NRI Tax obligation and Return Filing in India for Assessment Year 2021-22
Income Tax filing for NRIs
Are NRIs required to file Income Tax Returns in India? This is a very common question asked by NRIs. Whether an NRI or resident Indian, any individual whose annual income exceeds Rs. 2, 50,000 is required to file an income tax return in India.
Tax Slab for NRIs for AY 2021-22
Here are new income tax slabs for NRIs (Non-Resident Indians) for AY (Assessment Year) 2021-22/ AY 22-23:
|Income Tax Slab||Rate|
|Up to Rs. 2.50 lakh||Nil|
|Above Rs. 2.50 lakh to Rs. 5.00 lakh||5% of (taxable income – Rs. 2.50 lakh); in case, taxable income is up to Rs. 5 lakh, the tax payable shall be nil on account of Tax Relief under Section 87A|
|Above Rs. 5 lakh to Rs. 7.5 lakh||Rs. 12,500 + 10% of (total income – Rs. 5 lakh)|
|Above Rs. 7.5 lakh to Rs. 10 lakh||Rs. 37, 500 + 15% of (total income – Rs. 7.5 lakh)|
|Above Rs. 10 lakh to Rs. 12.50 lakh||Rs. 75,000 + 20% of (total income – Rs. 10 lakh)|
|Above Rs. 12.50 lakh to Rs. 15 lakh||Rs. 125,000 + 25% of (total income – Rs. 12,50,000)|
|Above Rs. 15 lakh||Rs. 187, 500 + 30% of (total income – Rs. 15,00,000)|
|Surcharge (subject to Marginal Relief)||– 10% of income tax for taxable income above Rs. 50 lakh|
– 15% of income tax for taxable income above Rs. 1 cr
– 25% of income tax for taxable income above Rs. 2 cr
– 37% of income tax for taxable income above Rs. 5 cr
NRIs are liable to pay taxes as and when their income falls under the jurisdiction of the Income Tax Act of 1961. The details about income tax for NRIs and the method of dealing with them fall under the category of NRI taxation. NRI taxation covers all the aspects of income tax, property tax and wealth tax. However, the focal point of taxation lies on the income tax.
Income Tax for NRIs
Before discussing the Non-Resident Indian income tax, let’s understand who is an NRI under the Income-tax Law.
Determining NRI residential status:
The Foreign Exchange Management Act (FEMA) has issued clear guidelines to ascertain the residential status of an individual. As per the Indian Income Tax Law, an individual will be treated as a resident Indian for a year if he/she satisfies any of the following conditions:
- He/ she has lived in India for a period of at least 182 days during the financial year. Or
- He/ she has lived in India for a period of 60 days or more in the year and for a period of at least 365 days or more in the preceding four years.
However, if an Indian citizen leaves India in any previous year as a crew member of an Indian merchant ship or for the purpose of employment, the period of 60 days mentioned in the second point shall be substituted with 182 days.
If the individual satisfies any one or both the conditions, he/she is considered a resident. If he/she satisfies no conditions, he/she will become a Non-Resident Indian (NRI).
Tax Sab for NRIs: Taxable Income of NRIs in 2021:
If you reside and work abroad, your tax liability as an NRI will depend on your residential status for the year. Residential status of an individual is divided into three categories – Resident and Ordinarily Resident (ROR), Resident but Not Ordinarily Resident (RNOR) and Non-Resident (NR). The scope of taxation in India based on the residential status of an Individual would be as under:
|Income received or considered to be received in India||Taxable||Taxable||Taxable|
|Income earned or accrued in India||Taxable||Taxable||Taxable|
|Income that accrues outside India from:|
– Business controlled in India or profession established in India
– Other income
Income Tax for NRIs is levied on the following income:
Salary received for services provided in India
Salary or income received by an NRI for the services provided in India shall be taxable, irrespective of the place of receipt. Salary of an Indian citizen paid by the Government of India for the services rendered outside India will be considered as Indian income and taxed even if the status of the individual is Non-Resident.
House property income
- Rental income from property owned in India by an NRI is taxable in the same manner as the resident.
- Capital gains generated from the sale of a property, rental income, etc. in India are subject to tax.
- NRI can claim a standard deduction of 30% in India. Under Section 80C, NRIs can also claim deductions for principal repayment, registration charges and stamp duty. They can also claim tax deductions up to Rs. 1.5 lakh on interest paid on a home loan during a financial year.
- The tenant who makes rental payments to NRI will be responsible for TDS deduction at 30% under Section 195. He/she will need to fill the form 15CA and submit it online to the income tax department.
Capital gains income
- Capital gains or income from the sale of listed short-term/ long-term securities, mutual funds are taxable.
- Capital gains on shares held in India are subject to tax.
- Capital assets like house property, securities, shares, gold etc. of Indian origin are taxable in India.
- Capital gains upon the transfer of any capital asset situated in India are taxable.
Income from other sources
- The interest income accrued from fixed deposits and savings bank accounts held by an NRI in Indian bank accounts is taxable in India.
- Interest on an NRO account is fully taxable. Interest earned on NRE and FCNR accounts is tax-free in India.
Income from business and profession
Any income earned by NRIs from a business established or controlled in India is taxable to the NRI.
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Tax Slab for NRIs: TDS Rate on sale of property
The income tax slab for NRIs explains how much taxes are applicable for a certain bracket of income. However, there are some aspects like the TDS Rate on sale of property that often pops up as a doubt in the minds of NRIs. Here is a quick view on the TDS Rate on sale of property for NRIs:
|Nature of Gains||Tax Liable||Tax Deducted at Source (TDS)|
|Short Term||As per Tax Slab||30%|
|Long Term||20%||20% (plus surcharge and cess) with indexation|
Note: Minimum Holding Period for Long Term Gains is 2 years
Deductions available to NRIs
Similar to resident Indians, NRIs can also claim various deductions and exemptions from their income in India. The following table shows the deductions and exemptions on Non-Resident Indian Income Tax:
|Section 80C||The following deductions are available under Section 80C|
– Investment in ULIPs
– Premium payment of a life insurance policy
– Investment in ELSS
– Principal repayment of a home loan in India
– Payment of tuition fees of children
|Section 80D||Premium paid towards a health insurance policy|
|Section 80E||Interest paid on an education loan|
|Section 80G||Donations for social service activities|
|Section 80TTA||NRIs can claim a deduction up to Rs. 10,000 on income from interest on a savings bank account|
|House property income of NRIs||NRIs can claim deductions on income from house property in India, the property tax paid, and interest on home loan|
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Deduction unavailable to NRIs
NRIs are not entitled to avail the following deductions under the Income Tax Act, 1961:
- Investment under RGESS (Rajiv Gandhi Equity Savings Scheme) under Section 80CCG
- Deductions for the differently-abled under Section 80U, Section 80DD and Section 80DDB
- Investments which are not available for NRIs as listed below:
- National Savings Certificate (NSC)
- Public Provident Fund (PPF)
- Senior Citizen Savings Scheme
- Post Office 5-year Deposit Scheme
Last date to File Income Tax Return in India
For NRIs, 31st July of the assessment year is the last date to file Income Tax Return in India.
Double Taxation Avoidance Agreement (DTAA)
India has entered into the Double Taxation Avoidance Agreement (DTAA) with more than 90 countries across the world. Whereby NRIs have to pay tax in either of the countries. In other words, NRIs can avoid getting taxed on the same income twice in the country of their residence and India by applying for relief under DTAA between the two countries. There are two ways to claim tax relief – exemption method and tax credit method. As per the exemption method, the income of NRIs is taxed in one country and exempted in another. As per the tax credit method, the income is taxed in both countries, the exemption can be claimed in the country of residence. NRIs currently living in one of these countries are exempt from double taxation.
Due to a Complicated Tax System, understanding tax slab for NRIs and other tax laws can be confusing and NRIs may miss claiming deductions and other benefits. At Onlineideation, we understand this struggle. You can connect with our NRI Tax Experts and get end-to-end assistance for hassle-free NRI Tax Filing.
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