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Frequently Asked Questions : Non-resident Indian

What is the condition to determine residential status of an individual ?
You are considered an Indian resident for a financial year:
when you are in India for at least 6 months (182 days to be exact) during the financial year
you are in India for 2 months (60 days) for the year in the previous year AND have lived for one whole year (365 days) in the last four years.

If you are an Indian Citizen working abroad or a member of a crew on an Indian ship only the first condition is available to you – which means you are a resident when you spend at least 182 days in India.

You are an NRI if you do not meet any of these conditions.

Check residential status

When do NRI need to file income tax return in India?
A ) If you are a NRI, then you need to file return of income in India, if your gross total income is more than Rs 2,50,000 in the previous financial year.
While resident senior citizens and super senior citizens enjoy higher exemption limits, maximum exemption limit of Rs 2,50,000 is fixed for an NRI irrespective of his or her age.
For estimating this gross total income, a resident has to include all the incomes earned by them anywhere in the world, while a non-resident’s gross total income for paying taxes in India only comprises income which is earned by them in India.
B ) Other cases when NRI is required to file return of income-

1 ) To Claim refund- Another scenario where an NRI must file a return is when the NRI is seeking a refund. (This can happen when Tax Deductible at Source (TDS) has been deducted on the NRIs income but her gross total income is below the Rs 2,50,000 threshold.) A refund can only be sought by e-filing your tax return.

2 ) Losses to carry forward-Where an NRI has losses to carry forward a return must be filed by them.

3) When an NRI invests in certain Indian assets, he is taxed at 20%. If the special investment income is the only income he has during the financial year, and TDS has been deducted on that, then such an NRI is not required to file an income tax return.

What is the taxable Income for NRI’s? ?
A ) Following are the incomes a non-resident is taxable for in India-
If an NRI receives salary directly to an Indian account it will be subject to Indian tax laws. This income is taxed at the slab rate he belong to. Income from Salary will be considered to arise in India if the services are rendered in India. So even though an individual may be an NRI, but if his salary is paid towards services provided by him in India, it shall be taxed in India.
2 ) INCOME FROM HOUSE PROPERTY : Income tax on rent received by NRI’s is taxable under head House Property and is levied in the same manner as resident Indian. The manner of computation of income tax on rent received by NRI is as below-
Gross Annual Value xxx
Less: Municipal tax paid (xxx)
Net Annual Value xxx
Less : Deduction under section 24e
Standard Deduction @30% (xxx)
Interest on Home Loan (xxx)
Income from House Propertye xxx
The net figure computed after allowing for above deductions would be liable to income tax as per the Income Tax slab rates of the NRI receiving the rent.
Any income earned by an NRI from a business controlled or set up in India is taxable to the NRI
Any income earned by an NRI from a business controlled or set up in India is taxable to the NRI
Interest income from fixed deposits and savings accounts held in Indian bank accounts is taxable in India. However, Interest on NRE and FCNR account is tax free. But Interest on NRO account is fully taxable.
What are the deduction under section 80 C allowed to NRI’s ?
A ) NRIs can avail the same deductions under Section 80C that are available to resident Indians. Maximum deduction of up to Rs. 1,50,000 is allowed under section 80C from gross total income for an individual.
Of the deductions under Section 80C, those allowed to NRIs are:
1 ) Principal repayments on loan for purchase of house property : NRIs can claim deduction for repayment of loan taken for buying or constructing residential house property. Also allowed for stamp duty, registration fees and other expenses for purpose of transfer of such property to the NRI.
2 ) ULIPS or unit linked insurance plan : Investment in ULIPS is also allowed as a deduction under Section 80C. This includes contribution to Unit Linked Insurance Plan of LIC Mutual Fund e.g. Dhanraksha 1989 and contribution to Other Unit Linked Insurance Plan of UTI.
3 ) Life insurance premium payment : NRIs can claim tuition fees paid to any school, college, university or other educational institution situated within India for the purpose of full time education of their children (maximum 2). This includes payments for play school, pre-nursery and nursery
What are the other deduction under section 80, allowed to NRI ?
A ) Other Deductions :

1 ) Similar to Residents, NRIs can claim a deduction of maximum Rs. 2,00,000 for interest paid on a home loan for a house property, which is lying vacant. For a property which is rented out, the entire interest out go was allowed as a deduction. But from AY 2018-19, Interest limit has been fixed to a maximum of Rs 200000 for rented property also While calculating rental income of the house property, deduction towards property tax paid as well as 30 per cent standard deduction is allowed to be claimed.

2 ) Deduction under Section 80D :

NRIs are allowed to claim deduction for premium paid for health insurance. This deduction is available up to Rs. 20,000 for senior citizens and up to Rs. 15,000 in other cases for insurance of self, spouse and dependent children. Additionally, an NRI can also claim a deduction for insurance of parents (father or mother or both) up to 20,000 if their parents are senior citizen and Rs. 15,000 if the parents are not senior citizens. Therefore, an NRI will be able to claim a maximum deduction of Rs. 40,000 under this section. Beginning FY 2012-13, within the existing limit a deduction of up to Rs. 5,000 for preventive health check-ups is also available.

3 ) Deduction under Section 80E :

Section 80E allows NRIs to claim a deduction of interest paid on an education loan. This loan may have been taken for higher education for the NRI, or NRI's spouse or children or for a student for whom the NRI is a legal guardian. There is no limit on the amount which can be claimed as a deduction under this section. The deduction is available for a maximum of 8 years or till the interest is paid, whichever is earlier. No deduction is allowed on the principal repayment of the loan.

4 ) Deduction under Section 80G :

If eligible donations have been made as per section 80G of the income tax act, deduction is allowed to NRIs.

5 ) Deduction under Section 80TTA :

Non-resident Indians can claim deduction on income from interest on savings bank account up to a maximum of Rs. 10,000 like Resident Indians. This is allowed on deposits in savings account (not time deposits) with a bank, co-operative society or post office and is available starting FY 2012-13.

What are the deductions which are not allowed to NRI’s?
1 ) Under section 80 C :
Investment in PPF are not allowed.
Investments in NSCs
Post Office 5 Year Deposit Scheme
Senior Citizen Savings Scheme.
2 ) Others :
Deductions not available for NRIs Applicable I-T Section
Medical treatment of disabled dependents 80DD
Medical treatment for specified ailments 80DDB
RGESS- Equity investments 80CCG
Disability 80U
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