Income tax rules for NRI returning to India

Under Indian tax provisions, NRI is an individual who is an Indian citizen or person of Indian Origin who is not a resident in India. RBI issues guidelines on varied matters relating to an NRI individual. These guidelines relate to opening and maintaining of bank accounts in India as well as for investments in and outside India. Income Tax for NRI will depend upon his Residential Status for the year. It is important to determine the residential status of an individual before determining their taxability.

Who is NRI?

As per Income Tax Act, an individual is considered as a Resident in India, if the individual meets either of the “basic conditions” of presence in India as below:

  • 182 days or more during the current Financial Year; or
  • 60 days or more during the current Financial Year and 365 days or more in total during 4 preceding Financial Year.

If neither of these two conditions is satisfied, the individual would be treated as an NRI. The tax year is calculated from April 1 to March 31. Further, there is another category of non resident Indians, known as ‘Not Ordinarily Resident’ (NOR). You can become an NOR either if your stay in India:

  • In the 7 financial years immediately preceding that financial year is less than 729 days, or
  • If you were a Non-Resident for 9 of the 10 financial years immediately preceding that financial year.
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Tax Implications for NRI Returning to India

The taxability of your income outside India (such as rental income from property outside India, capital gains, bank interest, dividends, etc.) arising out of your assets (such as bank accounts, stocks/securities, residential properties, etc.) shall majorly depend on your residential status in India.

While returning to India you may sell your overseas assets in capacity of a NOR or NRI. In such cases if you sell any overseas assets and receive the sale proceeds outside India, you do not have to pay any taxes in India. Further, you can first receive the sale proceeds in an overseas bank account and thereafter remit part or whole of the proceeds back to India without creating any Indian tax liability.

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Tax Liabilities for NRI Returning to India

Taxability in India is dependent on whether an individual qualifies as a Resident, NOR or Non-Resident. For income which accrues or arises outside India and received outside India during the preceding previous years and remitted to India during the previous year is not taxable to NOR/ NRI.

For income received or deemed to be received or accrues or arises in India during the previous year, is fully taxable for NOR/ NRI. However they can take the benefit of DTAA (Double Tax Avoidance Agreement) between the two countries for the doubly taxed income. This can help avoid paying tax on the same income twice.

The income which accrues or arises outside India and received outside India in the previous year from any other source is not taxable for NOR/ NRI.

Other Considerations while Returning to India

  • As per the guidelines, an individual is required to intimate the change in his residency to the concerned institutions such as banks, financial institutions, mutual fund, etc.
  • For instance, balances held in Non Resident Ordinary (NRO) account will have to be converted to resident status i.e. a normal savings account once the individual becomes a resident in India.
  • FCNR accounts can be continued till the date of maturity and upon maturity, can be converted to RFC accounts.
  • One should keep in mind that under DTC, a person may qualify as Resident Indian on account of removal of NOR concept. In such situation, it would bring assets situated outside India under the ambit of wealth tax.
  • DTC also proposes to levy wealth tax on net wealth in excess of INR 1 crore as compared to 30 lakhs of existing provisions.
  • Resident Foreign Currency is a Scheme approved by RBI that permits persons of Indian nationality or origin to open foreign currency accounts with banks in India for holding funds brought by them to India. It is permitted for those who have returned to India on or after 18th April 1992 for permanent settlement (Returning Indians), after being resident outside India for a continuous period of not less than 1 year.
  • Further, if the Returning NRI had been non-resident for a continuous period of 2 years, he gets exemption from income-tax for subsequent 9 years on the interest earned in RFC account.
  • Returning individuals should therefore focus on understanding the impact on India taxation, and plan their taxation matters accordingly.
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FAQ

Can a resident continue to maintain an account outside India, which was opened by him when he was a non-resident?

A person resident in India might maintain a foreign currency account outside India if he had opened it when he was resident outside India or inherited it from a person resident outside India.

What is RFC Account? What are the types of individual RFC accounts that a returning NRI can open?

An RFC (Resident Foreign Currency) Savings Account is a savings account maintained in foreign currencies for NRIs who have returned to India and hold funds in foreign currency. The types of RFC accounts are: Savings Bank, Current account and Term Deposits.

What will be the status of bank accounts of NRIs returning to India permanently?

Non-resident accounts will be re-designated to resident accounts in India on the return of the account holder to India and consequently becoming resident in India.

Can NRI continue with resident savings account?

Most individuals make a mistake of continuing a resident savings account even after becoming an NRI but the law does not allow it. Or in simple words, it is illegal to hold resident savings bank account for NRIs and it will attract hefty penalties.

Budget 2020 : Highlights

The Finance Minister, Nirmala Sitharaman had presented the budget 2020 on the 1st of February 2020. The record-breaking 2 hours and the 30-minute speech by the Finance Minister had many major announcements. The major highlights of the budget 2020 that have been covered under this article are as follows:

New Tax Regime v/s Current Tax Regime

Income Tax Slab Rates

According to the Finance Minister, the taxpayers now have the option to either continue with the current tax regime or join the new tax regime in the upcoming Assessment Year. The major difference between both of these tax regimes is the exemptions and deductions. The given below tables shows the slab rates under both the tax regimes:

Income Range Current Income Tax Rates New Income Tax Rates
Up to INR 2,50,000 NIL NIL
INR 2,50,001 to INR 5,00,000 5% 5%
INR 5,00,001 to INR 7,50,000 20% 10%
INR 7,50,001 to INR 10,00,000 20% 15%
INR 10,00,001 to INR 12,50,000 30% 20%
INR 12,50,001 to INR 15,00,000 30% 25%
Above INR 15,00,000 30% 30%

The Finance Minister announced that under the new tax regime, the basic tax exemption limit will remain the same for all assessees including the senior citizens. Therefore, in case you opt for the new regime, there will be no higher tax exemption for the senior and super senior citizens.

Changes in Deductions and Exemptions

According to the announcement made in the budget 2020, there have been major removals of tax exemptions and deductions. This has made compliance tax less tedious. Here is the list of what deductions have stayed and what deductions have been removed:

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Changes under Income from House Property

Changes in Deductions on Home Loan interest- Section 24(b)

No claim of home loan Interest on Self Occupied House Property: Individuals who have taken a home loan on their self-occupied property and are paying interest on it, can not claim that interest deduction under Section 24(b).

A claim of home loan Interest on Rental House Property: Under the new income tax regime, individuals can claim interest on home loans for let out property only up to the amount of their rental income.

The setting off losses from house property

As per the new income tax regime, losses from house property can only be set off against other income from house property. Moreover, losses from income from house property cannot be carried forward in the new income tax regime.

Deduction for first-time Homebuyers

Deduction u/s 80EE & Section 80EEA gives relief on interest paid on home loans for first time home buyers. This deduction is no longer available for taxpayers following the new income tax regime.

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Other Important Highlights of the Budget 2020

Dividend Distribution Tax (DDT)

Dividend Distribution Tax (DDT) has been abolished for the companies. However, the dividend is now taxable for the shareholders at the rate of 15%.

Corporate Tax

Tax on co-operative societies has been reduced from 25% to 22% without exemptions. Additionally, manufacturing startups will have to pay a 15% tax if they have registered after 1 October 2019, as long as they commence operations by 31 March 2023.

Foreign Portfolio Investment (FPI)

Foreign Portfolio Investment (FPI) is an investment by non-residents in Indian securities including shares, government bonds, corporate bonds, convertible securities, infrastructure securities etc. Post budget 2020, the limit in corporate bonds has been raised from 9% to 15%.

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Residential Status

Residential status conditions have been amended in Budget 2020. 180 days in the previous financial year has been reduced to 120 days.

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FAQs

How to calculate self-occupied house property income?

​A Self Occupied House Property is the one that you use as your own residence. This property may also be used by your children, spouse and/or parents. Since there is no Income from such House Property, the gross annual value of this property is NIL (zero).

​Since the gross annual value in the case of Self Occupied House Property is zero, claiming a deduction for Home Loan interest will result in a Loss from House Property. This loss can be adjusted against income from other heads.

What are the conditions to claim deduction u/s 80EEA?

Deduction u/s 80EEA is available subject to given below conditions:

1. The stamp duty value of residential houses shall be up to Rs. 45 lakh.
2. The deduction can be claimed only by individual taxpayers.
3. The loan is taken from a financial institution.
4. The loan has been sanctioned between 01-04-2019 to 31-03-2020.
5. Assessee is not claiming any deduction under section 80EE.
6. The assessee owns no residential house property on the date of sanction of loan.

Is TDS deducted on dividend paid to a non-resident shareholder?

Yes. Domestic Company distributing dividends to a shareholder not resident in India should deduct TDS at the prescribed rates as per Section 195 of the Income Tax Act. In the case of a resident shareholder, TDS should be deducted at the rate of Sec 194 or Sec 194K.

What are the general documents needed to file ITR?

Following are the documents required to file ITR:

1. Aadhaar
2. PAN
3. Bank account details
4. TDS Certificate (Form 16, 16A, 26AS)
5. Tax payment challan (Self-assessed or Advance tax)
6. Original notice (In case of refiling the ITR)

Income Tax : Rates, Due Date and Return Filing in India

Income Tax is a type of direct tax that you pay on income earned during the financial year. In India, a direct tax is governed as per Income Tax Act, 1961 along with Income Tax Rules, 1962 Income Tax is levied based on the different types of incomes and taxpayers.

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Who should file Income Tax Return (ITR)?

A taxpayer is required to file ITR if their income is more than the basic exemption limit. The basic exemption limit for Individuals and HUFs below the age of 60 years is INR 2.5 Lakh in AY 2019-20.

However, a taxpayer with income less than the basic exemption limit can also file an ITR. This is known as a NIL return.

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What are the Due Dates to file Income Tax Return (ITR)?

Category Due Date
Individuals to whom audit is not applicable 31st July of the Assessment Year
Companies 30th September of the Assessment Year
Individuals to whom audit is applicable 30th September of the Assessment Year
Individuals/ HUF who are partners in a firm and firm’s accounts are subject to audit 30th September of the Assessment Year

Due Date for Filing ITR for AY 2021-22

What are the Documents required to file ITR?

The basic documents required to file ITR are:

  • PAN (Permanent Account Number)   
  • Aadhar Number
  • Form 26AS
  • Bank Account Details
  • Challan of any advance tax or self-assessment tax (if paid during the year)
  • Details of the original return (if filing a revised return)

However, documents required to submit ITR may differ based on the income situations and ITR form the taxpayer has to file.

Which ITR Form to File?

The ITR form a taxpayer should file differs based on their income source and residential status. The Income Tax Department has prescribed 7 different ITR forms for different income situations. The taxpayer is required to choose the ITR Form that is applicable to them for that particular assessment year. The most common ITR form filed by individual taxpayers is ITR 1 or ITR 4.

ITR-1 (SAHAJ) The most basic ITR form for individuals having income up to Rs. 50,00,000 from salary/pension, one house property, and interest.
ITR-2 For individuals/HUF having income from salary/pension, multiple house property, capital gains, interest, and partner’s income from the partnership firm.
ITR-3 For individuals/HUF having income from salary/pension, multiple house property, capital gains, interest, and income from proprietary business or profession.
ITR-4 For individuals/HUF/Partnership firms having income from presumptive business or profession.
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What are the Income Tax Rates for AY 2019-20?

Income is taxed based on the category of a taxpayer. In India, income tax rates are declared every year in Union Budget by the finance minister. The Income Tax Slab Rates for Individuals and HUFs below the age of 60 years are:

Taxable Income Tax Rate
Up to INR 2,50,000 Nil
INR 2,50,000 to INR 5,00,000 5%
INR 5,00,000 to INR 10,00,000 20%
Above INR 10,00,000 30%
  • Rebate u/s 87A of INR 2,500 or 100% of the tax (whichever is lower) is available to Individuals with income is less than Rs. 3,50,000
  • A surcharge is applicable if your taxable income is:
    • between INR 50,00,000 to 1,00,00,000 : Surcharge 10%
    • above INR 1,00,00,000 : Surcharge 15%
  • Health & Education Cess is 4% on the total of income tax + surcharge

How to file ITR?

You can file Income Tax Return using:

  • Income Tax e-filing Website
    • Income tax account
    • IT utilities
  • ERI (e-Return Intermediary): these are government-approved intermediaries like Quicko

e-File ITR using Income Tax e-Filing Website

To e-file your ITR by using an income tax e-filing website, you should use your income tax e-filing account.

  • Log in to the e-Filing portal by entering the user ID (PAN), Password, Captcha code and click ‘Login’.
  • Navigate to e-file > Income Tax Return
  • Select ITR Form, Assessment Year and other details
  • Prepare your ITR
  • Pay Self-Assessment Tax if you have outstanding tax dues. Or claim Tax Refund if you have paid excess tax during the financial year.
  • Click on ‘Submit’ to e-File your ITR.

e-File ITR using Income Tax Utilities

Income Tax Department provides Java and Excel utilities to prepare and e-file your income tax returns. These utilities allow the taxpayer to prepare their ITR offline, and using the income tax e-filing account the taxpayer can submit their ITR.

  • Go to incometaxindiaefiling.gov.in click on Offline Utilities under the Download section. Now go to Income Tax Return Preparation Utilities and select the assessment year
  • Select the ITR Form you are required to file and Download ITR Utility for that ITR Form.
  • Extract the files from a zip folder: You need to have java runtime environment to unzip the utility
  • Prepare your ITR offline
  • Upload the utility on your Income Tax e-filing account.
Track Your ITR Status
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What is ITR e-Verification?

ITR filing process is not complete until you e-Verify your return. When a taxpayer files the ITR, they receive ITR V on their registered email id from the income tax department. ITR-V means Income Tax Return Verification Form, it is also known as ITR-V (Acknowledgement). 

You can e-verify your ITR by the following methods:

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FAQs

What is the due date to file the Income Tax Return (ITR)?

The due date to file the Income Tax Return (ITR) for individuals, Hindu Undivided Families (HUF), and taxpayers whose accounts are not required to be audited July 31st unless extended by the government.

What are the Income Tax slab rates for individuals?

The Income Tax slab rates for individuals for the Financial Year 2020-21 are given below. The table consists of both the current regime and new regime tax slab rates.

What are the basic documents required to file Income Tax Return (ITR)?

PAN (Permanent Account Number)   
Aadhar Number
Form 26AS
Bank Account Details
Challan of any advance tax or self-assessment tax (if paid during the year)
Details of the original return (if filing a revised return)

Is it necessary to verify the Income Tax Return (ITR)?

The Income Tax Return (ITR) filing process is not complete until the filed ITR is verified by the taxpayer. The taxpayer can either e-verify the ITR or can send signed ITR-V (Acknowledgement) to the Income Tax Department (ITD). If the e-Verification of ITR is not possible then the taxpayer needs to send the signed ITR-V to the Income Tax Department within 120 days at CPC Bangalore.

Income Tax for NRI and Foreign Income

Definition of NRI

Income Tax for NRI will depend upon his Residential Status for the year. It is important to determine the residential status of an individual before determining their taxability. The criteria to determine your residential status is as follows:

You are an Indian resident for a particular financial year:

  1. If you are in India for at least 182 days (6 months) during the financial year or
  2. You lived in India for at least 60 days (2 months) during the previous year and have lived for at least 365 days (a year) during the last four years.

However, only the first condition is applicable if you are an Indian Citizen working abroad or a member of a crew working on an Indian ship. So if you spend at least 182 days in India during the financial year, you are a resident India.

A person shall be deemed to be of Indian origin if he, or either of his parents or any of his grandparents, were born in undivided India.

However if you do not meet any of the above conditions, then you are an NRI.

The residential status will help us determine the taxability of the income.

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If your status for the previous year is “Resident“, your global income will be taxable in India. If your status is “NRI“, only the income which is earned or accrued in India will be taxable in India. Some of the examples of Incomes earned or accrued in India are Salary received in India, professional fees received in India, rent Income from House Property in India, capital gains on transfer of assets situated in India, interest income on fixed deposits or savings bank account in India, etc.

All these incomes are taxable in India for an NRI. So any income which is earned by an NRI outside India will not be taxable in India, for an eg. his Salary Income abroad or interest earned on NRE account or deposits abroad, etc.

Please note that interest income on the NRE account is completely tax-free whereas interest earned on NRO account will be applicable to TDS at the rate of 30.9%.

Taxable Incomes for NRI Include

Salary: As discussed earlier, any income which is earned or accrued in India will be taxable in India. So if the salary is earned or received in India by an NRI or by someone else on behalf of the NRI then it will be taxable in India. This salary income will be taxable at the slab rates applicable to individuals.

For Eg. Ravish is an employee of an Indian company and he has been deputed to Dubai to look after the company’s work there. He has been working in Dubai for the past two years. During his deputation in Dubai, Ravish’s salary was deposited to his designated bank account in India. Since his salary is received in India, it will be taxable in India.

Salary received by the diplomats and ambassadors is completely exempt

House Property Income: If an NRI owns a property which is situated in India, then any income from such property will be taxable in India.

The income from such house property will be calculated as if it is calculated normally in case of a resident Indian. The NRI will be allowed all the deduction including the standard deduction of 30% and the deductions for the interest and principal repayment in case a home loan is taken. This income will be taxed at the slab rates.

It is important to note that the rental income received by an NRI is applicable to 30.9% TDS. So when a tenant pays rent to the owner of the property who is NRI, he has to deduct TDS @ 30.9% from such rent.

Income from Business and Profession: Any Income from a Business that is set up in India or controlled from India is taxable in the hands of the NRI.

Income from Other Sources: Any income earned by NRI by way of interest on any deposits or balance in the savings bank account will be taxable in India. It is to be noted that the interest income on the NRE account and the FCNR account are completely exempt in the hands of the NRI however the interest earned on the NRO account is applicable to TDS @ 30.9%.

Income from Capital Gains: Any Capital Gains from the transfer of a capital asset situated in India is taxable in India. Even if an NRI invests in shares and securities India then capital gains on the transfer of such shares and securities will also be taxable in India.

Any NRI can claim exemptions available under section 54 & 54EC, from the capital gains arising on sale of residential house property.

Deductions and Exemptions for NRI

Here is a summary of deductions and exemptions which are / not allowable for NRI:

Deductions/ Exemptions Allowable Not allowable
Section 80C Life Insurance Premium Payment Investment in PPF
Children’s Tuition Fee Payment Investment in NSCs
Principal Repayment on Loan for purchase of House Property Post Office 5 year Deposit Scheme
Investment in ELSS Senior Citizen Saving Scheme
Investment in Unit Link Insurance Plan  
Section 80CCG Investment under RGESS
Section 80D Premium Paid for Health Insurance
Section 80DD Expenditure on Maintenance including medical treatment of a handicap dependent
Section 80DDB Expenditure towards medical treatment of a differently abled dependent
80E Interest paid on education loan
80G Donations for charity (social) causes
80TTA Interest income from savings bank account
80U Deduction available to differently abled individuals
80U Deduction available to differently abled individuals
Deductions from House Property Income Standard deduction
Property taxes paid
Interest paid on home loan
Exemption on sale of Long term property Section 54: On sale of long term house property
Section 54F: On sale of any long term asset other than house property
Section 54EC: On sale of any property and reinvestment in bonds of National Highway Authority of India (NHAI) and Rural Electrification Corporation (REC)

How to Avoid Double Taxation?

One of the most common questions amongst NRI is that “Do I have to pay taxes in both the countries i.e country of resident and India?”

The NRI can save themselves from double taxation by availing the relief from the Double Taxation Avoidance Agreement (DTAA) which is an agreement between India and foreign countries.

Different agreements with different countries may vary in terms of tax relief. But broadly, the benefit is provided in two ways:

  • Exemption from double taxation: When the agreement provides for the exemption, the NRI will be taxed in only one country and they will not have to pay any taxes in the other country. Say Manali is a non-resident Indian and she is working in the US as a Certified Accountant. She earns some interest income from fixed deposits in India. Now if India and the USA have entered into an agreement and have provided the exemption, Manali’s interest income will be taxed only in India and the same income shall be exempt from tax in the USA.
  • Tax Credit (Relief): When the agreement provides for relief, the incomes will be taxed in both the countries, however, tax relief will be allowed to the NRI in the country of their residence. Say Paritosh is a non-resident Indian and is working as a content writer for a newspaper company in Australia. He has rental income from his residential flat in India. If India and Australia have entered into an agreement and have provided relief from the double taxation by way of the tax credit, the rental income will be taxed both in India and Australia. However, Paritosh will be allowed to take the tax credit in Australia for the taxes which he has paid in India.

Changes for NRIs According to the Budget 2020

The budget 2020 announced by the Finance Minister Nirmala Sitharaman on the 1st of February had the following major changes for the Non-Resident Indians (NRIs):

Criteria for Determining Residential Status

The Primary condition of 182 days for determining Residential Status has been changed to 120 days in the Union Budget 2020. Hence, an Indian National will be deemed a resident of India if they have stayed in India for at least 120 days in a Financial Year.

Resident – Not Ordinary Resident

Previously, an individual had to be a resident for 2 out of the 10 previous years and had to be staying in India for up to 729 days in order to be deemed as an R-NOR. After the announcement made in the Budget 2020, the requirement for being a resident was increased to 4 out of the previous 10 years.

Section VI (IA) – New Clause

The new clause announced by the Finance Minister states that, if an individual is not a resident of any other country, then he/she will be deemed a resident of India by default. Furthermore, once the person is deemed a citizen of India, he/she becomes liable to disclose all their assets and finances they possess. These finances and assets can be either from India or from any foreign country.

Dividend Distribution Tax – DDT

According to the current tax regime, the DDT is deducted by the companies on the dividend paid to its shareholders. However, under the new tax regime, the dividend is no longer taxable at the hands of the shareholders. Therefore, the companies will deduct the TDS on the dividend distributed. Furthermore, TDS will be deducted u/s 195 in the case of NRI shareholders and dividend income will be taxed at slab rates.

Source of Income Resident Not Ordinary Resident None-Residents
Income earned in India Taxable in India Taxable in India Taxable in India
Any income received in India Taxable in India Taxable in India Taxable in India
Income earned outside India but received in India Taxable in India Taxable in India Taxable in India
Income earned and received outside India Taxable in India Taxable in India Not Taxable in India
Any income earned outside India for a business or profession controlled in or from India Taxable in India Taxable in India Not Taxable in India
Income earned outside India from any source other than business or profession controlled from India Taxable in India Not Taxable in India Not Taxable in India

 

FAQs

What are the Incomes taxable in India?

For NRIs, the incomes which are earned in India will be taxable in India. For Indian Residents, global incomes i.e incomes earned in India and also the foreign incomes will be taxable in India.

Do I have to pay tax on my foreign income, in India?

If you are an NRI then you are not required to pay taxes on your foreign income. You will have to pay taxes on the income which you have earned in India. On the other hand, if you are an Indian Resident than all your Global incomes will be taxed in India. However, if you have paid taxes on such foreign incomes in the same country, then you can claim the relief as per the Double Taxation Avoidance Agreements (DTAA)

Do I have to declare my foreign assets and incomes in India?

For NRIs, one does not need to declare foreign assets and foreign incomes in Indian Income Tax Return except the incomes which are earned or received in India as they would be liable to Indian Income Tax.
For Indian Residents, one needs to declare all the foreign assets and foreign incomes. The foreign incomes will be subject to Indian Income Tax (subject to Double Taxation Avoidance Agreement) as for a Resident Indian, global incomes are subjected to Indian Income Tax.

Is there any tax relief available to NRIs?

If any of the Incomes earned by NRI is taxable in India and the same income suffers from another tax levy in the country of residence of NRI, individual will be allowed to take the benefit of DTAA (Double Taxation Avoidance Agreement) so as to save the income from suffering double taxation. 
However, if no income of NRI is subject to the tax levy, the need to claim relief does not arise.

How to pay tax in India if I don’t have a NetBanking account in India?

For filing Income Tax Return (ITR), you need to have an Active Bank Account with any of the Indian Banks. Hence, for payment of Income Tax or claiming Income Tax Refund, you are required to have a bank account in India. However, for payment of Income Tax, anybody (if not you) can pay the tax on your behalf from his/her bank account. So NRIs can pay tax through any of their friends or family members who have an active Bank account in India.

I am an NRI. Do I have to file an Income Tax return in India?

​Whether you are an NRI or not, if your income exceeds Rs. 2,50,000 then you are required to file an Income Tax Return in India. On the other hand, even if your income is less than Rs. 2,50,000, you will have to file a return if:
​1. You want to claim a refund &/or
​2. You have a loss that you want to carry forward

What is the last date for filing the Income Tax Return for the NRI?

31st July is the last date to file the Income Tax Returns in India for the NRI

I am an NRI. Do I have to pay Advance Tax?

Whether you are an NRI or not, if your total tax liability exceeds Rs. 10,000 in a financial year, you are required to pay the Advance Tax. Interest under section 234B and 234C will have to be paid in case of failure to pay the Advance Tax.


Residential Status for Income Tax

The residential status of a taxpayer is determined every year for Income Tax purposes. The taxability of a person depends on their residential status.
The residential status is different from the citizenship of a person. For instance, in a financial year, a person can be a citizen of India but not a resident. Hence, impacting their taxability.

Residential Status Calculator
Residential Status Calculator for Income Tax. Taxability in India depends on residential status. Know your residential status from Resident, NRI, Resident but Not Ordinarily Resident(RNOR)
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Residential Status Calculator
Residential Status Calculator for Income Tax. Taxability in India depends on residential status. Know your residential status from Resident, NRI, Resident but Not Ordinarily Resident(RNOR)
Explore

Types of Residential Statuses as per Income Tax Act

  1. Ordinary Resident of India
  2. Resident but Not Ordinary Resident of India (RNOR)
  3. Non-Resident of India (NRI)

Primary Conditions:

A person is a resident of India if:

  1. He/She lived in India for 182 days or more during the financial year OR
  2. He/She lived in India for at least 60 days in a financial year and at least 365 days in the last 4 years.

However, in respect of an Indian citizen and a person of Indian origin who visits India during the year, the period of 60 days as mentioned in the 2nd point above shall be substituted with 182 days. Similarly, it is also applicable to the Indian citizen who leaves India in any previous year as a crew member or for the purpose of employment outside India.

The Finance Act, 2020, w.e.f., Assessment Year 2021-22 has amended the above exception to provide that the period of 60 days as mentioned in point 2 above shall be substituted with 120 days, if an Indian citizen or a person of Indian origin whose total income, other than income from foreign sources, exceeds INR 15 Lakhs during the previous year. Income from foreign sources means income that accrues or arises outside India (except income derived from a business controlled in or a profession set up in India).

Individuals not fulfilling any of the above conditions will, hence, be a Non-Resident of India (NRI). The second condition mentioned above will not be applicable in the following cases:

  • Any Indian citizen leaving India for the purpose of taking up employment (including self-employment) outside India.
  • Indian citizens leaving India as a member of the crew of an Indian ship.
  • Any person of Indian origin or Indian citizens residing outside India, if they come on a visit to India.

Additional Conditions

If anyone of the primary conditions is satisfied by a person then they are a resident of India. They also need to fulfill the following two conditions to become an Ordinary Resident of India:

  1. The person stayed in India for at least 2 years immediately before the current financial year out of 10 past financial years AND
  2. The person lived in India for at least 730 days immediately before the current financial year out of 7 past financial years.   

A person becomes Not Ordinary Resident of India (RNOR) if they do not fulfill any one of the above conditions.

Budget 2020 introduced changes in Condition of Residential Status. And the same will be applicable from FY 2020-21. Below is our chart for your reference
Tip
Budget 2020 introduced changes in Condition of Residential Status. And the same will be applicable from FY 2020-21. Below is our chart for your reference

Sources of Income and its taxability

 

Source of Income

Ordinary Resident

Not Ordinary Resident

Non-Resident

Income earned in India.

Taxable in India

Taxable in India

Taxable in India

Any income received in India.

Taxable in India

Taxable in India

Taxable in India

Income earned outside India but received in India.

Taxable in India

Taxable in India

Taxable in India

Income earned and received outside India.

Taxable in India

Taxable in India

Not Taxable in India

Any income earned outside India for a business/ profession controlled in/from India.

Taxable in India

Taxable in India

Not Taxable in India

Income earned outside India from any source other than business/ profession controlled from India.

Taxable in India

Not Taxable in India

Not Taxable in India

FAQs

Can the refund be credited to a foreign bank account?

Currently, Refunds can be credited only to a bank account located in India.

How can I e-Verify my returns & Form?

The returns can be e-Verified by logging in to e-Filing account through Net Banking login. However, this facility is available for account holders who have linked their PAN with the account numbers in leading banks in India.

How many types of residential status are there?

There are 3 different types of residential status:

Resident: If a person is in India for at least 182 days during the Financial Year or,
– If a person is in India for at least 60 days during the Financial Year and for at least 365 days during the last 4 Financial Years

Ordinary Resident: A person shall be treated as “Ordinary Resident” if he/she satisfies both the additional conditions:
– If a person is resident of India for any 2 out of last 10 Financial Years, and
– If a person is in India for at least 730 days during the last 7 Financial Years

Not Ordinary Resident: If any of the additional conditions specified above are not satisfied then that person is treated as “Not Ordinary Resident” for that Financial Year

Non-Resident: If none of the basic conditions are satisfied then the person is treated as “Non-Resident” for that Financial Year