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NRI Taxation
NRI Tax Planning & Filing Services
Specialized tax solutions for Non-Resident Indians to optimize
tax liability and ensure compliance with Indian tax laws
Residential Status & Taxability for NRIs
Determining the correct residential status is the first and most important step in NRI tax planning. As per the Income Tax Act, 1961, residential status is based on the number of days an individual stays in India during the financial year and preceding years. Only income received or accrued in India is taxable for NRIs. Global income is not taxable in India unless the person qualifies as a resident. Understanding your tax residency status helps ensure correct filing and avoids penalties. NRIs must reassess their status every financial year as it may change based on time spent in India.
Features
Status depends on number of days spent in India
Only Indian income is taxable for NRIs
Global income is exempt unless resident
Status to be checked annually
Definitions given under Section 6 of Income Tax Act
Status affects TDS, ITR type, and exemptions
Key for determining applicable DTAA rules
Impacts investment and repatriation policies
Taxable Income for NRIs in India
NRIs are taxed only on income earned or received in India. Common taxable income includes interest on NRO accounts, rent from property in India, capital gains from shares or real estate, and income from business or profession operated in India. TDS is deducted at a higher rate on most NRI incomes. Salary received in India for services rendered in India is also taxable. It's important to use the correct ITR form (usually ITR-2) and report all taxable incomes to avoid future scrutiny or notices from the department.
Features
NRO account interest is fully taxable
Rent from Indian property is taxed
Capital gains on Indian shares/land are taxable
Salary received for work in India is taxable
TDS is applicable at source for most incomes
ITR-2 is typically filed by NRIs
Income from business in India is taxable
Income must match with AIS/Form 26AS
Tax Benefits & Deductions Available to NRIs
NRIs are eligible for several deductions under Chapter VI-A of the Income Tax Act, 1961. Popular deductions include Section 80C for life insurance premium, ELSS, and principal repayment of home loan, Section 80D for health insurance, and 80G for donations. However, some deductions like 80TTB (interest on savings) are not available to NRIs. Strategic tax planning helps in reducing the effective tax liability. NRIs should also ensure investments are made through eligible instruments to avoid denial of deductions during scrutiny.
Features
80C: Allowed for LIC, ELSS, PPF (NRE excluded)
80D: Health insurance for self/family eligible
80G: Donations to registered funds allowed
80E: Education loan interest allowed
80TTA: Savings interest deduction up to ₹10,000
80TTB not applicable to NRIs
Tax planning must align with FEMA rules
Proof of investment must be retained
DTAA (Double Taxation Avoidance Agreement) & Tax Credit
India has DTAA treaties with over 90 countries to avoid double taxation. NRIs can claim relief under DTAA to prevent being taxed twice on the same income. For example, if an NRI pays tax in the foreign country, they may claim credit or exemption in India for the same income. To avail DTAA benefits, NRIs must provide a Tax Residency Certificate (TRC), Form 10F, and declaration of beneficial ownership. This prevents excess TDS and allows lawful tax minimization while ensuring compliance with both countries' laws.
Features
DTAA avoids double taxation of the same income
Available only if TRC is submitted
Form 10F and declaration are required
Helps reduce or eliminate TDS burden
India has DTAA with 90+ countries
Income must be taxable in both countries
Credit method or exemption method may apply
Must be disclosed correctly in ITR
Tax Implications Based on Residential Status
| Criteria | Resident | RNOR | Non-Resident (NRI) |
|---|---|---|---|
| Global Income Taxable in India | Yes | No (except Indian-source income) | No |
| Income Earned Outside India | Taxable | Not Taxable | Not Taxable |
| Indian Income (e.g., rent, FD) | Taxable | Taxable | Taxable |
| DTAA Benefits Applicable | No | Yes | Yes |
| Form Used for ITR | ITR-1/2/3 (as applicable) | ITR-2/3 | ITR-2 |
| TDS Applicability on Income | Lower (as per slabs) | Higher than resident | Highest rate applicable |
| Deductions (80C, 80D etc.) | Allowed | Allowed (with limits) | Allowed (with conditions) |
| Eligibility for 80TTB | Yes (Senior Citizens) | No | No |
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