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Getting Taxed On Your Income When An NRI

Posted on October 01 2020

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Your residential status is an important aspect to be considered when Income Tax is being discussed. Your Residential Status itself determines if at all you are required to pay taxes or not.

As per The Income Tax Act, an individual is a resident when:

You reside is India for a period of 182 days or more during the relevant previous year.
You are present in India for 60 days or more during the previous year and again for a combined total of 365 days or more during the previous 4 years prior to the previous year.

Your status of being a Resident or a Non-Resident Indian depends on the above criterion. For example, while you are an NRI, you were physically present in India for more than 182 days during one financial year. In such a case you will be considered as a resident when it comes to taxes and you are obliged to pay taxes to the Indian Government for the income earned in India, if any for that year. Thus an NRI is liable to be taxed only for income or capital gains earned in India under general circumstances.

While in India, What can you be taxed on?

The earnings made abroad do not come under the Indian Income Tax Acts, so you will not be taxed for the same. However if any income or capital gains arise from within Indian you may be liable to pay taxes for the same subject to various Tax Avoidance agreements with many countries.

Taxable Incomes for NRIs would include:

Salary & Consultancy: Income earned from your salary in India or income received on your behalf is taxable.
Property and Assets: Any income or capital gain that you generate from the sale/ rent or lease of a valued property or an asset based in India will be taxed as per the Income Tax rules.
Securities and Investments: Income or capital gains from long-term or short term investments are liable to be taxed.

If you are an NRI with your income sourced in India, you would have to file your tax returns. Presently, as per Income Tax Act,1961 and Foreign Exchange ManagementAct (FEMA), you may qualify to pay taxes in case you fulfill conditions:

·Your taxable income in India a particular financial year is more than the exemption limit of Rs 2 lakh.

·You have earned short-term or capital gains from sale of any investment or property, even if the gains are less than the exemption limit.

Good news is the Tax exemption for lucky NRIs?

You are taxed as per the incremental tax rate and slabs prescribed in India. All NRIs are required to file Taxes Return in order to avail credit of TDS.

As far as Tax Returns are concerned, you can file for tax returns under the following circumstances:

·You have a Pan card

·If you have any source of income or assets in India

·If your taxable income consists of only investment income or long term capital gain

·When the tax has been deducted at source, on income

We at Tax Assist feel that if you are a Non-Resident Indian, these taxation basics are good to know so that you are aware of when you are liable to pay taxes, how taxes are levied on your income earned in India, what are the tax deductions that you get as well as how tax returns work. Most importantly, it is the right thing to do if you pay taxes (when liable) diligently as they enable the government to meet their expenses as well as fund the country’s development.

You can give us a call or visit us any time you have any further queries.

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