Income tax for NRIs : Tax rebates, limits, and eligibility
Non-Resident Indians (NRIs) are required to pay income tax in India on the income that they have earned in the country. This includes income from employment, business, investments, and property.
The tax rates for NRIs are different from the tax rates for resident Indians. NRIs are taxed at a flat rate of 20% on their income, regardless of their income level. However, there are some deductions and exemptions that NRIs can claim, which can reduce their tax liability.
Can NRIs Claim Tax Rebate Under New Income Tax Regime?
In India, all citizens with an annual income of more than Rs 2.5 lakhs are required to pay income tax. However, the government announced a new income tax regime in 2023, which allows taxpayers with an annual income of up to Rs 7 lakhs to claim a full tax rebate under Section 87A of the Income Tax Act 1961.
But what about non-resident Indians (NRIs)? Can they claim the same tax rebate?
The answer is no.
The tax rebate under Section 87A is only available to resident Indians. NRIs are not eligible to claim this rebate, even if they have opted for the new income tax regime.
Here are some additional tips for NRIs about income tax:
- Get help from a tax professional if you are unsure about any aspect of the process.
- Keep good records of all of your income and expenses. This will make it easier to calculate your taxable income and claim deductions and exemptions.
- E-file your ITR as soon as possible. This will help to avoid any penalties for late filing.
- Pay your taxes in full and on time. This will help to avoid interest and penalties.
Other tax rebates available for NRIs
Although you are not allowed to claim a tax rebate under Section 87A, you can avail of certain tax deductions under Sections 80C, 80D, 80E, 80G, and 80TTA of the Income Tax Act. You can claim these deductions while filing your ITR.
Section | Maximum tax deduction |
Section 80C | Rs 1.5 lakhs |
Section 80D | Rs 50,000 |
Section 80G | No limit (conditions apply) |
Section 80E | No limit |
Section 80TTA | Rs 10,000 |
File Income Tax Returns as an NRI: A Step-by-Step Guide
This blog post will provide a step-by-step guide on how to file income tax returns for non-resident Indians (NRIs). The process is relatively simple, but there are a few key things to keep in mind.
Step 1: Determine your residential status
The first step is to determine your residential status for tax purposes. This will determine which ITR form you need to use and the tax rates that apply to you. There are three categories of residential status for NRIs:
- Resident but not ordinarily resident (RNOR): You are RNOR if you have been in India for less than 182 days in the financial year.
- Non-resident (NR): You are NR if you have been in India for 182 days or more in the financial year.
- Ordinarily resident (OR): You are OR if you have been in India for 182 days or more in the previous four financial years and for 60 days or more in the current financial year.
Step 2: Gather your income documents
Once you have determined your residential status, you need to gather all of your income documents. This includes income from salary, business, investments, and other sources. You will need to have the following documents:
- Form 16 (salary slip)
- Form 26AS (tax deducted at source statement)
- Form 12B (capital gains statement)
- Interest statements from banks and NBFCs
- Dividend statements from companies
- Rental income statements
- Other income statements
Step 3: Choose the correct ITR form
There are two ITR forms that NRIs can use:
- ITR 2: This form is for NRIs with income from all sources, including salary, business, investments, and other sources.
- ITR 3: This form is for NRIs with business income.
Step 4: Fill out the ITR form
Once you have chosen the correct ITR form, you need to fill it out carefully. You can find the ITR forms and instructions on the Income Tax Department website.
Step 5: Verify your ITR
Once you have filled out the ITR form, you need to verify it. You can verify your ITR online or by post.
Step 6: E-file your ITR
Once your ITR has been verified, you can e-file it on the Income Tax Department website. You will need to create a login ID and password in order to e-file your ITR.
Step 7: Pay your taxes
If you owe any taxes, you need to pay them within 30 days of filing your ITR. You can pay your taxes online, by cheque, or by demand draft.
Here are some additional tips for NRIs about income tax:
- Get help from a tax professional if you are unsure about any aspect of the process.
- Keep good records of all of your income and expenses. This will make it easier to calculate your taxable income and claim deductions and exemptions.
- E-file your ITR as soon as possible. This will help to avoid any penalties for late filing.
- Pay your taxes in full and on time. This will help to avoid interest and penalties.
