Investing in India has become increasingly popular for Non-Resident Indians (NRIs) in recent years. However, there are still some concerns and lack of awareness regarding taxation. In this article, we will discuss how taxation works for NRIs investing in India.
When it comes to taxes, there are 5 key things you need to remember:
Now, let’s go into the details.
If you are based in any of the 80+ countries which has Double Tax Avoidance Agreement (DTAA) with India, you don’t have to pay tax twice. List of countries with which India has DTAA are mentioned in this article.
Once you pay these taxes in India, you have to declare those in your home country so that you dont get taxed twice. For the same, you need to fill Forms 15CA and 15CB in India, which you can attach with your home country tax filing. This process is supported and end-to-end with our taxation experts.
To begin with, NRIs are taxed based on their residential status for taxation purposes. According to the Indian Income Tax Act, an individual is considered an NRI if he or she has spent less than 182 days in India in a financial year. Additionally, if the individual has spent less than 60 days in India in the relevant financial year and has been an NRI in the previous four financial years, he or she is also considered an NRI.
NRIs are taxed only on the income earned in India. Income earned abroad is not taxed in India. The types of income that are taxable in India for NRIs are as follows:
When an NRI earns income in India, the Indian government deducts tax at the source through TDS (Tax Deducted at Source). For instance, if an NRI earns interest on a fixed deposit in India or has salary income, the bank will deduct TDS on the interest earned. Note that only the interest earned from an NRO account is taxable, the income earned from NRE / FCNR accounts is not taxable.