Taxable Income of NRI – NRI Taxation (Benefits and More)

Published On - March 15, 2016

admin Income Tax

The income tax rules applicable for NRIs (Non Resident Indians) differ from that of the resident Indians. It is important to note that NRIs should pay taxes for capital gains or income they earn in India.

According to the Income Tax department, an individual is categorised as a non-resident Indian under specific conditions as listed below:

  • He or she lives outside India for 182 days in the previous year
  • He or she does not stay in India for 60 days during the previous year and 365 days or more for four years prior to the previous year

Taxable Income of NRIs:

According to Foreign Exchange Management Act and Income Tax Act, 1961, a NRI can should taxes under specific conditions as listed below:

  • Taxable income in a financial year in India is above Rs.2 lakh (exemption limit)
  • Long-term or short-term capital gains earned from the sale of any property

The following table consists of details of taxable income of NRIs

Particulars Description
Income from House Property and Home Loan
  • Income from House Property is taxable as per prevailing rates.
  • Capital gains generated from the rent, sale or lease of an asset in India is taxable as per income tax regulations.
  • A deduction of 30% can be claimed by a NRI on his or her home loan in India. Under Section 80C, a NRI can also claim deduction for principal repayment, registration charges and stamp duty.
  • If a tenant pays rent to his owner who is a NRI, the former can make TDS at 30% and submit Form 15CA
Salary Any income earned in India or even received on the behalf of a NRI can be taxed. In other words, if a NRI receives his or her salary for services in India, it is liable to be taxed
Investment
  • Capital gains or income from short term/long-term securities are taxable
  • Capital Gains on shares held in India are taxable
  • Capital gains upon transfer of an asset in India is taxable
Income from other sources The interest income accrued from savings bank accounts and fixed deposits held by a NRI in India are liable to be taxed
Investment Income
  • NRIs can avail of a special provision related to investment income.
  • A NRI is taxed at 20% if he invests in assets in India. All the same, he or she need not file returns if TDS has been deducted on the invested income.
  • The investment which are eligible for the special treatment are listed below:
  • Central government securities
  • Shares in Indian companies
  • Deposits
  • Debentures (for publicly listed companies)

Deductions Available to NRIs:

The following table shows the deductions and exemptions available for NRIs

Particulars Deductions
Section 80C NRIs can avail of the following deductions under section 80C

  • Payment of tuition fees for children
  • Ulips
  • Payment of premium for a life insurance policy
  • ELSS
  • Principal repayments on home loan
Section 80D Premium paid a health insurance policy
Section 80G Donations on social service activities
House property income for NRIs NRIs can avail of deductions for Income from House Property in India, property tax and interest income on home loans
Section 80E Interest earned on an education loan
Section 80TTA Up to Rs.10,000 can be claimed as deduction on interest income on savings bank accounts

Deductions Unavailable to NRIs:

NRIs cannot avail of the following deductions available under the IT Act, 1961

  • Investment under RGESS under section 80CCG
  • Differently-abled under Section 80U, Section 80DD and Section 80DDB
  • Investments which are unavailable to NRIs are listed below:
  • Senior Citizen Savings Scheme
  • National Savings Certificates
  • Post Office 5 Year Deposit Scheme
  • Public Provident Fund