Income earned abroad is not taxable in India, but other income (salary or income received in India or from a business in India) may be taxable for NRIs. Apart from these, rental income from houses located in India, interest received in a savings account and fixed deposits held in Indian banks, capital gains income from capital assets such as house property, shares and securities, gold, etc. are taxable in India.
Read more in Outlook Money latest story.
Once you have figured out which of your incomes and/or investments are taxable in India, find out the relevant tax slab so that you know your tax rate. Based on the income slab, NRIs may choose between the old and new tax regimes. Read more about the old and new tax regimes here.
For those whose earnings in India fall under the high-income tax bracket, it may be better to not go for the new tax regime. But there is a limitation here. A resident individual whose total income does not exceed Rs5 lakh is entitled to a tax rebate of 100 per cent of income tax or an amount of Rs12,500, whichever is less. This tax rebate is not available to an NRI.
The tax rates for NRIs and residents are the same but there are differences based on age. The basic exemption limit is Rs2.5 lakh, irrespective of age (for resident senior citizens above 60 to 80 years, the exemption limit is Rs3 lakh, and Rs5 lakh for super senior citizens above 80 years under the old tax regime). Surcharge and health and education cess rates are the same for NRIs and resident individuals.
What’s Available For Tax Deduction?
NRIs can get tax deductions on certain products, many of which come under Section 80C of the Income-tax Act, but there are others too.
Section 80C Instruments (maximum deduction of up to Rs1.5 lakh): Life insurance premium, children’s tuition fee paid in India, principal repayment on home loan to buy a house in India, investment in equity-linked saving scheme (ELSS).
Section 80D Deduction: Rs 25,000 for premium paid for health insurance for self, spouse and dependent children. Additional Rs25,000 for health insurance of parents if they are under 60 years.
Section 80TTA: Up to Rs10,000 deduction on interest earned on savings account.
What’s Not Available?
There are some avenues where the rules differ for residents and NRIs.
Public Provident Fund: NRIs cannot open a new PPF account. If you have an existing PPF account, you can’t extend it after it completes 15 years
Senior Citizens’ Savings Scheme (SCSS): NRIs are not eligible to invest
Sukanya Samriddhi Yojana: Not available to NRIs
Overall, if you are choosing financial products as an NRI, weigh the usability first, and then consider the taxability. Also remember that taxable as well as tax-exempt incomes have to be mentioned in the tax return. So, do remember to file tax returns and to include all relevant details.
