NRI Tax Filing in India requires more than just basic knowledge; it demands clarity, compliance and smart financial planning. Every detail matters, from identifying your residential status to managing accounts. Frequent rule changes and complex documentation make it necessary to have expert guidance. The NRI investment advisor in Pune offers tailored planning for tax solutions, investment planning, and regulatory compliance.
In this guide, we’ll explain NRI tax filing, who qualifies as a non-resident, and what the taxable income is for NRI.
What Qualifies as an NRI For Tax Purposes?
Understanding your residential status is the first and most critical step when it comes to tax filing in India. According to the Income Tax Act, 1961, the term ‘non-resident’ refers to a person who does not qualify as an Indian resident.
According to section 6 of the Income Tax Act, an individual is considered a resident of India for the financial year if they qualify for either of these:
- He/she has been in India for 182 days or more during the previous Financial Year.
- They have been in India for 60 days or more in the last Financial Year and 365 days or more during the four years immediately preceding the previous Financial Year.
If neither of the above conditions is met, the individual is considered a Non-Resident Indian.
What are the Taxable Incomes for NRIs in India?
According to Indian tax laws, Non-Resident Indians are liable to pay tax only on income earned or accrued in India. Their foreign income is not taxable if they maintain their NRI status for the relevant financial year. However, the scope of taxable income can still be broad, and NRI tax experts in Pune help you understand what falls under it. Here’s a brief breakdown of the income sources that are taxable in India for NRIs:
- Income from Salaries
If an NRI earns a salary for services rendered in India, it is fully taxable in India, regardless of where the salary is credited. You’re working remotely for a foreign company while staying in India for over 120 days; this salary may be taxed if it’s tied to services performed in India. Salary received directly into an Indian bank account is also taxable, even if services were rendered abroad. NRIs working with Indian companies from abroad (remote contracts) may be exempt, depending on tax treaties.
- Income from House Property in India
An NRI who owns residential or commercial property in India is taxed on income derived from:
- Rent received (after 30% deduction under section 24)
- Municipal taxes paid
- Home Loan Interest (eligible for deductions)
- Capital Gains from Assets in India
Capital gain on the transfer of a capital asset that is situated in India shall be taxable. The taxable income includes the following:
- Property
- Shares
- Mutual Funds
- Gold
- Other Tangible Assets
- Income from Business or Profession
If you operate a business, are a partner in an Indian firm, or offer consultancy services from India, your income is taxable here. Passive business ownership (e.g., being a shareholder in a company) is not taxable unless dividend income applies.
- Interest on Government Securities & Bonds
Interest income from the government securities, such as government savings bonds, non-convertible debentures (NCDs), & public sector company bonds, is taxable. These incomes are taxable unless they are exempted under Section 10.
- Income from Other Sources
Other incomes earned in India, such as royalties from a book published in Indian, fees for technical services or lottery winnings, are fully taxable. These incomes are usually charged at a rate of 30%.
Understanding NRE and NRO Accounts
Understanding NRE and NRO accounts helps NRIs manage income correctly. It ensures tax compliance, simplifies repatriation, avoids penalties, and makes informed financial decisions. Below is a brief explanation of both:
NRE Account:
An NRE account is designed for NRIs to deposit their foreign earnings in Indian banks. The funds are held in Indian Rupees (INR), and both the principal and interest are fully repatriable. Meaning they can be transferred back to your foreign account without restrictions. One of the biggest advantages of an NRE account is that the interest earned is completely tax-free in India.
These accounts can be maintained as savings, current, or fixed deposits, and are ideal for NRIs who want to invest or spend in India while keeping their income easily transferable. However, funds from Indian income sources cannot be deposited into an NRE account. Joint holding is allowed, but only with another NRI.
NRO Account:
The full form of NRO is Non-Resident (Ordinary) Account. An NRO account is used to manage income earned within India, such as rental income, dividends, pensions, or any payments from Indian sources. Like the NRE account, the funds are held in Indian rupees, but the difference lies in repatriation and taxation.
Repatriation from an NRO account is restricted to USD 1 million per financial year, subject to applicable documentation and tax compliance. Additionally, the interest earned on NRO deposits is fully taxable in India, and TDS is deducted at source. NRO accounts can be held jointly with either an NRI or a resident Indian, making them a flexible option for managing financial responsibilities back home.
Choose the Best NRI Investment Consultant: Sachin Gujar & Associates
If you’re an NRI looking to manage your money wisely in India, Sachin Gujar & Associates is a name you can trust. Based in Pune, we offer expert investment and tax consulting services tailored specifically for NRIs. We have decades of experience and a deep understanding of both Indian and global financial landscapes. We have the best NRI Investment Consultant Pune to help you make smart decisions. Some services offered by Sachin Gujar & Associates include:
- NRI Tax Advisory Services and filing of Income Tax returns
- Tax Implications on the Sale of Property in India by an NRI
- NRI Investment Consultation Services
- Residents and non-resident Indians require certification for Form 15CB for remitting funds outside India.
Final Thoughts
Filing taxes in India as an NRI may seem complex, but with the right guidance, it can be simplified. From understanding your residential status to choosing between different accounts, and knowing what income is taxable, staying informed is key to avoiding legal issues and managing your finances efficiently. For personalized support, consult Sachin Gujar & Associates, a trusted NRI investment advisor in Pune. Our team provides end-to-end assistance with tax filing, financial planning, and compliance, tailored to your unique NRI needs. Make smarter decisions with expert help that puts your goals first, no matter where in the world you live.
