Who is a Non-Resident Indian?

The determination of residential status is based on the number of days spent in India during a financial year. If an individual does not meet any of the conditions mentioned below, they are classified as an non-resident for the relevant financial year:

• Stay in India for at least 182 days during the financial year
• Stay in India for at least 60 days during a financial year and for at least 365 days during the preceding four financial years
• Persons of Indian Origin (PIO), who are individuals with at least one parent or grandparent born in undivided India, are subject to the same residency criteria
• Additionally, Indian citizens working abroad or crew members on Indian ships can qualify as residents by meeting the 182-day criterion

Do NRIs have to file income tax returns in India?

Filing tax returns is essential for both NRIs and other individuals. NRIs and other individuals alike are mandated to file income tax returns in India if their total income exceeds ₹ 2.5 lakh, as per Indian tax regulations. This includes various sources of income accrued in India, such as NRI salary received in India, income derived from services rendered within India, rental income from properties situated in India and capital gains arising from the transfer of assets or property in the country.

Additionally, income generated from deposits in India, such as interest on fixed deposits and savings bank accounts, is also taxable.

How are NRIs taxed?

NRIs are subject to taxation in India on various types of income earned or accrued within the country. Here's a breakdown of how NRIs are taxed:

• Income from salary:

  NRIs receiving salary in India, either directly into an Indian account or on their behalf, are taxed in India. Similarly, the salary earned for services rendered in India is also taxable.

• Income from property:

  Any income from a property located in India, whether rented or vacant, is taxable for NRIs.

• Income from other sources:

  Interest income earned on fixed deposits and savings accounts held in Indian banks is taxable in India. However, interest earned on Non-Resident External (NRE) and Foreign Currency Non-Resident (FCNR) accounts are exempt, while interest on Non-Resident Ordinary (NRO) accounts is fully taxable.

• Income from capital gains:

  Capital gains generated from the transfer of capital assets situated in India, including investments in shares and securities, are taxable in India.

Tax deductions available for NRIs

Tax deductions are provisions under The Income Tax Act, 1961 that help lower a taxpayer's taxable income. Just like resident Indians, NRIs can also claim various deductions to reduce their taxable income.

Deduction under Section 80C

Below is a list of the deductions available under Section 80C* for NRIs:

• Premiums paid towards life insurance policies
• Payments made towards tuition fees for the education of children are eligible for deductions
• Repayment of the principal amount of a home loan taken for the purchase or construction of a residential property
• Investments made in Equity-Linked Savings Scheme (ELSS) mutual funds

Deduction under Section 80D

Section 80D* of The Income Tax Act, 1961 offers deductions on premiums paid towards health insurance policies covering themselves, their spouse, children and parents. Insurance policies eligible for deductions under Section 80D* include individual health insurance, critical illness insurance, senior citizen health insurance and others.

Deduction under Section 80E

NRIs can claim deductions for the interest paid on education loans taken for higher education for themselves, their spouse and children. There is no upper limit on the amount of interest that can be claimed as a deduction under Section 80E* of The Income Tax Act, 1961.

What is the income tax slab for NRIs?

Income tax for NRIs is charged based on the chosen regime. NRIs can choose from the old or the new tax regime. Here is how each of them are taxed:

Old tax regime

New tax regime

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