A guide to tax implications for NRIs

Author: Ajay Sawhney

Most of the NRIs (Non Resident Indian) enjoy tax-free income in India, but what if you want to come back to your country for permanent residency? According to tax laws governed by Govt. of India, you're supposed to pay the taxes as per as NRIs rule. As India is member of double taxation treaty, under which you can enjoy the credit for tax that you have already paid in your resident country or you may be exempted from paying tax or reduced tax liability.

Here some rules for NRIs, as NRI need to pay income tax for income he/she earned in India. It is only valid if you earn any income in India otherwise as such no taxation system. You're entitled to pay tax, if you earned directly or indirectly in India.

You are entitled to pay taxes under following circumstances:

  • Trading Income

    • Property/Plot/House Income
    • Income from any family assets
    • Salary earned in India for services in overseas
    • Extra Bonus paid by any Indian company
    • In the form of Interest rates paid by NRI to government, bank,
    • Fees under industrial duty

Reserve Bank of India Policies encourages NRIs to invest more in their motherland and to have foreign exchange direct flowing into the country; as it comes under NRE taxation provision.

There are mainly two ways that a NRI can make income. Initially via rental income from his property which gets deposited to his NRE account. As NRE bank accounts are on a repatriation basis, you can make transfer your earnings abroad anytime. All NRIs can be benefited from income tax exemption on NRE accounts. Though, income held in NRO accounts is made taxable. As all these investments are made from NRE accounts only, having income tax exception will persuade them to make more investments. You can invest through shares, insurance, mutual funds, debentures and other deposition plans. Insurance policy is another way to enjoy tax exemption. There are mainly two ways that a NRI can make income. Initially via rental income from his property which gets deposited to his NRE account. As NRE bank accounts are on a repatriation basis, you can make transfer your earnings abroad anytime. All NRIs can be benefited from income tax exemption on NRE accounts. Though, income held in NRO accounts is made taxable.

As procedures are same as for regular citizen, NRIs are required to file Return of Income (ROI), provided your yearly income in any financial year is more than the exemption limit of 1Lac INR. You can also fill the Form 2A if your income is less than Rs. 2 lakh, where you aren't in any business or job or you have not carried forward your losses. By chance your income is above Rs. 2 lakh, then same "SARAL" form procedure is valid for NRIs.

In case you want to take benefit from double taxation treaty, then you need to submit the Residency Certificate issued by the income tax department of your country of residence. Submit this Residential certificate to NRI India's Bank Saving account. From then onward, the bank will directly apply the new rate of TDS on your savings.for more info visit: Tax Services for NRI in Delhi