NRI Taxation in India: A Brief Overview
NRI (Non-Resident Indian) taxation in India is governed by the Income Tax Act, 1961. The taxability of NRIs depends primarily on their residential status, which is determined by the duration of their stay in India. Only income that is earned, accrued, or received in India is taxable. Global income is not taxed unless the person is considered a resident.
Types of Taxable Income for NRIs:
- Salary earned or received in India
- Income from property located in India
- Capital gains on Indian assets
- Interest from NRO accounts (taxable), unlike NRE/FCNR accounts (tax-free)
Exemptions & Deductions:
NRIs can claim deductions under Section 80C (like life insurance premiums), Section 80D (health insurance), and Section 80E (education loan interest). They cannot invest in PPF or NSC or claim deductions under disability-related sections.
Income Tax Forms:
NRIs cannot use ITR-1 or ITR-4. They should use ITR-2 for salary, house rent, or capital gains, and ITR-3 for business/professional income.
TDS & Filing:
NRIs face TDS on various incomes—e.g., 30% on rent and interest on NRO accounts. Filing of ITR is required if taxable income exceeds basic exemption limits (Rs 2.5 lakh under old regime, Rs 4 lakh under new regime FY 2025-26). Filing is also advised to claim TDS refunds.
Double Taxation Relief:
NRIs can avoid double taxation through DTAA agreements, using tax credit or exemption methods. The recent introduction of Section 89A addresses tax issues on foreign retirement accounts.
Special Provisions:
Certain investments in Indian assets attract a flat 20% tax and may not require ITR filing if TDS is already deducted.
