We all have that member in our family who is presently working abroad after completing his education. This family member strives hard to pursue his dream and find a permanent place outside his native land. The person doesn’t need to be involved only in the job, but he might be in a business. There may be some situations when an individual is involved in a family business in his homeland India.
However, the individual might be staying abroad and working on a full-time basis over there. Although his income comes from both lands, he is to bear the NRI income tax for his income in India.
What is NRI Taxation?
NRI taxation is a differential system of incurring income tax on people’s income residing outside India and has a steady earning source. Before assigning the tagline of an NRI and imposing NRI taxation on the annual income of any individual, it is necessary to determine the eligibility of an individual. The eligibility is to make them fall under the category of an NRI. An individual who meets specific residing criteria for a considerable tenure in India or outside makes the individual eligible for NRI taxation.
The Taxable Income Sources for an NRI
Background Plays a Role- The residential status of the person depicts the NRI taxation system of an individual. The taxation system will depend on the income origin of the person and the location. If your income source belongs to India, then the tax will be as per the Indian Income Tax system. However, if an individual is a permanent citizen abroad, the NRI taxation will only apply to his income from India.
Variations in Income Sources- The imposition of the NRI taxation is on the income of an individual providing service in India. If you transfer any asset in India in return for a considerable amount of money or capital gains, then you will fall under the category of NRI income tax. NRI income tax will also be applicable on any rental income in India for any tangible property and fixed deposits.
Is there any Tax Deduction for NRI’s?
Claims on Life Insurance- There are also numerous ways by which an NRI individual can claim benefits to reduce their NRI income tax. The NRI’s can opt for tax deductions in the case of life insurance policies. It will help exempt certain portions of the life insurance policies if it is in the name of the child or spouse of an individual. The amount of premium should be less than a specific percentage incurred on the principal amount.
Loan of a Property- If an NRI individual is paying the fixed EMI on the principal loan amount. The purpose of the loan is for any residential land or property. The loan amount should also include the registration amount and the stamp duty.
Apart from the mentioned clauses, the NRI taxation deductions are also applicable for educational requirements. The parents of a child who wish to make their child study in prestigious educational institutes can claim deductions as a whole. They can get the tax deductions for a minimum of 2 children.
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