How do I determine my residential status?

Here’s how you can check your residential status for a financial year.

You're considered a 'resident' in a financial year if you satisfy one of the conditions below:

·         You are in India for 182 days or more during that financial year

OR

·         You are in India for 60 days or more during that financial year AND you are in India for at least 365 days during the 4 years preceding that financial year.

An exception is made for Indian citizens working abroad and members of a crew of an Indian ship or a PIO visiting India, where 60 days is replaced with 182 days.

You are an NRI if you do not meet any of these conditions.

Is my income earned abroad taxable?

An NRI's income taxes in India will depend upon your their residential status for the year.

If your status is 'resident' your global income is taxable in India. If your status is 'NRI' your income which is earned or accrued in India is taxable in India.

Salary received in India or salary for service provided in India, income from a house property situated in India, capital gains on transfer of asset situated in India, income from Fixed Deposits or interest on savings bank account are all examples of income earned or accrued in India.

These incomes are taxable for an NRI. Income which is earned outside India is not taxable in India. Interest earned on a NRE account and FCNR account is tax free. Interest on NRO account is taxable for an NRI.

Do NRIs need to file an Income Tax Return in India?

Income Tax Return must be filed by an NRI when their total income (before any deductions) is more than Rs 2,50,000 (for AY 2015-16 or FY 2014-15).

Income Tax Return must be compulsorily filed in the following cases:

·         NRI has short term or long term capital gains from any investments or assets (even when gains are less than Rs 2,50,000).

·         To get a tax refund

·         To carry forward losses so they can be adjusted later

A return need not be filed if income from short term or long term capital gains is the only income the NRI has and TDS has been deducted on it.

Can NRIs claim any deductions in their Income Tax Return?

Deductions under section 80

Some of the deduction under section 80C are available to NRIs – life insurance premium paid in India, ULIPs and ELSS purchased in India. Purchase of NSCs or investments in new PPF accounts are not allowed as deductions under Section 80C for NRIs. Deduction under section 80D for health insurance premium payments for parents are also allowed to be claimed. Here is complete guide to deductions under section 80C.

Deduction from House Property Income for NRIs

NRIs can claim all the deductions available to a Resident from Income from House Property for a house purchased in India. Deduction towards property tax paid and interest on home loan deduction is also allowed. You can read about house property income in detail here.

How can I take benefit of DTAA?

DTAA is Double Tax Avoidance Agreement between two countries to avoid taxation of an income in both the countries. If you have earned an income which is taxable in a foreign country and has to be offered to tax in India as well our CAs can help you take benefit of DTAA. This helps you avoid paying double tax on your income which is taxable in two countries.

NRIs who are residents of foreign countries can take benefit of DTAA as well as Resident Indians who earn foreign income.

Under DTAA, there are two methods to claim tax relief - exemption method and tax credit method. By exemption method, NRIs are taxed in only one country and exempted in another. In tax credit method, where the income is taxed in both countries, tax relief can be claimed in the country of residence.