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Income Tax Rules for NRIs

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If you are an NRI, your taxability depends on NRI status for a particular year.

 

Checkout the 5 income tax rules that you must know:

1. You must pay tax on all incomes that arise or accrues within or is received in India. Therefore, your Indian salary, interests earned from FD's and savings accounts, rental earnings, capital gains on all assets sold within India, are taxable income. If your earnings are more than the basic exemption limit for the particular year, you must file a return in India. Again, if you intend to claim a tax refund, or carry forward your losses to future years, you must file a return.

 

2. If you return permanently to your Country after being abroad for few years, your earnings overseas do not become taxable immediately. If you have lived out of the country for nine years or more, you remain an RNOR (Resident but Not Ordinarily Resident) for the next two years. It is the transitional status between being an NRI and turning into a permanent resident of India. This is the phase when your earnings outside India are not taxed within India. However, if the earnings come from a profession or business that you control from India, it becomes taxable income. As soon as you become a permanent resident of the country, both your Indian and Global income become taxable within India.


3. If you return to India and turn ordinary resident of the country for a particular year, you must disclose all foreign income and assets in your tax returns. There are rigid regulations under the Undisclosed Foreign Income and Assets Bill, 2015, for evading foreign income in your tax returns. All undisclosed foreign income and assets are taxed at 30%. You cannot claim for deductions, offsetting against losses or allowances for such income. Again, such earnings and assets will never be subject to regular domestic income tax laws. A penalty of INR 1,000,000 will be levied under the following scenarios:


  • Not furnishing tax return with the time specified under the income tax laws
  • Not furnishing information or offering inaccurate information while filing returns

Based on the severity of the offence, the bill also has stringent penalties of upto 300% tax deduction or amounting to 10 years or more of imprisonment.


4. In Indian Budget 2016, it was declared that NRI's without a PAN would not be deducted at a higher rate. However, you will still have to provide alternative documents to avail this benefit. There was no change in this rule in the 2017 budget.

 

5. You cannot open a PPF account. However, you had an existing PPF account before leaving the country; you can still operate the account until the time of its maturity. Once the PPF matures, you must remit the proceeds in your country of residence. However, you will not be able to avail the option of extension beyond the 15 years lock-in period. In case you leave the account unattended after maturity, it will be considered "extended without contribution".


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Income Tax Rules for NRIs

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