As defined by the Indian Income Tax Act of 1961, NRI taxes pertain to individuals generating income outside of their native country. The income tax laws and benefits available to them vary from those available to permanent Indians.

Non-resident Indian (NRI) income generated in India is taxable. The number of days a client has spent in India and the amount of income made determine whether or not he or she is categorized as an NRI.

The taxation on an individual’s income is determined by the origin of the income and the individual’s residency status in India. An Indian citizen’s residency status must be assessed individually for each fiscal year, which may differ from year to year.

NRI Taxation Updates

Individuals of Indian origin who have stayed in India for fewer than 182 days in a fiscal year would be considered NRIs until FY 2019-20. However, in Budget 2020, NRI residency time with an Indian income of more than Rs. 15 lakhs was decreased to 120 days.

Individuals who classify as ‘deemed residents’ since they are not taxed in any other nation will be deemed ‘Residents but Not Ordinary Residents (NOR). if they remain in India for more than 120 days but shorter than 182 days. Only income derived from India is taxed under RNOR. Income from any trade or activity controlled or established in India is also considered of Indian origin.

Individuals who previously enjoyed the privilege of being exempt from taxation will now find themselves subject to these new regulations. As a result, an Indian citizen must examine his or her residential status ahead of time to determine tax liability.

What types of income are taxable in India for non-resident Indians?

Income from Salary:

Income derived from a salary received in India or income derived from services done in India is subject to Indian tax rules. As a result, if an NRI gets a wage for services done in India, the money is taxed regardless of where it is received. The tax rate will be determined by the applicable slab rate for the fiscal year.

If the Indian government remits any compensation or income to an Indian citizen for services done abroad in India, it will still be deemed income earned in India and will be taxed, even if the individual’s residency category is ‘Non-resident’.

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Earnings from House Property

Rental income from a residence in India is taxed for an NRI who owns the house. The taxable dwelling property revenue shall be determined in the same manner as the resident.

The NRI is also entitled to a basic deduction of 30%, a deduction for property taxes paid, and a credit for interest on a home loan. Section 80C deductions can be claimed for principal repayment, stamp duty, and registration fees paid on the acquisition. Household income will also be taxed at the applicable individual slab rates.

However, when paying income to an NRI owner, the renter must ensure to deduct TDS at the rate of 30%. Furthermore, upon receipt of the CA certification in Form 15CB, he is obliged to file Form 15CA digitally (required in case remittance is more than Rs. 500,000 in an FY).

Income from Other Sources:

Income from other sources, such as interest earned on savings accounts and fixed deposits maintained in Indian banks, is chargeable to tax in hands of an NRI. In India, income on NRE and FCNR accounts is not taxed. The interest earned in the NRO account, on the other hand, is fully chargeable. To manage income earned in India, an NRO bank is formed in the identity of the NRI.

Income from capital gains:

Income from capital assets such as residential properties, shares and securities, jewelry, and so on that are of Indian origin is subject to Taxation in India. If an NRI sells any capital asset located in India, he must compensate capital gain tax; the regulations are the same as if he was a resident.

Earnings from business and profession:

Any money received by a non-resident Indian from a corporation established or managed in India is considered accumulated income and is thus taxed in India.

Double taxation relief: If NRI earnings are assessed in both India and the place of residency, tax relief can be obtained through a DTAA (Double Tax Avoidance Agreement) between both 2 nations. There are two ways to claim tax relief under the DTAA i.e. Exemption method and Tax credit methods.