FAQ on Taxation of NRI
Are NRE and FCNR interest income tax free?
Interest on NRE and FNCR deposits are exempted from tax in India.
What does the term Residential Status under the Income Tax Act mean?
Under the Income-tax Act, 1961, the three residential status are defined: Resident and Ordinarily Resident (ROR) Resident but Not Ordinarily Resident (RNOR) Non Resident Indian (NRI)
What are the tax benefits available to an NRI?
Bank Deposits investment in shares, units of Mutual Funds etc. are exempt from wealth tax in India.
Interest earned on NRE and FCNR accounts is completely tax-free.
Gift tax has been abolished for all types of gifts from the 1st October 1998.
However, gifts received on the occasion of marriage or from relative or under will or inheritance would not be subject to tax
How can NRIs, residing in other countries, take benefit of ‘Double Taxation Avoidance Agreements (DTAA)?
To avail benefit of lower rates of tax as per double taxation avoidance treaty entered in by India, NRIs need to submit the Residency Certificate issued by Tax Authorities of the country of his residence. These documents should be submitted to the designated bank branch at the time of opening the bank account or subsequently. New TDS rate shall be applied only after the acceptance of the Residency Certificate by the designated bank
Whether the pension, rental income, dividends payable in India to NRI can be remitted abroad?
Yes. The NRI has any income in India, the amount of pension, rents, dividends should be credited to his NRO account and his net income is allowed to be remitted after payment of applicable taxes. An application has to be made to the Authorised dealer with a certificate from a Chartered Accountant that the income tax thereon has been paid / provided for
What is Income Tax?
It is a tax imposed by the Government of India on any person who earns income in India. This tax is levied on the strength of an Act called Income tax Act which was passed by the Parliament of India. The Income tax Act applies to all persons who earn income in India, whether they are resident or non-resident.
All receipts are not taxable. Receipts can be classified into two kinds. A) Revenue receipt B) Capital receipt. The general rule under the Income tax Act is that, all revenue receipt are taxable unless a receipt is specifically exempted and all capital receipts are exempt from taxation unless there is a provision to tax it. Agricultural income is a revenue receipt and still it is not taxable based on exemption. In respect of Capital Gains one is not liable to Income-tax if he reinvests in specified assets or if he has capital loss in other assets
What do you mean by income earned in India?
Income earned in India is not limited to income earned within the geographical limits or boundaries of the country. Certain incomes are also deemed to have been earned in India although they may have been earned outside the country.
How is residential status relevant for taxation?
If an individual stays in India for 182 days or more in a year, he is treated as resident in that year regardless of his citizenship. If the stay is less than 182 days he is a non-resident. In case of resident individuals and companies, their global income is taxable in India. However non-residents have to pay tax only on the income earned in India or from a source/activity in India.
Do I have to maintain any records or proof of earnings?
For every source of income an individual has he has to maintain proof of earning and the records specified under the IT Act.
What is a return of income?
It is a prescribed form through which the particulars of income earned by a person in a financial year and taxes paid on such income is communicated to the Income tax department after the end of the Financial year. Different forms are prescribed for filing of returns for different Status and Nature of income.
What are the due dates for filing returns of income / loss?
The due dates are as follows:
Companies & their Directors
Business entities other than companies, if their accounts are auditable & their working partners
In all other case including Individuals
What are the benefits of obtaining a Permanent Account Number [PAN] and PAN Card?
A PAN number has been made compulsory for every transaction with the Income Tax department. It is also mandatory for numerous other financial transactions such as opening of bank accounts, availing institutional financial credits, purchase of high-end consumer item, foreign travel, transaction of immovable properties, dealing in securities etc. A PAN card is a valuable means of identification accepted by all government andnon-government institutions in the country.
Is it mandatory to file return of income after getting PAN?
No. Return is to be filed only if the individual has taxable income exceeding Rs. 250,000.
If you want to file your tax returns in India, write to us at [email protected]