NRI Income Tax in India

Introduction: Comprehensive guide on understanding NRI Income Tax in India

Navigating the intricacies of income tax regulations as a Non-Resident Indian (NRI) requires a comprehensive understanding of residency criteria, tax liabilities, exemptions, and filing procedures. In this detailed guide, we delve into various aspects to equip NRIs with the knowledge needed for seamless compliance with Indian income tax laws.

Residential Status Determination:

The determination of NRI status revolves around Section 6 of the Income Tax Act, 1961. An individual is considered a resident if present in India for 182 days or more during the previous year. Alternatively, if in India for 60 days or more in the previous year and 365 days or more in the preceding four years, residency is established. Amendments introduced by the Finance Act, 2020, refine these conditions, with exceptions for Indian citizens and persons of Indian origin.

Income Tax Liability of NRIs:

Understanding the taxability of income is paramount for NRIs. Income earned in India, such as salary, property income, capital gains, and interest on deposits, is taxable. However, foreign income generally remains exempt from taxation in India. This distinction is crucial for accurate compliance.

Tax Incidence for Non-Residents:

The taxability of income for NRIs is categorized as follows:

• Income accruing or arising in India is subject to taxation.
• Deemed income accrual in India is taxable.
• Income received in India is taxed.
• Deemed receipt of income in India attracts taxation.
• Income from a business controlled or a profession set up in India but accruing outside India is not taxed.
• Income with no relation to India remains non-taxable.

When to File Income Tax Return?

Mandatory filing of income tax returns applies to NRIs with a total annual income exceeding the basic exemption limit of Rs.2.5 lakh. The due date for filing returns is 31st July of the relevant assessment year, with an extended deadline of 30th September for working partners in audited firms.

High-Value Transactions and SFT:

NRIs must exercise caution regarding high-value transactions to avoid scrutiny. Regularly checking Form 26AS or AIS on the Income Tax portal allows NRIs to track transactions identified against their PAN, preventing discrepancies.

Exemptions and Deductions for NRIs:

Under the old tax regime, NRIs can avail exemptions under Sections 80C, 80D, 80E, 80G, and 80TTA. However, certain exemptions like those under Section 80CCG, 80TTB, and 87A are not applicable to NRIs. Investment restrictions apply to schemes such as the Senior Citizens Savings Scheme, NSCs, Post Office Deposit Scheme, and PPF.

Belated and Revised Return of Income Tax:

Filing belated returns under Section 139(4) is allowed until 31st December or assessment completion, attracting late filing fees. Revised returns can be filed before 31st December or assessment completion if errors are identified.

New Tax Regime for NRIs:

NRIs can opt for the new tax regime, but this decision requires careful consideration due to the forfeiture of certain deductions. Changes in the basic exemption limit, tax slabs, standard deduction, and surcharge rates have been introduced. Switching between regimes has limitations, necessitating thorough evaluation.

Conclusion:

This comprehensive guide serves as an invaluable resource for NRIs navigating the complexities of income tax in India. For personalized assistance, expert advice, and seamless compliance, our dedicated team at NRIeCA stands ready to provide tailored services meeting the specific needs of NRIs.