5 Interesting Income Tax Filing Rules and Policies for NRIs

As an NRI, it can be quite confusing to figure out how your income is taxed in India and the country of your residence. It goes without saying that each country has its own tax laws and understanding these laws can be challenging if you do not have the expertise in this field. Nonetheless, you are expected to pay your taxes in India and the country you reside in. So, it is best to figure out the tax filing rules and policies that govern non-resident Indians so that you can easily handle the Indian tax liability.

Tax on Interest

Typically, resident Indian citizens, have to pay taxes on interest that they receive on their savings. However, the tax is payable only if the interest amounts to more than INR 10,000. Fortunately, this rule does not apply to NRIs. Hence, they can continue remitting money into the non-resident bank accounts in India and accrue interest without having to pay taxes on it. But if the money is in resident account then it is taxable as per normal law.

No higher tax bracket now

Earlier if an NRI without a PAN card he had to incur a higher TDS deduction. This rate would be 20% or applicable rate (whichever is higher). Since 2016 this rule has been amended. Now the NRI taxpayer can furnish alternative documents and avoid paying higher tax.

Taxable Income

Any short- or long-term gains from investments, the sale of assets and rental income are taxable in India. But you can avail a deduction of 30 percent on rental income. In case you have inherited property from parents or other family members, you will not have pay taxes. However, if you earn money through rent from this property, you are liable to pay taxes. The same also holds true when you sell the property.

Tax Exemption in India

You need to be aware of the tax laws in your country of residence. In some instances, such as dividends by companies in India are not taxed. However, in countries like the US, you will have to pay taxes on the dividends. Hence, when you are opting for US tax filing from India, this is something NRIs should be aware of.

Paying Your Taxes in India

It is prudent to remember that in India, taxes are usually deducted before payments are made out. This is known as tax deduction at source, or TDS. This deduction is by Section 195 mentioned in the Income Tax Act. So, if you still have to pay taxes on your income from different sources in India, you can do it with ease online.

It is best to file a tax return only if your income https://www.hrblock.in/income-tax-services/us-tax-filing-in-india.aspxis more than the threshold limit. Any earning that is less than INR 2.5 lakh is exempt from taxes. So, if all your income in India excluding capital gains is more than INR 2.5 lakh, you will have to pay taxes and file your tax return. For NRI’s they have to pay taxes on their capital gain at the applicable rate irrespective of the fact that their total income is less than Rs 2.5 lakh. However, if TDS has been deducted from your income, but your income is less than Rs 2.5 lakh, then you should file the return to get a tax refund.

Double Taxation norms

As an NRI, you can avail the benefits of Double Taxation Avoidance Agreement that India has signed with different countries. This agreement allows you to declare the income you have in India to earn tax credit in your country of residence. This credit can reduce your tax burden.

With these rules, you will be much better informed about the rules governing Income Tax eligibility, exemptions, filing and payment.

Author: Robin Gupta