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A beginner's guide to taxation for an NRI

Who is an NRI as per Income Tax rules?
A person will be subject to NRI taxation in India if 

  • Their collective stay in the country during the year is less than 181 days &
  • Their collective stay in the country is more than 60 days during the year but not more than 365 days during the previous 4 years.

Do NRIs need to file IT returns in India?
Yes, If an NRI’s annual income exceeds ₹2.5 lakhs, they need to file returns for NRI taxation in India.

Is income earned abroad by NRIs taxable in India?
No. 

Is income earned in India by NRIs in India considered for tax for NRIs in India?
Yes, Incomes from the following sources earned in India by NRIs are taxable 

  • Salary for services provided in India 
  • Income from a property in India 
  • Interest from fixed deposits in Indian banks
  • Interest on NRO savings accounts in Indian banks 
  • Income from business set up or controlled in India
  • Income from capital gains on assets in India

What are the rates for income tax for NRIs in India?
Income tax for NRIs in India follows the tax slabs applicable to ordinary residents of India. 

What are the special investments for NRI taxation?
Some investments in India, categorized as special investments, are taxed at 20% for NRIs. 

  • Shares in an Indian company (private or public) 
  • Debentures by an Indian company (publicly listed company)
  • Deposits in public companies and banks
  • Central Government securities
  • Other Central Government assets as mentioned in the official gazette specifically for this purpose

Is income tax for NRIs in India eligible for tax deductions under Section 80C?
Yes, but only for specific ones. Under the Income Tax Act, the following investments under Section 80C are eligible for deductions

  • Life insurance premium 
  • Children’s tuition fees
  • Principal repayment of housing loan 
  • Unit Linked Insurance Plans (ULIPs)
  • Investments in ELSS

What is double taxation?
Double taxation is when a person is taxed twice on the same income in two different countries. 

Is there a way out of double taxation for NRIs?
NRIs can avoid double taxation under the Double Tax Avoidance Agreement (DTAA), a treaty signed between two countries. An NRI can either claim a tax credit in their country of residence or claim relief from payment of tax in either country. 

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