NRI or Non-resident Indian income tax slabs are applicable for those who are from India but are earning income in a foreign country. The NRI rules state that a person has to stay for at least 182 days in India to be deemed an NRI. Income tax slabs for NRIs are different from the income tax slabs applicable for resident Indians.
Let’s dive in to know how NRI income tax slabs work.
The income tax Department rules that a non-resident Indian is
Section 6 of the income tax Act states that a person is an Indian citizen if he/she has stayed in India for 182 days or more during the previous year also if he/she has stayed at least 60 days in the previous year and more than 365 days in 4 years preceding the previous year.
Further, section 6(1A) states that Indian citizens should earn over Rs.15,00,000 (other than from foreign sources) to be deemed a resident. Also, he/she must not be paying taxes in any other country. The Amendment Act of 2020 rules that an individual is an Indian resident if he/she stays in India for at least 120 days before leaving. An Indian resident is liable to pay taxes on his global income. However, an NRI should pay taxes according to the NRI Income Tax Slabs in India only when he/she generates income in India.
The income tax schedule for non-residential Indians depends on their residential status. Simply put, an Indian resident is liable to pay taxes in India. However, an NRI is liable to pay taxes only if he/she earns a taxable income in India. Thus an NRI is liable to pay taxes on income earned in India, capital gains on asset transfers, income from fixed deposits or savings accounts, etc. In short, income earned in NRE accounts is tax-free, and that on NRO is taxable.
Section 115D of income tax essentially provides special provisions for calculating the total income of NRIs. It states that:
This section states that:
This section rules that:
Firstly, if the valuation of a new asset is higher than that of the original asset, he/she is not liable to pay taxes on the entire capital gains.
Secondly, if the valuation of a new asset is minor, he/she is not liable to taxation, assuming the same proportion of acquired capital to acquisition cost.
According to this section, an NRI is not liable to present his/her income returns if
This section states that any NRI who is legally a resident following his/her total income must furnish a declaration of his income returns to the assessing officer. The provisions of the chapter will be applied henceforth, and he/she is liable to do it for every year of assessment.
This section allows NRIs to choose not to be governed by the regulations of the chapter. However, he/she must present his income returns for the current/previous year, which implies that his total income will be subject to taxation according to provisions of this Act.
NRIs are liable to certain deductions on their income subject to certain factors. The income tax department provisions a standard deduction of 30% for income on a property. Additionally, they can enjoy interest deduction for home loans and principal repayment under section 80C.
Capital gains also attract tax deductions of 20%. Capital gains exemption is applicable for house property investment or on capital bonds.
According to India’s NRI income tax slabs, NRIs enjoy certain tax exemptions on particular interest and dividend earnings. Tax exemption items include:
|Taxable Income (Rs.)||Tax Rates||Education Cess||Secondary/Higher Education Cess|
|2,50,000 – 5,00,000||10%||2%||1%|
|5,00,000 – 10,00,000||20%||2%||1%|
Also read: Income Tax Act, 1961: Overview, Tax Slabs and More https://navi.com/blog/income-tax-act-1961/
|Taxable Income (Rs.)||Surcharge Amount|
|50,00,000 – 1,00,00,000||10%|
|1,00,00,000 – 2,00,00,000||15%|
|2,00,00,000 – 5,00,00,000||25%|
The income tax department makes sure that NRIs pay taxes according to the mentioned NRI Income Tax Slabs. However, it makes sure that they do not pay excess taxes. Since NRIs cannot utilize 15G/15H to avoid TDS, they must submit their tax return filing and investment proofs. The double taxation avoidance agreement makes sure that NRIs do not pay taxes twice.
NRIs can avail tax deductions by investing in equity linked saving schemes. In addition, it provides the benefit of tax exemption under Section 80C.
Yes, salaries earned in countries with which India has Double taxation avoidance agreement are liable to taxation.
A resident of India is liable to taxation under NRI Income Tax Slabs on his/her income irrespective of where he/she has earned it.
If an individual is not earning any income in the form of capital gains or other means, he/she is not liable to file tax returns.
Dividends are exempt from taxation irrespective of one’s resident status. However, it has to be reported.
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