Taxes collected from citizens are the foundation of the Indian economy. The Indian Income Tax Act, 1961 applies to those earning income outside of their country of residence. Residents of Indian reservations are subject to different income tax rules and perks than non-residents. Get to know more about the NRI legal tax in India.
Taxation for NRIs
Despite the fact that income earned abroad is not taxable, NRIs are required to pay taxes on capital gains from shares, mutual funds, term deposits, and rental properties in India.
India’s economy depends heavily on taxation. Different types of taxes are imposed on services and products availed by Indian citizens. In order to increase consumer appeal, consumption taxes are imposed on products and services. The common forms of taxation that Indians are familiar with include taxes deducted at source, income taxes, service taxes, and property taxes. The Indian tax system affects both residents and non-residents of Indian origin, so we must ask how it affects them.
The Income Tax Act of 1961 also requires non-resident Indians to pay appropriate taxes. The purpose of this category is to explain how NRI taxes should be handled and what they are. Taxation of NRIs includes income taxes, wealth taxes, and property taxes.
Income Tax for NRIs:
Tax liability for NRIs in India should be understood clearly by them. In order to qualify as an NRI under the FEMA (Foreign Exchange Management Act), a citizen of Indian origin must spend a specified number of days abroad.
By default, India does not tax NRI income earned abroad. A tax return would be required if NRIs earn income in India through investments in shares, mutual funds, rental properties, and term deposits.
NRI income from India is taxed at the highest rate because TDS is levied at the highest rate on capital gains earned from term deposits, shares, and mutual funds. It is usually not necessary to file a tax return. The amount of TDS, on the other hand, can sometimes exceed the NRI’s basic tax liability. A tax refund can only be claimed by filing a tax return.