Income Tax for NRI- Which Income in India is taxable and its tax rates
Income Tax for NRI: Non-resident Indian must pay income tax on income earned in India, which means they must pay tax on income that accrues or arises in India, according to Income Tax rules. NRIs must also pay tax on income deemed to have accrued or arisen in India. In India, money received or deemed to be received is taxable. Recent studies have reported NRI investing patterns, with only 2% of respondents have never invested in India. 87 percent of those who invested in India did so in real estate, while 39 percent invested in shares or mutual funds.
Almost half of NRIs (48%) who had not filed the ITR believed that tax (TDS or Tax Deducted at Source, which is tax deducted at the source of income before paying the balance to the payee) deducted on investments or income generation in India was equivalent to tax paid, and thus they were not required to file income tax returns.
Furthermore, nearly 90% of research participants who had their taxes deducted but did not pay taxes could have easily recovered the majority of their estimated tax.
Types of Income of NRIs
The Income Tax for NRI is determined by the source of the income as well as his or her residential status in India. An Indian citizen’s residential status must be determined for each financial year, which may differ from year to year.
The following are the incomes that are taxed in India.
1. Salary Income of NRI:
Revenue from salaries received in India, as well as income from services rendered in India, is subject to Indian tax laws. As a result, if an NRI receives a salary for services rendered in India, the income is taxable regardless of where it is received. The tax rate will be determined by the applicable slab rate for the financial year.
Even if a citizen of India receives a salary or income from the government of India for services done outside India, it will be regarded income earned in India and subject to taxation, even if the individual’s residency status is ‘non-resident’.
2. House property income:
Rental income from a residence in India is taxed for an NRI who owns the residential property. The taxable house property income will be calculated in the same way as the resident income. The NRI can take advantage of the standard deduction of 30%, as well as the deduction of property or municipal taxes paid and interest on a house loan.
A deduction under Section 80C can be claimed for principal repayment, stamp duty, and registration fees paid on the acquisition of property. House property income will be taxed at the applicable individual slab rates. It should be remembered that the person making the rental payment to the NRI is responsible for the TDS deduction under Section 195 at the rate of 30%. In addition, the tenant must file Form 15CA and submit it to the Income Tax Department electronically.
3. Income from other sources:
Other sources of income, such as interest on savings accounts and fixed deposits in Indian banks, would be taxed in the hands of NRI.
In India, interest on NRE and FCNR accounts is not taxable. on the other hand he interest earned in the NRO account is fully taxable. NRO account is opened in the name of NRI to manage income earned in India. The interest earned in the NRO account is fully taxable. NRO account is opened in the name of NRI to manage income earned in India.
4. Income from business or profession:
Any income earned by a non-resident Indian from a business set up or controlled in India is deemed income accrued in India and is thus taxable.
5. Income from capital gains:
Capital assets of Indian origin, such as real estate, stocks and bonds, gold, and so on, will be taxed in India. An NRI must pay capital gain tax if he transfers any capital asset located in India; the rules are the same as a resident.
If an NRI sells a house property after holding more than 2 years, the buyer is responsible for deducting tax (TDS) at a rate of 20%, and if the holding period is less than 2 years, TDS will be deducted at a rate of 30%. NRIs, on the other hand, can claim capital gains exemption under Section 54 by purchasing a home or under Section 54EC by purchasing capital gain bonds. The taxes laws for NRIs and resident Indians are the same when it comes to capital gains deriving from the sale of listed Indian stocks and securities.
If the holding period period is longer than 12 months, the profits are deemed long term capital gains and are taxed at 10% on excess gains of INR 100,000 (Dh9,990); if the holding period is less than 12 months, 15% tax is payable.
For debt mutual funds, a holding period of 36 months will be regarded as long-term capital gains classification and will be taxed at 20% after indexation, whilst gains of less than 36 months will be treated as short-term capital gains taxable at the applicable individual slab rate.
NRIs cannot adjust their capital gains income from the basic exemption limit of INR250,000, as can be done by the resident citizens for tax purposes.
Income Tax slab rates for NRI
|Income Tax Slab (in Rs)||Tax Rate|
|Up to Rs 2,50,000||Nil|
|2,50,001 to 5,00,000||5% of total income exceeding 2,50,000|
|5,00,001 to 10,00,000||12,500 + 20% of total income exceeding Rs 5,00,000|
|Above 10,00,000||1,12,500 + 30% of total income exceeding Rs 10,00,000|
|Income Tax Slab||New Regime Income Tax Slab Rates for FY 2020-21|
|Rs 0.0 – Rs 2.5 Lakhs||NIL|
|Rs 2.5 lakhs- Rs 5.00 Lakhs||5%|
|Rs. 5.00 lakhs- Rs 7.5 Lakhs||10%|
|Rs 7.5 lakhs – Rs 10.00 Lakhs||15%|
|Rs 10.00 lakhs – Rs. 12.50 Lakhs||20%|
|Rs. 12.5 lakhs- Rs. 15.00 Lakhs||25%|
|more than Rs. 15 Lakhs||30%|
Special income have special rates. Certain income tax exemptions and deductions will not be available under the new tax regime.
Surcharge under Income Tax
Surcharge is a tax on tax which shall be calculated on total income tax payable before Health and Education Cess which is 4%. In both New and old tax regimes, Surcharge will be applicable as per tax rates below in all categories of individuals and HUF, mentioned above:
1. 10% of Income tax if total income more than Rs.50 lakh
2. 15% of Income tax if total income more than Rs.1 crore
3. 25% of Income tax if total income more than Rs.2 crore
4. 37% of Income tax if total income more than Rs.5 crore
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