Meet Rahul, a non-resident Indian living in New York City. He’s carved a successful career in finance, but tax season always sends a shiver down his spine. The complexities of tax for NRIs seem like an endless maze.

He’s not alone. Millions of NRIs face the same dilemma every year. If you are one of them, this article is your guide, outlining the NRI taxation in the current financial year (FY 2023–24 and assessment year 2024–25) and equipping you with practical tips to navigate it with ease.

Tax laws for NRIs in India
 

In India, the tax for NRIs depends on the source of income and residential status. If you are a –

• Resident, then your entire global income is taxable
• Non-resident, then only the income accrued, earned, or received in India is taxable

Now, let’s understand these conditions determining the residential status. The Finance Act of 2020 modified these criteria, reducing the threshold from 182 days to 120 days for individuals whose total income (excluding foreign-sourced income) during the financial year exceeds ₹15 lakh.

So, for the financial year 2023–24, you are an NRI if –

• You’ve been in India for less than 182 days, and your income is ₹15 lakhs or below
• You’ve been in India for less than 120 days, and your income exceeds ₹15 lakhs
• You were in India for less than 60 days during the year and less than 365 days within the last four years

The calculation of income tax for NRIs depends on days spent in India, making it crucial to track your stay in the country. You can even refer to the dates of your flight bookings to compute this period.

Also read - Discover Metra Trust NRI Banking Service under 3 minutes!

Breaking down tax for NRIs in India
 

Here’s everything you should know about NRI taxation in India –

NRI income taxable in India

Your taxable income shall include any income earned or received in India, such as –

- Salary

- Rent

- Interest on deposits

- Dividend on shares

- Capital gains from investments

- Income from business or profession in India

Some points to be noted are –

- Income earned outside of India is not taxable in India

- If your income earned in India is taxed in your resident country, you can claim an exemption or tax credit on such income, thanks to double taxation avoidance agreements (DTAAs) signed by India and various countries

NRI tax in India under different tax regimes for the current fiscal year

 

You can choose between the old and new tax regimes in India. The new tax regime is considered default, with concessional tax rates and restrictions on deductions.

The tax for NRIs this fiscal year is as follows –

Additional considerations –

• You need to pay a health and education cess at 4% on the above taxes
• When you earn a higher income, you need to pay extra tax in the form of a surcharge as follows   

Deductions and exemptions available for NRIs

Various tax laws for NRI in India offer tax incentives.

First are the deductions under Section 80 of the Income Act (available only for old regime). These are reduced from your total income to arrive at your taxable income, upon which the tax for NRIs is calculated. The deductions available to you are –

- Section 80C – You can claim a maximum deduction of ₹1,50,000 for payment or investments made in –

- Life insurance premium

- Tuition fees

- Principal repayment of home loans

- Unit Linked Insurance Plans (ULIPs)

- Equity Linked Tax Saving Schemes (ELSS)

- Section 80D – You can also claim up to ₹25,000 for you, your wife, and your children, and, additionally, up to ₹50,000 for your dependent parents.

- Section 80E – If you have availed of education loans for higher education, you can claim a deduction for the interest portion.

- Section 80G – If you make eligible donations, the amount is allowed as a deduction.

- Section 80TTA – As an NRI, you can open bank accounts in the form of NRE and NRO bank accounts. The interest earned on the NRE account is tax-free, and interest on the NRO account is liable to tax. However, you can claim the benefit of a maximum of ₹10,000 under this section.

Here are some additional tax incentives you can claim as an NRI.

• Against your income from house property (like rent), you can further claim –

- A standard deduction of 30%

- Deduction for property taxes

- Benefit for the interest portion of the home loan

• If you sell your house property, the long-term capital gains can be claimed as exceptions if you reinvest such gains in a prescribed manner within a specific period

These deductions and exemptions significantly reduce the tax for NRIs.

Tax deducted at source (TDS)

Withholding taxes is the government’s way of tracking your income and ensuring you file income tax returns. Any person or company making a payment must deduct tax for NRIs at a specified rate, remitting the remaining amount.

Following are the rates at which NRI income is subject to TDS.

But here’s your catch – You can make an application to the assessing officer for non-deduction or a lower rate of deduction for TDS by submitting Form 13.

And with this understanding of income, deductions, tax rates, and TDS, you can easily file your income tax return this FY24. 

Globalisation and taxation
 

Global taxation under the Base Erosion and Profit Shifting (BEPS) project is on the horizon. Meanwhile, governments and financial institutions worldwide are coming up with ways to combat tax evasion and money laundering, such as –

• Foreign Account Tax Compliance Act (FATCA)
• Common Reporting Standard (CRS)

These regulations require financial institutions to report information about foreign accounts held by their clients to their respective tax authorities. While calculating your NRI tax in India for this financial year, ensure you have submitted the necessary declarations.

Practical tips for complying with and minimising tax for NRIs
 

Nobody likes paying taxes, but you can’t avoid them. Some ways you can manage your taxes are –

Filing your returns – To ensure compliance –

- File your income tax return by the 31 July 2024

- But your job doesn’t end with filing ITR; you must verify your return

- As an NRI, you can verify it through net banking

- Furthermore, to receive your refund, you need to validate your bank account

Also read - What NRIs visiting India must know about the gift tax rules and the right banking services

Equipped and empowered: Conquering this tax season as an NRI
 

You should have a proper understanding of the applicable provisions of tax for NRIs to ensure appropriate discharge and compliance. Moreover, for convenient tax deposit, income tax verification, and bank account validation, Metra Trust NRI Accounts have got your back. You can further enjoy attractive interest rates, 100% liquidity, and multiple banking channels.

So, stay updated, plan strategically, and conquer your tax season this year and beyond with Metra Trust!