Tax Exemptions and TDS for Non Resident Indians (NRIs) and Other advantages

Definition of NRI according to Income Tax Act

You will be considered as an Indian citizen in the following conditions:

• If a person is in India for at least 182 days during the financial year.
• If a person in India for 60 days during the previous year and have lived in India for complete one year (365 days) in last four years.
• The same is applicable in case of a Person of Indian Origin (PIO) who is on a visit to India. A PIO is defined as a person whose parents or any of the grandparents were born in undivided in India.
• The person is an NRI (Non-Resident-Indian) if he/she do not meet any of the above conditions.

Income Tax

• Any person, whether he/she is NRI or not, whose income crosses Rs 250,000 will have to file tax return in India.
• For NRIs, 31st July is the last date for filing income tax return in India.

Tax Exemptions for Non Resident Indians (NRIs)

NRI's are taxed according to income tax slabs appropriate to resident Indians underneath the age of 60 years independent of the age criteria of non resident indian. Basically implies that if the NRI is over the age of 60 years still he will be taxed a for every tax rate relevant to resident indian who is beneath the age of 60 years.

However, in the accompanying two cases NRIs need not to file tax return:

• In the event that taxable income comprises of just investment income or long term capital gains.
• At the point when the tax has been deducted at source, on such income.

Other than the above advantages, NRI's are additionally allowed with some tax free incomes which are told by Income Tax office as follows:

Interest acquired on Saving Certificates and so forth

Interest acquired on Non Resident (Non Repatriable) [NRNR] Deposit.**

** Note – w.e.f. first April,2002 banks can't acknowledge new nor restore NRNR deposits. Upon maturity Interest on NRNR deposits and principal amount can be transferred to Non Resident (External) [NRE] account at the choice of account holder.

Interest procured on Foreign Currency Non Resident (Bank) [FCNR(B)] Deposit which actually is exempt under Section 10(4)(ii) too being covered by the meaning of a NRE deposit under the FERA 1973 if there should be an occurrence of a " Non Resident " or "Resident yet Not Ordinarily Resident" according to the provisions of Income Tax Act, 1961.

Interest acquired on Foreign Currency Non Resident (Bank) [FCNR(B)] Deposit proceeded until maturity by a Non Resident Indian (NRI) who has returned to India for taking up employment , business, vocation for example for lasting settlement gave he is a " Non Resident " or "Resident however Not Ordinarily Resident" according to the provisions of Income Tax Act, 1961. Abroad income of NRIs.

Profit income from Indian Public/Private Company, Indian Mutual Fund and from Unit Trust of India is exempt from tax in India at standard with residents.

Long-term capital gains emerging on transfer of equity shares exchanged on perceived Stock Exchange and units of equity schemes of Mutual Fund is exempt from tax at standard with residents, given Security transaction tax is paid.

Remuneration or expense got by non-resident/non-resident/resident however not ordinarily resident 'specialists', for severing specialized consultancy in India under affirmed program including remuneration of their employees, and income of their family members which accumulate or emerge outside India.

Interest on informed bonds.

Deductions under section 80C for NRIs

(A) Tuition fees of children (for 2 children) (includes payments for play-school, pre-nursery and nursery).

(B) Unit-linked insurance plan (ULIPS)

(C) Life insurance premium payment

(D) Principal repayments of loan taken to buy or construct house property

(E) Investments in ELSS

Other allowed deductions other than section 80C

• Deduction for House Property Income for NRIs
• Deductions under section 80D : premium paid for health insurance
• Deductions under section 80E : interest paid on education loan
• Deductions under section 80G : donations for social causes
• Deductions under section 80 TTA : interest on savings bank account

TDS provisions for Non Resident Indians (NRIs)

Finance Act, 2008 embedded another sub section (6) to section 195 viable from 1st April, 2008, which requires the individual answerable for making payment to a non-resident to outfit information identifying with such payments in forms to be endorsed.

The Central Board of Direct Taxes ("CBDT") has recommended another rule 37BB in the Income Tax Rules, 1962 ("the rules") endorsing Form 15CA and Form 15CB to be filed comparable to settlements to non-residents under section 195(6) of the Income Tax Act, 1961 ("the Act").

Steps for settlement to non-residents

The Steps that should be followed, before any settlement can be made, is as under:

(1) Obtain a certificate from a Chartered Accountant in Form No 15CB. Certificate in Form 15CB isn't needed when settlement doesn't surpass Rs 5,00,000 altogether in a financial year.

(2) Furnish the information in Form No15CA

(3) Electronically upload Form 15CA on the assigned website

(4) Take Print out of Form 15CA and file a signed copy

(5) Remit money to the Non Resident

There is a typical uncertainty which for the most part strike the minds of students that is Double Taxation of money.

By and large individuals feels that if a NRI is paying a tax in the country in which he is a non resident then the country of his home will likewise requests tax from that individual for that income. Yet, in the event that this happens this will prompts double taxation. Considering students or others is totally directly as the law says the equivalent yet law is consistently a stride ahead from our minds. Law previously found a path in order to evade double taxation of income if there should be an occurrence of NRI's and that stunning thing is Double Taxation Avoidance Agreement (DTAA).