Income tax for NRIs and other applicable taxes in India

New Delhi (India), October 31

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The only thing constant after change is tax. While Indians need to pay taxes on their income and various other services, the same holds true for non-resident Indians (NRIs). Income tax for NRIs is applicable for any income earned in India in any form, through property, mutual funds, shares, business, etc.

This article aims to decode income tax for NRIs and simplify NRI taxation. Let’s begin.

NRI tax in India

Income tax for NRIs

As per the Foreign Exchange Management Act (FEMA) and the Income Tax Act 1961, income tax for NRIs is calculated based on the income earned in India/from sources in India during a fiscal year. For an NRI, you would need to pay taxes if your taxable income exceeds Rs 2.5 lakhs.

Tables (I) and (II) show the various tax slabs and the applicable tax rates for the Assessment year 2024-25 (FU 2023-34) under the old and the new tax regime.

Table (I) : Under the old tax regime

Table (II): Under the new tax regime under section 115BAC

The above rates of tax will be subject to surcharge and cess as below:

• 10% of Income tax if total income > Rs.50 lakh
• 15% of Income tax if total income > Rs.1 crore
• 25% of Income tax if total income > Rs.2 crore
• 37% of Income tax if total income > Rs.5 crore            

*Under the new tax regime, the highest surcharge rate of 37% has been reduced to 25%.

·         Property tax

Property tax is another common income tax for NRIs. If you buy immovable property from a resident Indian, you need to deduct –

·         A tax deducted at source (TDS) of 1% on the payments made if the purchase amount is above Rs 50 lakhs

On the other hand, if you buy a property from a non-resident where long-term capital gains (LTCG) are applicable, you need to deduct a TDS of 20%. In the case of short-term capital gains (STCG), you need to deduct 30% of TDS.

If you sell a property in India, you need to pay tax on the capital gains. The applicable taxes depend on whether the gains are LTCG or STCG. The table below shows whether the sale qualifies as LTCG or STCG, along with the applicable tax rates.

*Surcharge and cess, as stated above, would be applicable on this tax rate.

·         Wealth tax

You need to pay wealth tax on your money accumulated in India and not foreign wealth. You need to pay a wealth tax of 1% of the taxable net wealth exceeding Rs 30 lakhs as on the valuation date, which is the last date of the previous financial year, i.e. 31 March.

·         Capital gains tax on listed equity shares and equity mutual funds

Capital gains tax for NRIs on listed equity shares and equity mutual funds depends on whether the gains qualify as LTCG or STCG. The table below shows the LTCG and the STCG tax rates based on the holding period.

*Surcharge and cess, as stated above, would be applicable on this tax rate. Surcharge rates of 25% or 37% will not be applicable to the income which is taxable under sections 111A (Short Term Capital Gain on Shares), 112A (Long Term Capital Gain on Shares),

·         Taxes on business income

If you set up or control a business in India, any income made from the business is taxable as per the income tax slab mentioned above.

Take advantage of the double taxation avoidance agreement (DTAA)

Now that you know about income tax for NRIs, along with other applicable taxes, you need to know about DTAA. It is an agreement the Indian government has with your country of residence. If you pay taxes in India and your country of residence, you can seek tax relief under DTAA.

There are two ways to do so –

·         Exemption method

·         Tax credit method

In the exemption method, you need to pay tax only in one country and be exempted from the other. In the tax credit method, you can claim tax relief of the taxes paid in India in your country of current residence.

Manage and transfer your income in India

An IDFC FIRST Bank NRI Savings Account aids you in the seamless management of your finances in India. Save, invest, and transfer funds anytime from anywhere in a few clicks. Get competitive interest rates and make the most of your income.

The contents of this article are for information purposes only to enable readers to have quick and easy access to information. The readers are advised to consult their own tax consultants before entering into any transaction.

Disclaimer : The above is a sponsored article and the views expressed are those of the sponsor/author and do not represent the stand and views of The Tribune editorial in any manner.