So you have made a plan to come back to your beloved country for permanent stay. You plan to start working here. But are you aware of the tax laws governing Non-Resident Indians?
Here we take a look at income tax rules governing income tax for the NRIs in India.
If an NRI earns income in India
For an NRI, income must be paid provided he earns any income in India. Otherwise, you don't have to pay the tax, if your income is earned elsewhere.
You are liable to pay tax if:
- It is earned directly or indirectly in India.
- It is amassed in India.
In the following cases you must pay income tax:
- Business income
- Property income
- Income from any asset or source
- Salary earned in India or salary paid by the Government of India to an Indian citizen for services provided overseas
- Dividend paid by an Indian company to an NRI living abroad
- Interest paid to an NRI by government, bank, company or any body else
- Fees paid for technical services provided by an NRI
Exceptions to the rule
On the other hand, following cases of income are not regarded as income earned in India.
Income earned from activities involving running a news bureau, printing newspapers, magazines etc, which involves collection of news and views to be transmitted abroad
Income earned from shooting a cinematography film if you are not an Indian citizen, working for a company whose owner(s) is/are nor Indian citizen(s) or resident(s) or employed by a company with no Indian shareholder(s).
You are required to file Return of Income (ROI), provided your annual income in any financial year is more than the exemption limit of Rs 1 lakh (Rs 100,000). You can fill Form 2A if your income is less than Rs 2 lakh (Rs 200,000), you are not in any business or profession or you have not carried forward your losses.
In case if your income is more than Rs 2 lakh, or Saral. These forms can be downloaded from the income tax website filled and submitted online. Once the process is complete, you are given a digital signature.
If you don't get this signature, you must file the returns physically.
But what if you have worked a part of the financial year abroad and have already paid the tax there? It is not fair that you have to pay tax on the same income twice in two different countries.
It is here double taxation treaties signed by India with 66 other countries will help you. As per this treaty, you can get credit for the tax that you have already paid back in your resident country or you may be exempted from paying tax Consequently, your tax liability in India will reduce.
If you are an NRI and want to benefit from double taxation treaty, you have to submit the Residency Certificate issued by the income tax department of your country of residence. Submit this certificate while opening a bank account or later on. From then, the bank will apply the new rate of TDS.
Some handy tips
- Always file your tax returns on time, failing which you will attract stiff penalty or even imprisonment.
- Always calculate your tax liability.
- Try to make the best possible use of tax saving schemes available to you.
- If you are unable to file returns yourself, get the help of expert tax advisor.
- Ensure you keep the proof of having paid the tax in your original country of residence to avoid being taxed again.
Every person, whether Indian or NRI, must pay their taxes. Non-payment of taxes is a criminal offence, leading to fine or even imprisonment in worst cases. Hence it is important for everybody to pay their taxes diligently.