Non-Resident Indians (NRIs) are individuals who reside outside India for work, education, or other purposes. As NRIs earn income from various sources in India, they are subject to Indian taxation laws. In this article, we will provide an overview of NRI legal tax, including the tax implications, filing requirements, and common issues faced by NRIs. Get to know more about the NRI legal Services in India.
Tax Implications for NRIs
NRIs are subject to tax on income earned in India, including salary, rental income, capital gains, and business income. Additionally, they may be subject to tax on income earned outside India if it is received or deemed to be received in India. The tax rates for NRIs are the same as those for resident Indians.
Filing Requirements for NRIs
NRIs are required to file a tax return in India if their taxable income exceeds the exemption limit. The exemption limit for NRIs is the same as that for resident Indians, which is INR 2.5 lakh for the financial year 2021-22. NRIs are required to file their tax return online through the Income Tax Department’s e-filing portal. They can use their Aadhaar number, passport number, or a unique identification number assigned by the Income Tax Department to file their tax return.
Common Issues Faced by NRIs
NRIs often face challenges in complying with Indian tax laws due to various reasons, including lack of awareness, confusion over tax laws, and difficulty in obtaining necessary documents. Some common issues faced by NRIs are:
- Double Taxation: NRIs may be subject to double taxation, where the same income is taxed in India as well as the country where they reside. To avoid double taxation, India has entered into double taxation avoidance agreements (DTAAs) with various countries. NRIs can take advantage of these agreements to avoid double taxation.
- Tax Residency Status: NRIs may face confusion over their tax residency status, which determines their tax liability in India. The tax residency status is determined based on the number of days the individual spends in India during a financial year. NRIs should carefully calculate their days of stay in India to determine their tax residency status.
- TDS Deductions: NRIs often face issues with TDS (Tax Deducted at Source) deductions, where the payer deducts tax from their income at the source. NRIs should ensure that the correct TDS rate is applied and that they claim the credit for TDS deducted while filing their tax return.
- Capital Gains Tax: NRIs may face challenges in understanding the capital gains tax laws in India, which apply to the sale of assets such as property, shares, and mutual funds. NRIs should carefully evaluate the tax implications before selling their assets in India and seek professional advice if necessary.