NRI

NRI

The Central Board of Direct Tax (CBDT), by means of the Income Tax Act, 1961; maintains the Direct-Tax Structure within India. The Income Tax Act, 1961 (hereinafter referred to as The Act) has made its own criteria to define the liability of individuals towards the provisions of Income Tax.

  • The Act has the following Residential Status(s) for Individuals:-
  • Non – Resident
  • Resident But Not Ordinarily Resident
  • Resident And Ordinarily Resident

 

NRI DEFINITION ( NON RESIDENT DEFINITION IN INCOME TAX):

Non Resident Indian – The term usually refers to An Indian, who happens to stay abroad. Such an understanding of the abbreviation NRI is derived from the common man’s Usual Interpretation and Understanding of the RESIDENCY Concept.

Citizenship of a Country and Residential StatusCitizenship of a country and residential status are separate concepts. A person may be an Indian national/citizen but may not be a resident in India. On the other hand, a person may be a foreign national/citizen but may be a resident in India.
It should be noted that The I.T. Act does not use such a definition of NRI to determine the taxation criteria for individuals, instead the Act has its own criteria defined – as has been mentioned above.

Therefore,
To understand the Taxation rules that may apply to NRI’s, it is important to understand the Entity(s) Residential Status as per The I.T. Act.

NRI residential status:

As explained earlier, only the NON-RESIDENTs are exempted from complying to the provisions of the Income Tax Act. Therefore, it is important for us to understand the Act’s definition of a NON-RESIDENT.

  • The Income tax department classifies an individual to be a non-resident when:
  • You reside outside India for a period of more than 182 days during the relevant previous year.
  • You are not present in India for 60 days or more during the previous year and again for a combined total of 365 days or more during the previous 4 years prior to the previous year.
  • Your status of being a resident or a non-resident Indian depends on the above criterion. For example, while you are an NRI, you were physically present in India for more than 182 days during one financial year. In such a case you will be considered as a resident when it comes to taxes and you are obliged to pay taxes to the Indian government for the income earned in India, if any for that year
  • Now that it is clarified as to which NRI’s are liable tocomply with the provisions of the Income Tax Act, we can move ahead to see what level of compliance is required by such NRI’s , with regards to the source of origin of Their Earnings.
  • For this purpose, we can now simplify our Residential Status Chart:-
  • The Act has the following Residential Status(s) for Individuals:-
  • Non – Resident  (Since they are usually not required to comply with the provisions of the I.T. Act)
  • Resident But Not Ordinarily Resident
  • Resident And Ordinarily Resident.
  • As is noticeable, the I. T. Act, in its definition of a Resident, has 2 variants,  Resident But Not Ordinarily Resident (R.NOR)& Resident And Ordinarily Resident (R.OR) . We shall now see as to how NRI’s are classified as either R.NOR or R.OR.
  • Obviously, if an NRI also happens to be a NON-RESIDENT, the question of him being R. NOR or  OR does not arise.
  • Further, the Act has Actively defined the term R. NOR; Hence, all NRI’s who are Resident’s, and do not fall under R. NOR criteria, will be considered as R. OR (because of the passive definition)
  • A NRI is an RNOR if he meets either of these two conditions:

Not Resident in India

TDS Rates (in %)

Section 192: Payment of Salary

Normal Slab Rate

Section 192A: Payment of accumulated balance of provident fund which is taxable in the hands of an employee (with effect from 01.06.2015).

10

Section 194B: Income by way of winnings from lotteries, crossword puzzles, card games and other games of any sort

30

Section 194BB: Income by way of winnings from horse races

30

Section 194E: Payment to non-resident sportsmen/sports association

20

Section 194EE: Payment in respect of deposits under National Savings Scheme

20

Section 194F:Payment on account of repurchase of unit by Mutual Fund or Unit Trust of India

20

Section 194G: Commission, etc., on sale of lottery tickets

10

Section 194LB: Payment of interest on infrastructure debt fund

5

Section 194LBA(2): Business trust shall deduct tax while distributing any interest income received or receivable by it from a SPV to its unit holders.

5

Section 194LBA(3): Business trust shall deduct tax while distributing any income received from renting or leasing or letting out any real estate asset owned directly by it to its unit holders.

30

Section 194LBB: Investment fund paying an income to a unit holder [other than income which is exempt under Section 10(23FBB)] shall deduct tax therefrom (with effect from 01.06.2015).

10

Section 194LC: Payment of interest by an Indian Company or a business trust in respect of money borrowed in foreign currency under a loan agreement or by way of issue of long-term bonds (including long-term infrastructure bond)

5

Section 194LD: Payment of interest on rupee denominated bond of an Indian Company or Government securities to a Foreign Institutional Investor or a Qualified Foreign Investor

5

Section 195: Payment of any other sum to a Non-resident

  

a) Income in respect of investment made by a Non-resident Indian Citizen

20

b) Income by way of long-term capital gains referred to in Section 115E in case of a Non-resident Indian Citizen

10

c) Income by way of long-term capital gains referred to in sub-clause (iii) of clause (c) of sub-Section (1) of Section 112

10

d) Income by way of short-term capital gains referred to in Section 111A

15

e) Any other income by way of long-term capital gains [not being long-term capital gains referred to in clauses (33), (36) and (38) of Section 10]

20

f) Income by way of interest payable by Government or an Indian concern on moneys borrowed or debt incurred by Government or the Indian concern in foreign currency (not being income by way of interest referred to in Section 194LB or Section 194LC)

20

g) Income by way of royalty payable by Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern where such royalty is in consideration for the transfer of all or any rights (including the granting of a licence) in respect of copyright in any book on a subject referred to in the first proviso to sub-section (1A) of Section 115A of the Income-tax Act, to the Indian concern, or in respect of any computer software referred to in the second proviso to sub-section (1A) of Section 115A of the Income-tax Act, to a person resident in India

10

h) Income by way of royalty [not being royalty of the nature referred to point g) above E] payable by Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to a matter included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy

10

i) Income by way of fees for technical services payable by Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to a matter included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy

10

j) Any other income

30

Section 196B: Income from units (including long-term capital gain on transfer of such units) to an offshore fund

10

Section 196C: Income from foreign currency bonds or GDR of an Indian company (including long-term capital gain on transfer of such bonds or GDR)

10

Section 196D: Income of foreign Institutional Investors from securities (not being dividend or capital gain arising from such securities)

20