Who are the residents of India?
Indian residents are of 2 types
- ROR- Resident and Ordinarily Resident
- RNOR- Resident But Not Ordinarily Resident
Non-resident Indian Tax
The Income Tax Act, of 1961 has imposed some rules for attaining residential status in India.
Your duration of stay in India helps in determining your residential status (the calculation is based on the beginning of the financial year). The days when you have arrived in India and departed from the country are also considered.
You are an NRI if
- You are not in the country for more than 182 days.
- You have not been in the country for more than 2 months in the previous year.
These rules are not applicable to those who have an Indian origin or have left the country as a crew member of an Indian ship. Moreover, the rules are not suited for Indian citizens who have left the country for employment abroad.
RNOR
Section 6(6) of the Act is intended for those who have returned to India for some good reasons. They have to fulfill some conditions for the special RNOR status.
- The person has been an NRI for 9 years or more.
- His or her settlement in the country throughout the past 7 years.
If these criteria are not fulfilled, then the person will be a ROR.
Under FEMA, there are some other rules regarding the residential status of NRIs
Based on the FEMA rules, residential status can be identified according to how many days in the financial year the person has stayed in India.
- A person can be an Indian resident if he/she lives in the country for 182+ days.
- He or she has moved from India for business purposes.
- He/she has arrived in India for employment.
Permanent Account Number
The Income Tax Department in India allots a 10-digit alphanumeric number, known as PAN. ITD has authorized UTIITSL and NSDL e-Gov to issue, process, and print the PAN cards. To get a PAN in India, you have to fill out an application form. The PAN assigned to a person is permanent, and even if he updates his personal details, the number will be the same.
PAN has become mandatory to
- Open a bank account and Demat account
- Invest in securities
- Manage mutual funds
- Immovable property transactions
You need to submit your Aadhar Card and passport (for foreigners) to apply for the PAN. As an NRI, you should have PAN to avoid tax deductions at
- 20%
- Rates mentioned in the Act
- Rates mentioned in the Finance Act
NRIs can also claim the refund of the deducted tax by filling the ROI in India. To file it, they have to be registered with PAN. Moreover, ITD also provides some relaxation when they have provided details to the payer.
Filing an Income tax return in India
You should file the Return of Income in case your total income is not taxable. The income limit for tax exemption is Rs. 2,50,000. If your account does not need to be audited, you should submit your return of income before 31st July. It is intended for the earnings you have made in the previous year that ended on 31st March. In case you have not filed the Return of Income on time, you should do it in the next 20 months. Non-filing can also result in a penalty of Rs 5000.
Double Taxation
Avoidance Agreement
If the NRI is responsible for paying tax in the country of origin, he needs to know about double taxation. For instance, you are a citizen of the USA and your source of earnings is India. Thus, you will be liable to pay income tax in the USA and India.
Both countries will implement DTAA to prevent larger or double taxes. It also promotes investment and economic trade between the countries.
DTAA has made provisions for eliminating double taxation in some ways.
- Grant rights to tax to one country
- Grant tax rights to both nations but make a provision to limit the taxation rate of every country.
- Grant right to another country’s resident and gain credit for the amount paid as tax
Different provisions covered under DTAA are
- Dividend income
- Interest income
- Employment earnings
- Royalties earnings
- Capital gains
Recent Immigrant- Returning India
Returning Indians are those who return to India for merchandise from a different country (where they have citizenship). They should know FEMA Act and other rules and regulations.
RIs have the right to own, hold, invest in, and transfer foreign security and foreign currency. It is also mandatory for RIs to quote their Aadhar Numbers in ROI. After becoming ROR, RIs should ensure that their assets and income are reported properly to avoid penalties.
Thus, these are some income tax details for NRIs in India. You can consult with our team to learn more and solve issues.
