Who is an NRI?
NRI’s or Non-Resident Indians are the citizens and hold a legal passport of the Indian Govt. provisionally residing in some foreign country. He/she shouldn’t have applied or planned to apply in future to acquire for citizenship of her/his current country of residence.
NRIs and their income earned or investments in India are controlled by a different set of rules, as compared with resident Indians. Matters would be simple if those investments had to be apprehended singly.
Now read about some noteworthy income tax aspects involving the NRIs.
No disparity in tax slabs for the non-residents
For the NRIs, earning is the solitary differentiator in income tax slabs. There is no special slab which is based on age, gender, etc like in the case for Indian residents.
TDS functional at highest rates meant for the entire incomes of NRIs
Various incomes like interest, capital gains do not focus TDS or only focus it beyond a verge income in the case of residents. But, for all NRIs incomes, that are taxable, attract the TDS.
Likewise, for non-residents, it is functional at the maximum rate of tax for that meticulous kind of income.
Tax exemptions and deductions for NRIs
The extent of exemptions and deductions is narrower for the NRIs. On investment income, no deductions are permissible. From Chapter VI A deduction, which frames most of the accepted deductions like insurance premium, ELSS, home loan principal refund, etc are not allowable for a NRI’S meant for income from capital gains of long-term or investments. If GTI includes income from these sources then it is to be lessened for computing deductions.
Filing of Income tax return for NRIs
They do not require filing income tax returns if fulfilling the two conditions mentioned in sec 115G.Only if the income earned in India consists only long-term capital gain or investment income and also if TDS was practical on such income only then they would not require to file returns. Though, in case if refund is asked then tax return should be filed.
Here are some tax-related liabilities any one could face for their investments:
The rental income earning by an Indian resident is not subjected towards tax deduction at source or TDS. One simply does add it to the whole income and then pays the tax accordingly to the slab. But, all income earnings of an NRI are subject to TDS, usually at flat 30 % rate, and the tenant’s lawful obligation. Means he must subtract the amount and gives you a certificate of TDS.
In case of any joint property, although, applicability of TDS depends on who is the first owner—the Indian resident or the NRI. For all investments, tax is the first holder’s compulsion. So, if first holder is an Indian resident, there would be no TDS. Then both would have to tolerate the tax liability separately.
NRIs could not hold a resident FD in India. Although, if you are previously holding one mutually with an NRI member from your family, the bank may permit you to keep the deposit up till maturity and do not allow to renew it further. But if you still want to hold any deposit jointly, in that case the NRI can create an NRO deposit, with a resident family associate as a 2nd holder.
However, there’ll be dissimilarity in the rates of TDS. For regular FDs, TDS is computed at 10%. Then the entire amount of interest is added with the overall income, & then taxed accordingly from the slab. Then a TDS credit can be claimed while filing return.
Though, for NRO deposits, TDS rate is flat 30%. Conditionally if you lie in the uppermost tax bracket, this change may not matter. But, if you lie in a lower group, instead of claiming credit, you should ask a refund.
Similar to deposits and bank accounts, the NRIs can keep mutual fund investments in cooperation with any other family members. But, the stocks can’t be held jointly, since NRIs wanting to trade in Indian stock markets will have to enroll with a bank which offers portfolio investment schemes, especially designed for them.
In connection with mutual funds, once more there will be the 1st and 2nd holder notion. Taxation remains same for both residents and NRIs. Except for, in case of the STCG or short-term capital gain for NRIs, flat 15% is deducted for some gains from mutual equity funds and 30%for debt funds. Adjustment against capital losses for short-term, if any, be able to be made by the time of return filing.
This STCG tax for the equity funds are at parity with that of levied for residents. But for debt funds, although, the gains are additional to income & are taxed according to taxation slab. This 30% TDS rate can be greater than your income.