There is always some confusion when it comes to an NRI and income which is taxable in India. Mentioned below are a few basics on how to determine the residential status of an individual and the taxable income for an NRI.
1. Determining the Residential Status
In a financial year, if you have lived in India for a minimum of 6 months I.e. 182 days to be precise, or if you are in India for 60 days or 2 months in the previous year and have lived in India for one whole year or 365 days in the last four years, you are considered to be a resident Indian for that financial year.
In case you are an Indian citizen who is working abroad or you are part of the crew of an Indian Ship, the first condition applies to you. This is applicable to even a Person of Indian Origin (PIO) who is visiting India. The second condition will not be applicable to these persons. An NRI is one who does not meet any of the above conditions.
A) Is Income Earned Abroad Taxable?
The income tax of an NRI n India is based on his/her residential status for the financial year. In case the status is ‘resident,’ the global income of the NRI will be taxable in India. In case the status is ‘NRI,’ the income that is earned or accrued only in India will be taxable in India.
Examples of income that is accrued and earned in India are the salary that is received in India, income from house property located in India, salary for service is provided in India, capital gains on transferring of assets located in India, interest earned on the savings bank account, income from fixed deposits. These will be taxable for an NRI in India. Income that is earned abroad will not be taxable in India. Also, note that the interest earned on an FCNR or NRE account is tax-free. However, interest earned on an NRO account will be taxable for an NRI.
B) Should an NRI file their Income Tax Return in India?
Irrespective of whether you are an NRI or not, an individual whose income goes beyond Rs.2,50,000 has to file their income tax return in India.
C) What is the Last Date for Filing Income Tax Return in India?
For NRIs the last date to file income tax returns in July 31st in India.
D) Should NRIs Pay Advance Tax?
In case the tax liability is in excess of Rs 10,000 in any financial year, the individual has to pay advance tax. Interest u/s 234B and 234C is applicable when advance taxes are not paid.
2. Taxable Income for an NRI
The salary income of an NRI is taxable when they receive their salary in India or even if someone does it on behalf of the NRI. Hence, if you are an NRI and your salary is credited directly into an Indian account it is subject to the tax laws of India. This income will be taxed at the slab rate you fall into. The income from salary, house property, rental payments, other sources, business and profession, capital gains, investments, etc., must be understood well to know which income is taxable for an NRI in India.
These basics will definitely help you understand the basics of filing of income tax returns for an NRI in India.