Basics of Non-Resident Indians (NRIs) Taxability


Basics of Non-Resident Indians (NRIs) Taxability

  1. Whether a person is assessable as Resident in India or non-resident is based on who the person is. The status is depends on whether the person is individual or HUF or firm or a company. The basic criteria in the Income Tax Act, 1961 is the number of days stayed in the country. To have a detail analysis of whether the person is Resident or Non- Resident refer:

There may be instances where Resident may become a non-resident. In such case he is advisable to give Letter of Authority/ Power of Attorney to someone for ease of operations in bank accounts and investments. There is no limitation on holding investments in mutual funds, further invest in mutual funds even through SIP route, keep insurance policies taken earlier in force and pay further premiums and invest further as well, after becoming NRI.

  1. The second point is whether all the Non- Residents are required to file the return of income? The answer is NRIs whose taxable income in India exceeds basic exemption limit is required to file the return of income. Secondly, the basic exemption limit is not available for those who have earned short-term or long-term capital gains from sale of any investments or assets. They are compulsorily required to file the return.

There are few more exceptions given to non residents with respect to filing of return. Specially, there are few sections that say non-residents are not required to file return of income if tax has been deducted at source. Refer the following article:

  1. The TDS rates for NRIs are mostly the rates in force. For that reason, high TDS is being deducted in case of NRIs. To claim this refund of excess TDS, filing tax return is compulsory.
  1. There are basically two different types of bank accounts in case of NRIs. Funds in NRE savings accounts are held in convertible rupees. The principle and interest portion in such account are fully repatriable. Interest is fully exempt from tax in India. Funds in NRO savings account are held in India, in Indian rupees. The NRO account can be funded through NRI income in India. Only the interest in an NRO account is repatriable. Interest income on this account is liable for Indian income taxes. To have a detail study about the different accounts refer

  1. Any person, after becoming an NRI is required to inform the change in his residential status to the:
  • banks where he has savings or term deposits,
  • companies where he has shareholdings and
  • MFs whose units he holds.