The income tax applicable for Indian citizens residing in India is different from the tax for Indian citizens residing outside India (NRIs). In India, income tax depends on the source of income as well as the residential status of the concerned citizen. A lot of Indians looking to move abroad often wonder whether they’d have to pay income tax or what type of NRI incomes are applicable for income tax.
If you’re an NRI or are going to be one, income tax would be applicable for the following incomes.
Even if you’re living abroad, any salary received in India or salary received for services rendered in India would be liable for income tax and will be subject to Indian income tax laws. Therefore, irrespective of the place of receipt, any salary received for services rendered in India would be taxable according to the slab rate for that financial year.
In the case of remittances paid by the Government of India for services outside India, the said payment would still be considered as income accrued in India and would be taxable even if the individual is an NRI.
- Income from Rented Property
Income gained from any house or property in the form of rent in India would be taxable for NRIs, too. The amount of taxable income from such sources would be deduced in the same way as that of a resident Indian. All the benefits that apply, like standard deduction of 30%, deduction on property tax and interest benefit on NRI home loan, will be applicable. Deductions under Section 80C for principal repayment, stamp duty and registration charges can also be claimed. Income from the property will also be charged according to the income tax slab rates.
The onus of TDS deduction here lies with the tenant. So they’re required to deduct TDS of 30% from the rent under section 195. Additionally, the tenant will then have to fill out Form 15CA and submit it online to the Income Tax Department.
- Income from Other Sources
Income sources like interest received in accounts and fixed deposits in India will be taxable for NRIs. Interest income received in NRO accounts would also be fully taxable. However, interest received in an NRE or FCNR account is not liable for tax.
- Income from business or profession
If the business or professional service is set up and controlled in India, then any income gained from such an enterprise would be liable for income tax according to the usual income tax laws.
- Capital Gains Income
Capital assets like stocks, property, gold, securities etc., that are of Indian origin would be liable for capital gains tax for NRIs with the same set of rules as that of resident Indians.
In case the NRI sells their property after a holding period of two or more years, then the buyer is responsible for deducting TDS at 20%. IF the holding period is less than two years, then a TDS of 30% is applicable. NRIs can claim capital gains exemption under Section 54 and 54EC.
As far as equity stocks and shares are concerned, capital gains tax rules are the same for residents and NRIs. A holding period of more than 12 months would be liable for long term capital gains tax, whereas a holding period of fewer than 12 months would be liable for short term capital gains tax.
- Double Taxation Relief
If NRI income is taxed in India as well as the country of residence, tax relief can be sought by the NRI under the Double Tax Avoidance Agreement between the two countries.