Taxation of NRI - International Taxation - Income Tax

Taxation of NRI Residential Status of a person is the main aspect of determining the income tax liability in India. Non-Resident Individual (NRIs) means whose Residential status is Non-Resident as per Section 6 of IT, Act, 1964 + Indian Citizen/Person of Indian Origin NRI s need to pay tax as when they fall under the jurisdiction of the Income Tax Act, 1961 Income of NRI is only taxable in India, If the income earned in India or income which accrue or arise or is deemed to accrue or arise in India (i.e. capital gains on shares mutual funds, interest on FD, any other interest income earned in India, Rental Income or Salary earned in India etc.) which exceed the basic exemption limit, NRI need to file his/her ITR return. Exemption from filing ROI if Total Income include only Investment Income LTCG and TDS has already deducted. Foreign Exchange Assets means Any of the following assets acquired / purchased in foreign exchange assets. Chapter XII-A Shares of Indian Company (Public/Private) Debentures of Indian Public company Deposits with an Indian Publix Company Securities of Central Govt. Any other asset as may be notified by CG LTCG from foreign exchange assets , Investment Income = Any Income derived from foreign exchange assets. Method of computation of Income from foreign exchange asset as per section 115D Investment Income No deduction in respect of any expenditure or allowance shall be allowed under any provision of this Act. LTCG Chapter VI-A not available. First Proviso to Section 48 Available. Second Proviso to Section 47 (Indexation) Not available. Other Income = Normal Provisions. Exemption on LTCG Section 115F LTCG of FOREX assets shall be exempt if net consideration is utilized for acquiring other FOREX assets or Saving Certificate u/s 10(4B) with 6 Months from the date of transfer Exempt Amount LTCG * Cost of New Asset / Net Considerations New assets should not be transferred or converted into money within 3 years from the date of acquisition, if it is transferred then exempted LTCG earlier shall now be taxable as LTCG in the year in which new asset transferred or converted into money. Exemption from filing return of Income as per section 115G In case if :- Total Income include only investment income LTCG. TDS already deducted. Provisions of FOREX income, ROI Exemption shall also apply even if NRI becomes Resident as per Section 115H ​​​​​​​ In case NRI becomes resident, he can file declaration with ROI for AY in which he becomes Resident that he wants to be governed by the provision of Chapter XII-A. It means Investment Income continue to be taxed @20%. And Chapter-XII-A will apply till transfer or converted into money of such forex assets. Taxability of Income for Individual HUF Income Resident OR Resident but NOR Non-Resident Indian Income Taxable Taxable Taxable Foreign Income - Income from Business/Profession controlled/setup from India Taxable Taxable Not Taxable Other Foreign Income Taxable Not Taxable Not Taxable Some relevant points related to NRI taxation. Any individual being Senior Citizen NRI is allowed basic exemption limit only up to ₹ 2.5 lakhs NOT upto ₹3 lakhs as in case of Resident Senior Citizens NRI is not allowed to invest in PPF, NSC to claim deduction u/s 80C. Deduction u/s 80 TTB Interest on FD, RD, saving bank is not allowed to Senior Citizens NRI NRI is not allowed to claim basic exemption limit in case of STCG u/s 111A, LTCG u/s 112A LTCG u/s 112 Interest earned on NRO account is fully TAXABLE in the hands of NRI under income from other sources as per income tax slab rates. However, Interest earned on NRE FCNR accounts is fully EXEMPT in the hands of NR.