More than three crores of Indians live outside of their homeland, and if you are one of them and wondering whether you need to file your income taxes here in India or in the country you are dwelling in, then you need to read this.
Often people think that every Indian who lives out of India is an NRI; however, that is not the case. For taxation purposes, the Income Tax Department of India has specific criteria to qualify as an NRI. Therefore, to understand whether you require filing your taxes in India or not, you need to find out your residential status.
Who is an NRI?
As per the Income Tax Act of 1961, an NRI or Non-Resident Individual in India is a person who is not a Resident in India. So, now you need to know who is a Resident in India, right? As per the Indian government and Income Tax Department, a Resident in India is any individual who:
- Was in India for at least 182 days in the previous year or
- Was in India for 60 days or more in the previous year and at least 365 days in four years immediately preceding the previous year.
So, if you do not meet these two criteria, you will be considered an NRI in India.
However, if you are a crew member outside India, or left India for employment outside the country, then the 60 days in the second criterion above will be replaced by 182 days. This also goes for Indian citizen and person of Indian origin (PIO) who visits India during the year.
Again, the 60 days in the second criterion above will be substituted by 120 days if the Indian citizen or the PIO has a total income, apart from income from foreign sources, over and above Rs. 15 lakhs in the previous year. These individuals will be considered deemed residents of India only if they do not pay or are liable to pay taxes in other countries.
Which incomes of an NRI are taxable in India?
An NRI needs to pay income tax on their income generated in India. While a resident in India has to pay income tax on the total income irrespective of the origin of the income. Let’s take an example to understand this.
Suppose you are working in the UK for two years now, and in FY 2022-23, you came to India for 25 days. This makes you an NRI, as you do not meet any of the two criteria to be a Resident in India. Now let’s say you earn around Rs. 50 lakhs in a year from the job you are doing in the UK, and back home in India, you have two house properties from which you earn a rental income of around Rs. 50,000 in a month. Therefore, the yearly rental income from these house properties is Rs. 6 lakhs.
Since your income from India is above Rs. 2.5 lakhs, you need to file ITR in India, though there will not be any tax liability if you opt for the default income tax regime. Your income from your job in the UK will not be taken into consideration for taxation purposes in India.
Now let’s say, you came to India in FY 2022-23 for 5 months or approximately around 150 days, then your income of Rs. 50 lakhs which you earn in the UK will also be considered for income tax payment if you do not pay any taxes on your income in the UK. Also, if you had lived in India for 150 days in the previous financial year, then you automatically become a Resident in India, and not an NRI as per the Finance Act, 2020.
Note: The interest you earn on your NRE account and/or FCNR account will be tax-free as well. However, the interest earned on NRO account/s will be taxable in India if you are an NRI.
What are the tax slabs applicable for NRIs?
The tax slabs for NRIs and residents in India are the same. So, if you are an NRI having income from India, then you have to pay taxes as per the following slabs:
|Old Tax Regime||New Tax Regime u/s 115BAC|
|Income Tax Slab||Income Tax Rate||Income Tax Slab||Income Tax Rate|
|Up to ₹ 2,50,000||Nil||Up to ₹ 2,50,000||Nil|
|₹ 2,50,001 – ₹ 5,00,000||5% above ₹ 2,50,000||₹ 2,50,001 – ₹ 5,00,000||5% above ₹ 2,50,000|
|₹ 5,00,001 – ₹ 10,00,000||₹ 12,500 + 20% above ₹ 5,00,000||₹ 5,00,001 – ₹ 7,50,000||₹ 12,500 + 10% above ₹ 5,00,000|
|Above ₹ 10,00,000||₹ 1,12,500 + 30% above ₹ 10,00,000||₹ 7,50,001 – ₹ 10,00,000||₹ 37,500 + 15% above ₹ 7,50,000|
|₹ 10,00,001 – ₹ 12,50,000||₹ 75,000 + 20% above ₹ 10,00,000|
|₹ 12,50,001 – ₹ 15,00,000||₹ 1,25,000 + 25% above ₹ 12,50,000|
|Above ₹ 15,00,000||₹ 1,87,500 + 30% above ₹ 15,00,000|
What are the documents required for filing ITR?
As an NRI when you file your income tax in India, the documents you need to keep handy includes –
- Bank account statements of your NRE/ NRO or FCNR accounts
- Details of the income you earned in India
- Form 26AS in case of any tax credit is applicable or TDS is deducted
- Form 16 in case of any TDS is deducted on salary or Form 16A for TDS deduction on income other than salary. For instance, the interest earned on your NRO account, when credited to your account, TDS is deducted. So, for the same and similar instances, you need to submit Form 16.
- You need to have a valid passport, PAN card for verification purposes.
So, if your residential status is of an NRI and your income from India is over Rs. 2.5 lakhs for FY 2022-23, you must gear up for filing the ITR soon as the last date for doing is 31st July 2023.