Non-Resident Indians (NRI) maintain strong ties with India and play a vital role in India's economic landscape. This article aims to provide an overview of key aspects relating to NRI taxation in India, reporting requirements and how Double Taxation Avoidance Agreements (DTAA) with foreign countries can be leveraged by an NRI.
Who is a Non-Resident (NR)?As per section 6 of the Income-tax Act, 1961 (the Act) an individual is considered as a NR for a Financial Year (FY) if the below conditions are not satisfied:
- Physical stay in India ≥ 182 days in relevant FY.
- Physical stay in India ≥ 60 days during relevant FY and ≥ 365 days in preceding 4 FYs.
In case an Indian citizen or person of Indian origin who is outside India, comes on a visit to India during the FY, 60 days threshold is replaced with 182 days if total income (other than incomes from foreign sources, as defined) does not exceed Rs 15 lakhs for the relevant FY. However, if such income exceeds Rs 15 lakhs, then the 60 days threshold will be replaced with 120 days.
Additionally, individuals being citizen of India having income > Rs 15 lakhs in India and who are not liable to tax in any other country by reason of domicile / residence / any other similar criteria in such other country, then such individuals shall be deemed to be Resident but Not Ordinarily Resident (NOR) in India.
Taxation in India and Filing of Tax ReturnNRI individuals are taxable in India only in respect of incomes earned / received in India. Income earned outside India is not considered as taxable in India. Such taxation is generally at the normal rates of taxation except specific incomes which are taxed at flat rates (e.g., dividend from shares of Indian companies, foreign currency investment in specified securities etc.)
NRIs whose taxable income exceeds the threshold limit of income not chargeable to tax (i.e., Rs 3 lakhs for FY 2023-24 under new tax regime), are required to file income tax within the specified due date. It is to be noted that in the case of taxpayers following the old tax regime (higher tax slab rates but with exemptions/ deductions), the threshold limit is Rs 2.50 lakhs.
Tax filing requirements would also be there in specific circumstances even if income is below the above-mentioned thresholds.
Reporting of AssetsNRIs having total income exceeding Rs 50 lakhs need to provide details of Indian assets and corresponding liabilities as on 31st March of FY in the income tax return. Additionally, NRIs are required to report the following details, as required in applicable tax return forms:
- Shares held in unlisted companies (including foreign companies);
- Directorship position held in companies (including foreign company, having incomes received / earned in India).
Benefits from DTAANRIs who are taxable in India in respect of incomes earned from India, income may again be taxed in foreign countries of which they may qualify as Residents. Under the DTAAs, NRIs may be eligible to claim the exemption from tax / credit of tax paid in India in the country of residence, to avoid double taxation of the same income in the two countries.
Furthermore, one may also be benefitted from the lower rate of Indian taxation prescribed in the DTAAs in respect of dividend, interest incomes in India and the tax exemptions provided in specified cases in respect of salary and professional incomes.
The beneficial provisions (as applicable) referred above are available only where NRI qualifies as Resident of foreign country and Tax Residency Certificate (TRC) is obtained from the foreign tax authorities. In cases where TRC doesn’t contain the specified particulars (like nationality, tax identification number, period, etc.), then a separate Form 10F is required to be e-filed by the taxpayer.
At the end, it is advisable for NRIs to have a proper understanding of the applicable provisions to ensure appropriate discharge of tax liabilities and to remain tax compliant.
(Parizad Sirwalla is National Leader, Global Mobility Services – Tax, KPMG in India)
Start a Conversation
Post comment