Tax Benefits for Non Resident Person
If you are a Non-Resident Indian (NRI) living abroad, you may wonder whether you need to file an Income Tax return in India and what are the benefits of doing so. In this blog post, we will answer these questions and explain the tax benefits that are available for NRIs in India.
Who is an NRI for Tax Purposes ?
According to the Income Tax Act, 1961, an Individual is considered to be an NRI if he or she satisfies any of the following conditions
- He or she is not in India for a period of 182 days or more during the previous year or
- He or she is not in India for a period of 60 days or more during the previous year and 365 days or more during 4 years immediately preceding the Previous year.
However, there are some exceptions to these rules. for examples, if an Indian Citizen or a person of Indian Origin visits India during the year, the period of 60 days is extended to 182 days. Similarly, if an Indian citizen leaves India for employment or as a crew member, the period of 60 days is also extended to 182 days.
Fromthe assessment year 2021-22, there are some changes in these rules. if an Indian citizen or a person of Indian origin has a total income (other than income from foreign sources) exceeding Rs. 15 Lakh during the previous year, the period of 60 days is reduced to 120 days. Also, if an Indian citizen has a total income (other than income from foreign sources) exceeding Rs. 15 Lakh and is not liable to pay tax in any country, he or she will be deemed to be a resident in India.
What is the tax liability of an NRI ?
An NRI is liable to pay tax in India only on the Income that is received or deemed to be received in India or that accrues or is deemed to accrue or arise in India. This means that any income that is earned outside India by an NRI is not taxable in India. However , if such income is remitted to India, it may be subject to tax deduction at source (TDS).
Some examples of income that are taxable for NRIs in India are:
- Salary received in India or for services rendered in India
- Interest, dividend, royalty or fees for technical services from an Indian source
- Rental Income from property situated in India.
- Capital gains from transfer of assets situated in India
- Income from business of profession carried on in India
What are the tax benefits for NRIs in India ?
There are several tax benefits that NRI can avail in India, such are:
- Deduction under section 80G for donation made to certain charitable institutions.
- Exemption under section 10(4) for interest earned on non-resident external (NRE) account and foreign currency non-resident (FCNR)account.
- Exemption under section 10(5) for leave travel concession (LTC) received from employer.
- Relief under section 90 and 91 for taxes paid in foreign country, subject to double taxation avoidance agreement (DTAA) or unilateral
How to file income tax return as an NRI ?
- ITR-2: For NRIs having income from salary, house property, capital gains and other sources (except business or profession)
If you have paid excess tax or are eligible for a refund, you can claim it by filing your ITR and providing your bank account details. The refund will be credited to your bank account after processing your ITR.
Filing Income tax return as an NRI has several advantages, such as:
- Claiming TDS refund, if any
- Carrying forward loss, if any, for future offset
As an NRI, you can enjoy various tax benefits on your income earned in India. However , you have to comply with the tax laws and file your ITR if required. you can also take advantage of the DTAAs to avoid double taxation and save tax in both countries. By following these steps, you can reduce your tax liability and maximize your savings as on NRI.
