What if you have worked a part of the financial year abroad and have already paid the tax there? It is not fair that you have to pay tax on the same income twice in two different countries. It is here double taxation treaties signed by India with 66 other countries will help you. As per this treaty, you can get credit for the tax that you have already paid back in your resident country or you may be exempted from paying tax Consequently, your tax liability in India will reduce.
So you have made a plan to come back to your beloved country for permanent stay. You plan to start working here. But are you aware of the tax laws governing NRI? Here we take a look at income tax rules governing income tax for the NRIs in India.
IF AN NRI EARNS INCOME IN INDIA
For an NRI, income must be paid provided he earns any income in India. Otherwise, you don’t have to pay the tax, if your income is earned elsewhere.
You are liable to pay tax if:
- It is earned directly or indirectly in India.
- It is amassed in India.
In the following cases you must pay income tax:
- Business income
- Property income
- Income from any asset or source
- Salary earned in India or salary paid by the Government of India to an Indian citizen for services provided overseas
- Dividend paid by an Indian company to an NRI living abroad
- Interest paid to an NRI by government, bank, company or any body else
- Fees paid for technical services provided by an NRI
EXCEPTIONS TO THE RULE
On the other hand, following cases of income are not regarded as income earned in India.
- Income earned from activities involving running a news bureau, printing newspapers, magazines etc, which involves collection of news and views to be transmitted abroad
- Income earned from shooting a cinematography film if you are not an Indian citizen, working for a company whose owner(s) is/are nor Indian citizen(s) or resident(s) or employed by a company with no Indian shareholder(s).
You are required to file Return of Income (ROI), provided your annual income in any financial year is more than the exemption limit of Rs. 1 lakh. You can fill Form 2A if your income is less than Rs. 2 lakh, you are not in any business or profession or you have not carried forward your losses. In case if your income is more than Rs. 2 lakh, or Saral. These forms can be downloaded from the income tax website filled and submitted online. Once the process is complete, you are given a digital signature. If you don’t get this signature, you must file the returns physically.
But what if you have worked a part of the financial year abroad and have already paid the tax there? It is not fair that you have to pay tax on the same income twice in two different countries. It is here double taxation treaties signed by India with 66 other countries will help you. As per this treaty, you can get credit for the tax that you have already paid back in your resident country or you may be exempted from paying tax Consequently, your tax liability in India will reduce.
If you are an NRI and want to benefit from double taxation treaty, you have to submit the Residency Certificate issued by the income tax department of your country of residence. Submit this certificate while opening a bank account or later on. From then, the bank will apply the new rate of TDS.
SOME HANDY TIPS
- Always file your tax returns on time, failing which you will attract stiff penalty or even imprisonment.
- Always calculate your tax liability.
- Try to make the best possible use of tax saving schemes available to you.
- If you are unable to file returns yourself, get the help of expert tax advisor.
- Ensure you keep the proof of having paid the tax in your original country of residence to avoid being taxed again.
Every person, whether Resident Indian or NRI, must pay their taxes. Non-payment of taxes is a criminal offence, leading to fine or even imprisonment in worst cases. Hence it is important for everybody to pay their taxes diligently.
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What about income that we earn by blogging and by writing for newspapers abroad while living in India?
For an NRI, this income is not taxable, since the income is not considered to be generated in India. This despite you living in India and doing the work. Similarly, if you hold any foreign securities, you will not be taxed for the income obtained from the same.
You have to pay tax on that as your world income is taxable when you are a ‘resident’ in india as per income tax act.
Are..chodo yaar…tax wax ka fikar math kare. bindas jiyo
yeh toh sayiye !
My son is working in USA. He is paying tax there. Also getting part salary here after deduction of TDS.No tax liability as such. However, he could not file his return here for the last 3 years. Can he file his return now for 2006-7.2007-8 and 2008-9.
#1 he can, but that will accrue fine.
#2. He can always get a NRI status since his stay has been for more than 6 months and that could directly waive off the tax
I am an NRI and working for MCC funded projects, on rMCC funded projects all the consultant do not have to pay the local taxes. Als NRI, I do not have to pay tax in India? when i will retun back to India, what taxes I will have to pay?
What about if an NRI has a capital gain income in India by way of selling shares. Will he have to pay tax in India? Can he directly take that money in the NRI account so that to use the same in the foreign country?
Please advice!
Thanks
It’s a great ariticle to see, but please correct yourself in the last paragraph.
“Every person, whether Indian or NRI, must pay their taxes”. An indian is an indian irrespective of his residential status. I thiink it should read as resident or non resident instead of Indian or NRI.
Like a True Patriot I filed the IT-RETURN of my brother(as a Power Of Attorney Holder) for his Indian Income and there was a Refund due to him of around Rs.7000/- which has not been refunded to him over the last more than 3 years. He even recently went to their Office in India at Fort and submitted Form 30 for REFUND CLAIM along with copy of the Return for that Year. He was informed he will get the REFUND in 15 days. ….STILL WAITING for that elusive REFUND….will he have to make another visit from Pune?
Please use RTI for claiming your dues. There is a format /form that you’d have to mail to the correct office .Goto rtiforums.com to get more info.
this information is quite good…and much can learned from this…
I am an NRI, I rented my house in india, and i am earning income from that,
what percentage of TDS should be deducted from my income.
Please let me know can I file an ROI(Return on Income)on the interest rate I earn On fixed Cds which I have in indian Banks.I am NRI living in USA and also an OCI(Overseas citizen of India).Right now I pay a tax of 33% on the interest I earn.
Thankyou
Mitali
If India really wants to benefit from NRI wealth it should make all investments in infrastrcture moderinzation by people of indian origin tax free. As a further incentive all investments over 10 years should be guranteed to pay a rate equal to India stock market index - now watch the money flow in.
Very interesting idea, we’re glad you like it. I mean, her, awesome thoughts