NRI Tax Related FAQs

These FAQ’s are related to NRIs

Q. Who is an NRI?

A. an Indian staying abroad is known as an NRI i.e. Non-Resident Indian.

Q. What is the time limit to file the Return of Income ?

A. Every person who is not carrying on business is required to submit return of income by 31st July every year for the income earned during the prior year ending 31st March provided his income exceeds the maximum amount not chargeable to tax i.e. Rs. 1,10,000/-.

Q. Is there any tax concession available for NRI’s?

A. NRI’s have been offered a separate concessional tax regime in respect of certain types of income. Concessional tax of 20% is available in respect of investment income and 10% in respect of long term capital gains from the specified assets which are acquired out of convertible foreign exchange.

Q. What are the specified assets?

A. Specified Assets are defined under section 115c(f) as following:

  1. Shares in an Indian company.

  2. Any security of the Central Government.

  3. Debentures and deposits in an Indian Company

  4. Any other notified asset.

Q. What is Tax Exemption Certificate?

A. The TDS rate prescribed from NRI’s income is the maximum rate at which relevant income is taxable in India. But the actual tax liability is lower than this. However, the higher deduction of tax so made is not claimed as refund by filing of return. So to assist such situation the Income tax Act provided a procedure where an NRI can apply to the assessing officer to issue a tax exemption certificate authorizing the payer of income to deduct tax at a lower or nil rates.

Q. Who can apply for tax exemption certificate?

A. Any NRI who receives an income after tax being deducted at source can apply to obtain tax exemption certificate provided his income is less than Rs. 50,000/- p.a. in India.

Q. How long will it take to issue such certificate?

A. The Tax Exemption Certificate is issued within 30 days.

Q. For how long is such certificate valid?

A. The certificate is valid for 1 year.

Q. What are the Tax-liabilities of an NRI leaving India for good?

A. All those individuals who leave India for good have to complete certain formalities in relation to their financial affairs in India. They have to inform the banker that the local bank accounts shall be treated as NRI accounts. They have to inform the companies concerned about the change in their status as NRI. He shall inform the income tax department about the change in the residential status within the meaning of Income Tax Act.

Q. What are the tax liabilities of returning NRI’s?

A. NRI returning India for good should be aware of the various aspects of Foreign Exchange Regulations Act (FEMA) and Banking regulations in order to rearrange his financial affairs in India. He should also inform those related to his residential status according to income tax act i.e. inform the banker and the companies concerned regarding the change of status from Non resident to Resident.