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The below content is purely for informational purposes and is not intended to constitute advisory of any kind. Please note, these are in-depth articles which are best viewed on large screen devices like laptops, desktops and tablets. The position reflected in this article has been updated as of January 15, 2024.

An individual (who is a resident or a non-resident) will be subject to taxation in India is based on the following factors:

  • The residential status (based on period of stay in India) in India under the Income Tax Act, 1961, (IT Act)
  • Income earned/accrued in India

There are two tax regimes operational in India. The primary income threshold for taxation is reached when your income exceeds ₹2.5 lakh in the existing tax regime or ₹3 lakh in the new tax regime.

 

You will be a Resident if you satisfy EITHER of the two conditions with respect to your period of stay:

1) You stay in India for 182 days or more in a Financial Year (April-March) 

2) You stay in India for 60 days or more in a Financial Year and 365 days or more in four years immediately before that Financial Year.

 

If you are not a Resident as per any of the two conditions above, you can check if you are eligible for deemed residency for the purpose of taxation. You will be a deemed resident of India if you satisfy both the conditions: 

1) If you are not liable to pay taxes in any other country due to specified reasons.

2) If you have an income sourced in India of more than ₹15 lakh in that Financial Year

 

You will be a Non-Resident (NR) as per the IT Act, 1961 if you are neither a Resident nor a Deemed Resident. 

Note: If you qualify as a resident, your residency status can be further classified as Ordinarily Resident (OR) and Not Ordinarily Resident (NOR) based on the following conditions:

Please note, tables are best viewed on desktops and in landscape mode on mobile phones.

Not Ordinarily Resident (NOR) Ordinarily Resident (OR)

You will be NOR if you satisfy any of the below scenarios:

1) You are a deemed resident.

2) You are a non-resident as defined above in at least nine out of the immediately preceding 10 Financial Years before the current one.

3) If you stayed in India for less than 730 days in the seven Financial Years immediately preceding the current one.

4) If you are an Indian citizen/Person of Indian Origin (PIO) coming to India for more than 120 days but less than 182 days and have an income sourced in India of more than ₹15 lakh in a Financial Year.

If you do not meet any of the four criteria outlined in this table for qualifying as an NOR, you will be categorised as an OR.

Residency is defined differently in the IT Act, 1961 and the Foreign Exchange Management Act, 1999 (FEMA).

An individual will be considered a ‘Resident in India’ under FEMA based on their intent to stay in India. FEMA residency is essential for individuals interested in foreign exchange transactions such as investments in foreign currency or foreign securities, acquisition or transfer of immovable property, etc.

Residency under the IT Act is determined only based on the physical stay of the individual in India, irrespective of the purpose of stay. Residency under the IT Act will help you determine your taxable income and the applicable tax rates. 

Once you determine your residential status in any Financial Year as an NRI and your income in India (before considering deductions and exemptions) exceeds the basic threshold limits, you are liable to pay taxes.

NRIs are only taxed on income earned and accrued or received in India. Let us ascertain which of your incomes are subject to taxation.

 

Know your taxable income and deductions

Please note, tables are best viewed on desktops and in landscape mode on mobile phones.

Taxable in India Non-taxable in India
  • Income earned and accrued in India, irrespective of it being received in or outside India.

    For example: Any dividend declared by an Indian company or rental income from residential property situated in India or gain arising on the sale of Indian investment is considered earned in India.

  • Income earned and accrued outside India but received in India.

    For example: Any dividend declared by a foreign company or rental income from residential property situated outside India or gain arising on the sale of foreign investment is considered earned outside India. However, such dividends, rental income, or sale proceeds of investment deposited in an Indian bank account will be regarded as income received in India and therefore, it would be taxable in India.

  • Income earned, accrued and received outside India.

    For example: Any dividend declared by a foreign company or rental income from residential property situated outside India or gain arising on the sale of foreign investment is considered earned outside India. Such dividends, rental income, or sale proceeds of investment deposited in any foreign bank account will be regarded as income earned, accrued and received outside India. Therefore, it would not be taxable in India.

 

Did you know?

For an Indian citizen crew member on international waters, the stay in India during the Financial Year will be calculated as per their Continuous Discharge Certificate (CDC) or passport. Accordingly, if they qualify to be a non-resident, then their overseas salary may not be taxable in India. You should consult a tax expert for more details.

NRI income tax slab rates 2023-24: Choose your tax regime wisely

Residents, as well as non-residents, have the same tax slab rates. Both have the flexibility to choose between the existing tax regime and the new tax regime slabs. Each option offers distinct advantages and understanding them can help you make an informed decision that aligns with your financial goals.

The new tax regime is the default tax regime in which you are not entitled* to exemptions like house rent allowance, leave travel assistance, etc., or deductions like medical insurance, life insurance premiums, Provident Fund (PF), etc. However, in case you wish to be governed by the existing tax regime, you need to opt for the same while filing your income tax return.

*Section 115BAC

Did you know?

India has signed a comprehensive Double Taxation Avoidance Agreement (DTAA) with over 90 countries to help NRIs avoid being doubly taxed. You must check if your country of residence has a DTAA with India to enjoy benefits such as exemptions, low tax rates, etc.

Income tax slabs for the tax year 2023-24

Please note, tables are best viewed on desktops and in landscape mode on mobile phones.

Existing tax regime New tax regime

Level of income (₹)

Rate of tax

Level of income (₹)

Rate of tax

0 – 2,50,000

Nil

0 – 3,00,000

Nil

2,50,001 – 5,00,000

5%

3,00,001 – 6,00,000

5%

5,00,001 – 10,00,000

₹12,500 + 20% of the amount exceeding ₹5,00,000

6,00,001 – 9,00,000

₹15,000 + 10% of the amount exceeding ₹6,00,000

10,00,001 and above

₹1,12,500 + 30% of the amount exceeding ₹10,00,000

9,00,001 – 12,00,000

₹45,000 + 15% of the amount exceeding ₹9,00,000

   

12,00,001 – 15,00,000

₹90,000 + 20% of the amount exceeding ₹12,00,000

15,00,001 and above

₹1,50,000 + 30% of the amount exceeding ₹15,00,000

 

Understanding surcharge and cess (health and education) on NRI taxable income

The surcharge is an additional tax levied on your base income tax when your taxable income crosses ₹50 lakh. Additionally, you are liable to pay a health and education cess of 4% on income tax as well as the surcharge. These rates are the same for resident Indians and NRIs.

The rate of surcharge based on income level is provided below:

Please note, tables are best viewed on desktops and in landscape mode on mobile phones.

Level of income Existing tax regime New tax regime

(₹)

Rate of surcharge for dividend income from companies and capital gains from specified assets

Rate of surcharge for income other than specified in column B

Dividend income from companies and capital gains from specified assets

Rate of surcharge for income other than specified column D

Less than 50 lakh

Nil

Nil

Nil

Nil

50 lakh – 1 crore

10%

10%

10%

10%

1 crore – 2 crore

15%

15%

15%

15%

2 crore – 5 crore

15%

25%

15%

25%

Above 5 crore

15%

37%

15%

25%

Additionally, you are liable to pay health and education cess at 4% under both regimes.

Source: Income tax portal of India

 

Special tax provisions for NRIs

NRIs are also allowed to benefit from special rate tax provisions for certain income. These are not subject to taxes as per the regular NRI income tax slab rates. These include:

Please note, tables are best viewed on desktops and in landscape mode on mobile phones.

Type of income Nature of income Rate of tax Remark

Long-term capital gain

- Earned from equity shares listed on an Indian-recognised stock exchange

- Equity-oriented mutual funds

- Unit of business trusts or zero-coupon bonds

10%

Inflation indexation benefits not available

- Earned from unlisted shares (not listed on an Indian-recognised stock exchange) and securities such as bonds, debentures, etc. 

- On the transfer of foreign exchange assets

10%

Inflation indexation benefits not available

- From the property

- Any other capital gain

20%

Inflation indexation benefits available

Short-term capital gain

- Earned from equity shares listed on an Indian-recognised stock exchange

- Equity-oriented mutual funds or units of business trusts

15%

Subject to specific conditions

Normal income

 

 

Any income from investment such as interest, dividend, etc. 

20%

Nil

Source: Chapter XII (A), section 112, 112(A) and 111(A) of the Income Tax Act, 1961.

 

Points to remember regarding special provisions

  • If you face taxation for the same income in your resident country and India, check whether your country has signed a DTAA with India. If so, you can avail yourself of a treaty benefit/Foreign Tax Credit (FTC) in your resident country under the relevant DTAA. You should consult a tax expert to understand the implications of DTAA.
  • You are exempted from taxes on any long-term capital gains from the sale or transfer of specified foreign exchange assets which are acquired in India through inward remittance in foreign currency. However, this is possible only if the net consideration (proceeds) is re-invested into other specified assets, such as: 
  • Shares and debentures of an Indian company, 
  • Deposits with banks and Indian public companies, 
  • National Savings Certificate, etc.

Let us understand the tax calculations, including surcharge and cess as well as special income cases. 

Samuel is an NRI living in Canada. In the past three years, he has earned an annual income from various sources in India, including rental income, dividends from shares held with Indian companies, short-term capital gains on the sale of unlisted shares and interest from Non-Resident Ordinary (NRO) bank accounts. He has no deductions and exemptions to be claimed. For this fiscal year, Samuel’s taxable income is ₹55 lakh and he wants to know his tax liability under the existing and new tax regimes as per the income tax slab rates. 

 

Let’s understand how the taxes will be calculated under the existing and new tax regimes for him:

Please note, tables are best viewed on desktops and in landscape mode on mobile phones.

Existing tax regime regime

Particulars

in ₹

 Particulars

in ₹

Total income

55,00,000

Total income

55,00,000

On income up to ₹2.5 lakh

0

On income up to ₹3 lakh

0

On income between ₹2.5 lakh and ₹5 lakh (5% of ₹2.5 lakh)

12,500

On income between ₹3 lakh and ₹6 lakh (5% of ₹3 lakh)

15,000

On income between ₹5 lakh and ₹10 lakh (20% of ₹5 lakh)

1,00,000

On income between ₹6 lakh and ₹9 lakh (10% of ₹3 lakh)

30,000

On income above ₹10 lakh

(30% of ₹45 lakh, (₹55 lakh minus 10 lakh))

13,50,000

On income between ₹9 lakh and ₹12 lakh (15% of ₹3 lakh)

45,000

   

On income between ₹12 lakh and ₹15 lakh

(20% of ₹3 lakh)

60,000

   

On income above ₹15 lakh

(30% of ₹40 lakh (₹55 lakh minus ₹15 lakh))

12,00,000

Tax liability

14,62,500

Tax liability

13,50,000

Surcharge

(at 10%; as income exceeds ₹50 lakh but is below ₹1 crore)

1,46,250

Surcharge

 (at 10%; as income exceeds ₹50 lakh but is below ₹1 crore)

1,35,000

Educational cess (at 4%)

64,350

Educational cess (at 4%)

59,400

Total tax liability

16,73,100

Total tax liability

15,44,400

Savings

-

Savings

(over existing tax regime)

1,28,700

Note: Calculations are as per the income tax calculator on the income tax website.

Samuel has a lower tax liability under the new tax regime, so it is preferable for him to opt for it.

You should consult a tax expert to understand which regime may best suit your situation.

Surcharge calculations for different types of income

Suppose Samuel decides to move back to India. He still qualifies as an NRI; however, he now has a taxable income of ₹2.45 crore for FY23 in India. The taxable income includes:

  • Rental income  ₹1.20 crore
  • Dividend from shares held with Indian companies  ₹15 lakh
  • Short-term capital gains on the sale of unlisted shares  ₹45 lakh
  • Long-term capital gains on the sale of unlisted shares of ₹15 lakh        
  • Interest from bank accounts of  ₹50 lakh

 He has opted for taxation under the existing tax regime. His taxability is computed as below: 

Please note, tables are best viewed on desktops and in landscape mode on mobile phones.

Tax liability

(Calculated as per tax slabs under the existing tax regime) without considering dividend income and long-term capital gains

₹62,62,500

 

Tax liability on dividend income

(₹15 lakh*30%, i.e., the highest slab rate)-
Note: There is no separate tax rate for dividends. This is calculated separately only for the purpose of calculating the surcharge)

₹4,50,000

 

Tax liability on long-term capital gains at special rates

 (₹15 lakh*20%)

₹3,00,000

₹70,12,500

Add: Surcharge

(at the rate of 15% on dividend income and long-term capital gains)

₹1,12,500

 

Add: Surcharge

(at the rate of 25% on other income)

₹15,65,625

₹16,78,125

Health and education cess of 4% on tax plus surcharge

 

₹3,47,625

Total tax liability

 

₹90,38,250

Samuel has to pay taxes of ₹70,12,500, along with a surcharge of ₹16,78,125 and cess of ₹3,47,625. This takes his overall tax liability to ₹90,38,250.

It is, therefore, important to make a note of the applicable surcharge while computing your tax liability as an NRI.

 

Advance tax payments

Resident individuals below 60 years of age and NRIs are required to pay taxes in advance if their estimated income in a Financial Year after Tax Deducted at Source (TDS) is more than ₹10,000*. To know the due dates for advance tax and the amount of advance tax payable on each instalment, please click here.

Any default or shortfall in the payment of advance tax will attract interest at 1% per month. For the first three instalments, interest needs to be paid for three months and for the fourth instalment, interest needs to be paid for one month**. Any default or shortfall in the payment of interest which continues after March 31, an additional interest of 1% per month needs to be paid till the month the interest is paid off. Thereafter, taxes need to be paid as self-assessment taxes before filing the income tax return.

ICICI Bank is one of the designated banks through which you can make this tax payment. Please click here to know more.

*Section 208 of Income Tax Act, 1961.

**Section 234C of the Income Tax Act, 1961.  

 

Conclusion

Understanding NRI tax slabs and choosing the right tax regime can help you stay compliant with the laws and optimise your tax liabilities. You must keep abreast of the latest tax rates and exemptions that apply to your income sources in India. For guidance, you should reach out to tax experts who specialise in international taxation.

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