Income Tax for NRIs

Non residents are Tax differently in India and are treated different for taxation purposes. Although Non Resident Indians are taxed at a higher rate then normal residents they are also provided with benifits such as non taxability of foreign income, which might add to the confusion about the whole taxability aspect. So if you ara non resident and want to know which income is Taxable in India and which is exempt, please go through the article written by our Chartered Accountant.

Who is considered as Non-Resident Indian?

To understand various tax implications on NRIs first it is important to understand who is said to be an NRI?

NRI means Non-Resident Indian i.e. a Non – Resident having Indian Origin.

= Non-Resident + Person of Indian Origin.


Any individual is resident in India in any previous year, if he—

  1. Stays in India for a period of 182 days or more in that financial year.
  2. Stays in India for 60 days in that FY and for 365 days in the preceding 4 FY preceding current FY.

(182 days where person of Indian origin leaves India as crew of Indian ship or for employment purpose or where persons of Indian origin comes to visit India)

Person of Indian origin leaves India as crew/ or for employment/ comes to India for visits Residential Status
Stays 182 days in that year Resident
Stays 60 days in that year and 365 days in preceding 4 years Non-Resident Indian
Stays 182 days in that year but does not stay 365 days in preceding 4 years Resident
Does not satisfy both the conditions Non-Resident Indian

If a person does not qualify the residence criteria then he is Non-Resident.

Person of Indian Origin

A person is said to be of Indian Origin if any of his parents or grand parents have been born in undivided India.

Income deemed to accrue or arise to Non- Residents

As NRIs are nothing but Non-Residents of Indian Origin all the provisions applicable to Non-Resident will be applicable for Non-Resident Indians. However, few special provisions applicable to NRIs are been discussed in the subsequent paragraphs.

NRIs being Non-Resident, their global income is not taxable, Only Income which is accrued or deemed to arise in India is taxable.

Say for E.g. – A person receiving rental Income from a house situated in India and also Salary Income in the country of his residence (Say US) Then in this case his salary income is not taxable but his Rental Income is taxable in India.

Special Exemptions for Non-Resident Indian

Section 115C/D/E/F/G/H/I

This section mainly deals with LTCG and Interest Income on Foreign Exchange Assets. This section is optional i.e. if an NRI wants to get taxed at normal rates applicable to any Non-Residents then he may do so.

Special tax rates for NRI

Long-term Capital Gain on sale of FOREX Assets – 10%
Interest Income from FOREX assets– 20%

What are FOREX Assets

  1. Shares of Indian Company
  2. Debentures in Indian public company
  3. Deposits with an Indian Public company
  4. Securities of Central Government
  5. Any other assets as notified

These assets Purchased in Foreign exchange are FOREX assets.

Conditions and restrictions to this option

  • Section 28 to 44C, Section 57 and Chapter VI-A not available
  • First proviso to Section 48 is available but second proviso (Indexation benefit is not available).

Exemption from filing return

If Total Income includes only Interest and LTCG and if TDS is deducted then there is no need to file return of Income.

Section 115F – Exemption of Capital Gains

Any long-term capital gains arising from the transfer of a foreign exchange asset will be exempt if net consideration or a part of it is utilised for acquiring other foreign exchange asset within a period of 6 months from such transfer.

Exempt amount = LTCG*Cost of New Asset/Net consideration
Lock-in-period = 3 years
Violation of Lock-in period = exempt amount taxable in year of transfer of new asset

If you require any assistance in Filing for taxes of Non Resident Indians please reach our experts at +91-7008804070