NRI Taxation - Income Tax return & Advisory
Indian Nationals staying abroad play a major role in the Indian economy. Every year thousands of Indians migrate to foreign countries for achieving better prospects for themselves and their family members. The non-resident Indians may remit their income earned abroad in the form of investments, savings or, remit the amount to the account of their family members who are residents in India.
The World Bank measures the creditworthiness of the nation through remittance inflows by the non-resident Indians. Each NRIs money transfer adds to the wholesome development of the Indian economy.
Though many analysts have been stating the growth to the Indian economy through non-resident Indians on forex markets, the people abroad are ignorant of their contribution to the Indian economy. As many do not have the knowledge of their residential status when shifted to abroad, follow rules or regulations to bring money into India or, tax implications on income generated on their property in India.
A non-resident Indian may earn income by way of interests on bank accounts maintained in India, rental income from investment in real estate, passive business income operated in India, capital gains from the transfer of properties, dividend income from investment in securities or return on mutual funds in India, etc. These incomes are broad categories of earnings by a non-resident Indian in India by way of remittances made to India apart from their salary income or income from business or profession earned abroad.
A non-resident Indian would be taxable in India if any of the incomes stated above deem to accrue or arise in India. For a non-resident Indian though global income may not be taxable, any income that arises out of property or security situated in India, non-resident Indian has to declare such earnings and file return of income in India. Yet, a check on taxability is primitive in such cases. Consulting a professional on these matters would make your job easier.
Secondment of service
Apart from incomes by way of investments, in certain cases tax implications in case of salary would also become essential as India being a developing country, in recent times many multi-national companies have showered their investments into India and established their businesses in various parts of India. Due to these companies’ work environment, employees are being deputed from India to the resident country of the MNC. As this deputation effects at any time of the year, an employee would be having income both in India and abroad. This is known as the secondment of service.
Hence one has to know the chargeability of such incomes arising in India as well as abroad for the respective financial year. We at Numbro would provide advisory and building tax structure relating to the Secondment of Services.
Also as India has entered into DTAAs with many countries, the assessee has to verify with the DTAA provisions of respective countries in which he/she is a resident, before filing the income tax return in India. Since going through DTAA is not a layman’s play, we could do the job for you and structure your tax return with all the compliances and allowing you to cross these hurdles without much stress.
- Determination of residential status
- Determination of Basis of charge
- Reviewing of DTAA with respective countries
- Transaction advisory in compliance with FEMA provisions
- Tax planning and advisory
- Filing of income tax returns
- Responding to tax authorities and RBI authorities for notices issued to assesses
- Filing of forms in case of remittances made
- Advisory services in case of Liberalized Remittance Scheme
For a common understanding, a non-resident Indian is a person who holds legal Indian citizenship but does not live in India. For tax purposes, a person’s taxability basis is his residency rather than citizenship.
As per the Income Tax Act, 1961, a person is a non-resident Indian if he satisfies the following conditions:
- If he is not in India for 182 days or more during the previous year, OR
- 60 days or more during the previous year AND has been in India for 365 days or more during the preceding 4 years immediately before the current previous year.
Further verification of additional conditions is not required and in case of a person leaving India is a member of the crew of an Indian ship or a person leaving India for employment outside India, the checking of the above condition (b) is not required.
For detailed information on this, please do check our article Residential Status of Non-Resident Indian.
A person can hold an Overseas Citizen of India card if he holds a passport of another country other than Pakistan and Bangladesh. An OCI cardholder does not need the visa sticker passport to travel to India. He/she needs an OCI card in conjunction with a current valid foreign passport to travel to and from India.
An overseas citizen of India cardholder has a multi-purpose lifelong visa to visit India. They do not need complying with the foreigner registration requirements for a longer stay in India.
Indians who live abroad are broadly categorized as a Non-Resident Indian (NRI) or an Overseas Citizen of India (OCI). Before 2015 there was another category known as Person of Indian Origin (PIO), which was however merged with the provisions of OCI later on.
We are here to foster you on the elements you have to know if you are a non-resident Indian or an overseas citizen of India.
The Income-tax Law has its own set of provisions for determining the residential status of a person. Thus, while determining the residential status of a person under the Income-tax Law, facts like Indian citizenship, Indian passport, etc., have no relevance. From the point of view of Income-tax Law, a person is a resident in India if he satisfies the criteria specified in this regard under the Income-tax Act
If your status is ‘resident’ then global income is taxable in India but for an ‘NRI’ only income earned or accrued in India is taxable in India. Income earned outside India is not taxable for a non-resident India in India.
Any income which deems to accrue or arise in India is taxable for a non-resident in India. Salary received in India or salary for service provided in India, income from a house property situated in India, capital gains on transfer of asset situated in India, income from fixed deposits or interest on a savings bank account are all examples of income earned or accrued in India. These incomes are taxable for a non-resident Indian.
In case of interest earned on NRE and FCNR accounts of an NRI are tax-free and interest on NRO account is taxable for an NRI. The payee has to deduct tax at source under section 195 before making any payment to the non-resident Indian.
A non-resident Indian is taxable if his/her income exceeds the basic exemption limit for that financial year and also requires filing return of income in India. A non-resident Indian is also eligible for certain deductions and exemption while filing his return of Income.
For a detailed list of TDS and exemption provisions applicable to non-resident Indian please refer to our articles on Guide on Income Tax Deductions to Non-Resident Indians and Income Tax Exemptions applicable to NRIs.