Tax On Nri Income - All You Need To Know

By Author: Kirthy Shetty
Total Articles: 2542
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An increasing number of Indians move out of the country every year for work or study, for carrying out business or vocation. A lot of these people moving out maintain a bank account in Indian banks for investment and saving purposes or for transfer of money to and fro. If you're a Non Resident Indian earning income in India, you need to be aware of NRI tax policies of Indian government. As an NRI all kind of foreign exchange / overseas assets such as bank deposits, stocks, properties, life insurance policies can be owned by an NRI abroad can be continued to be held even after permanent settlement in India.

If you are a Non Resident Indian you're liable to pay tax on the income that earned by you in India. As far as the income earned in India is concerned, it is directly or indirectly received, accrued, or the law construes it as having accrued in India. Income accrued in India can be that arising through any business connection in India, or income earned from any asset source in India. Also, if you're receiving income from dividend paid by an Indian company, or by way of interest payable by the Government is to be taxed ...
... in India.

Non resident Indians are faced with a lot of problems when it comes to paying taxes, filing returns, and clearance certificate forms. Therefore, as a Non resident Indian you need to apply for an Income Tax clearance certificate on Form 31, as per Section 230 (I) of the Income Tax Act 1961. And, after filling up details, the applicant receives Form 32 from the accessing officer authorizing your application. This authorizing certificate is the only certificate that needs to be submitted to IT authorities before taking up employment.

As a Non Resident Indian you need to file return every year on the salary earned in India. While Indians abroad are exempt from paying taxes on their foreign income. Also, if an individual is a non-resident, there's no need to pay tax on stock options. However, once he has a resident status, the sale of stocks is chargeable to tax.

As far as the sale of investments in GDRs and ADRs of an Indian company is concerned, Non Residents Indians do not pay any tax on this income as GDRS and ADRs are foreign securities. NRI investors putting their money in the Indian stock market are required to file tax returns as this income is earned in India. If you have plans to settle in India, there's no tax on the income that you've earned abroad.

As an NRI, if you're working as consultant to an Indian company, you need to file returns for the income received in India. Also, in case you're moving out for short-term assignment, not having met the eligibility status of NRI, you'll still need to file tax returns. Most importantly, a Non resident Indian would have to quote his PAN while investing in the Indian stock market. As an NRI you need to constantly keep an eye on the Income tax policies of the Indian government to be able to enjoy tax benefits.

Kirthy Shetty,
Get more information on Income tax for NRI, Open NRI Account