Whether you have to pay tax and file a return in India depends upon your residential status. How residential status is determined? To determine your tax obligations, you must first ascertain your residential status for the current financial year (e.g., 2024-2025), as per the prevailing tax laws.
If you have spent less than 60 days in India, then you are an NRI (non-resident Indian). If you are an Indian citizen leaving India for a job abroad and you have spent less than 182 days in India, then you will be considered NRI. The time limit of 182 days is permitted to persons of Indian origin who come on a visit to India. Suppose you have spent more than 60 days in India but less than 182 days. In such a case if you have spent a total of 365 days in the past 4 years in India, then you will be considered a resident of India.
If you are an NRI, and earn an income from a source in India, such income is taxable. Apart from this, income from a job where services are provided in India is taxable as well. Therefore, though you may be a non-resident Indian, if you worked in India for a part of financial year 2015-16 and earned a salary, then this salary will be included in your taxable income. Also, if you have rented out a property in India, you have to pay tax for the rent that it earns there.
Furthermore, there is a similar tax treatment for capital gains on sale of assets situated in India. Or you have to sum up all the incomes, which either originate in India or are received here. Also, the tax slabs applicable to NRIs are the same as those for residents of India. Rules have been laid down for TDS on certain payments made to NRIs. Also, those paying rent to NRIs have to deduct TDS. You can take credit of the TDS against your final tax due like inhabitants.
How is your total taxable income determined as an NRI? Let’s understand this with an example. Suppose you are an NRI residing in the US. Your salary is paid in dollars in the US, and you have some money in an Indian bank account earning interest. Additionally, you own an apartment in Mumbai which is rented out for Rs. 30,000 per month. You also gift an expensive item to your parents and transfer Rs. 15,000 every month to their account for household expenses. You also buy an insurance policy of Rs. 25,000 in India for your parents.
Your total annual income from rent is Rs. 3,60,000. As per Section 24 of the Income Tax Act, a standard deduction of 30% is allowed from income earned via house property.
Applying the 30% standard deduction to your annual rental income (Rs. 3,60,000), your taxable income from the apartment becomes Rs. 2,52,000. When you add the Rs. 20,000 interest income from your Indian bank accounts, your total gross income assessable in India amounts to Rs. 2,72,000. Furthermore, you can claim a deduction of Rs 25,000 under Section 80C towards life insurance purchased for your parents. So, total taxable income is Rs 2,47,000, on which income tax slabs shall be applied as well as tax paid accordingly. You will also have to file a return in India. Keep in mind that the expensive gift car and the Rs 15,000 sent for your parents is not taxable for you as well as for your parents.
There are many NRI Tax Consultants in Pune and providing taxes related consultancy services at affordable prices. You can go for Sachin Gujar & Associates, a reliable one if you need consultancy services on NRI Taxes in India.
