Income Tax on Non Resident Indians (NRI) / Persons of Indian Origin

Who is an NRI/ PIO ?

NRI(Non-Resident Indian) is an Indian citizen residing outside India. Person of Indian Origin(PIO) means an individual (not being a citizen of Pakistan or China or Bangladesh or Sri Lanka or Iran or Nepal or Bhutan), who has either held an Indian Passport at any time or who himself or either of whose father or grandfather was a citizen of India.

Residential status of an individual provides the scope of his taxable income and tax thereon.

When Does an Individual Becomes NRI/ PIO?

An individual becomes a NRI if he satisfies both the understated conditions:

  • He is not in India for 182 days or more during the relevant previous year, and
  • He is not in India for 60 days or more during the relevant previous year and he is not in India for 365 days or more during the 4 years prior to the previous year.

In case where a person leaves for employment or where an Indian Citizen who is abroad comes to India for a visit, the period of stay would be 182 days instead of 60 days in the previous year as per point  2 above.

Which all income of  NRI/ PIO is taxed in India ?

The following incomes of a ‘non-resident’ are taxable in India:

  • The income received or deemed to be received in India on his behalf, and
  • Income which accrues or arises or is deemed to accrue or arise in India during the previous year.

Can Incomes which  may not actually accrue or arise in India, be taxed in India ?

Certain categories of incomes are deemed to be received in India even though they may actually accrue or arise outside India like

1) income from business connection in India,

2) income from any property,

3) asset or source of income in India,

4) capital gain on transfer of a capital asset situated in India,

5) dividend paid by Indian company,

6) royalty or fees for technical  services paid by GOI(Govt of India) etc.

Are Non Resident Indians are required to file tax returns in India ?

In order to avail credit of  TDS deducted  on any source of income earned in India, the non-resident assessees are required to file their return of income in India.

Income of a non-resident individual is taxed as per the Income tax rate and slab prescribed for Male assessee below 60 years irrespective of women and senior citizen.

Is NRI/ PIO are permitted to invest/ sale property/ assets in India ?

NRIs and PIOs are permitted to buy and sell property in India, make investments, deal in shares and securities in accordance with FEMA.

General permission is available for purchase of only residential or commercial property in India but PIOs, purchasing residential property in India are required to file a declaration with the central office of the RBI.

A foreign national of Non-Indian origin, resident outside India, cannot acquire any immovable property in India without the RBI’s nod.

A NRI or a PIO cannot acquire agricultural land/plantation/farm house in India by way of purchase. Moreover a foreign national of non – Indian origin may acquire only residential accommodation on lease, for not more than five years.

Is there any tax savings option available to an NRI?

Tax savings options are also available to NRIs as per the I.T Act,1961. Some of them are deduction u/s 80C,  Life Insurance and Retirement/Pension schemes,  Investment in House Property – Deduction of both principal amount and interest on loan,  Tax saving Equity Fund schemes, Deduction u/s 80D – Health Insurance Premium and Deduction u/s 80E.

Is the interest received by Non–Resident on NRE Account taxable?

The interest earned is not taxable as per the rules and regulations of FEMA.

If an NRI has all his earnings from abroad & has NRI PAN, is it taxable in India?

Tax is to be paid in India only if the income has generated here, if not then there is no tax to be paid in India.

Whether income arising from transfer of shares of an Indian Co. by an NRI to another NRI is deemed to accrue or arise in India?

Since the capital asset i.e. shares are situated in India , the capital gain arising from transfer of such shares will be deemed  to accrue or arise in India

We at taxdost help you file your Income tax return

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One Response to Income Tax on Non Resident Indians (NRI) / Persons of Indian Origin

  1. Raju says:

    Hi, I transferred my money from abroad to my NRE account in India. My Banker then invested it in a fixed deposit associated with NRO account (this account created specifically for FDs as Banker told that NRE cannot have FDs). Is that FD now taxable? What should I have done or should do to avoid tax on this FD? Thanks.

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