NRI Income Tax Return: A Comprehensive Guide

Introduction

Non-Resident Indians (NRIs) are required to adhere to Indian income tax laws when they earn income in India. The Income Tax Act, 1961, specifies the tax liabilities of NRIs based on their residency status, sources of income, and applicable exemptions. Understanding the rules regarding NRI income tax return filing is crucial for compliance and effective financial planning.

Who Qualifies as an NRI?

According to the Indian Income Tax Act, an individual’s residency status is determined based on their stay in India during a financial year (April 1 to March 31). An individual is considered an NRI if:

• They have spent fewer than 182 days in India in a financial year.
• They have not been in India for 60 days or more in a financial year and 365 days or more in the preceding four financial years.

Taxable Income for NRIs

NRIs are only taxed on income earned or accrued in India. The following types of income are subject to taxation:

1. Salary Income: If an NRI receives a salary for services rendered in India, it is taxable regardless of where the payment is received.
2. Rental Income: Income earned from renting out property in India is taxable. NRIs can claim a 30% standard deduction and deductions for municipal taxes paid.
3. Capital Gains: Any capital gains from the sale of property, shares, or mutual funds in India are taxable. Long-term capital gains (LTCG) and short-term capital gains (STCG) tax rates vary based on the asset type and holding period.
4. Interest Income: Interest earned on savings and fixed deposits in Indian banks is taxable. However, interest from Non-Resident External (NRE) accounts is exempt from tax, whereas interest from Non-Resident Ordinary (NRO) accounts is taxable.
5. Other Incomes: Business income, dividends, and professional fees earned in India are also subject to tax.

Tax Rates for NRIs

NRIs are subject to the same income tax slab rates as resident Indians: