Everything you need to know about NRI tax in India – For Indian citizens who travel abroad for work most of the year, figuring out how taxes work can be a real challenge. There are a lot of differences in the tax law regarding resident and non-resident Indians, but also quite a few similarities.
Here is what you need to know if you’re an NRI.
What Are NRI Qualifications?
NRIs, or non-resident Indians, have to pay different taxes, which is essential, but it’s challenging to determine precisely what an NRI qualifies as.
Although there are many technicalities involved, an NRI is generally someone who resides in India for less than six months in a year or has resided in India for less than 365 days over the past four years.
There Is Capital Gains Tax
Capital gains, or income received through selling assets, are taxed by the government and change based on whether capital gains are considered “short-term” or “long-term.”
Short-term capital gains are taxed at a flat 15% and long-term capital gains, which include property or assets owned for more than a year (or two years in the case of land), are taxed at 20%.
Rental Income Has to Be Reported
If you rent properties to people, your income is subject to tax as an NRI. Rental properties can include a long list of things, such as undeveloped land, apartments, or storefronts, and are taxed at a nominal rate of 30%, although with additional fees and other costs, it’s much closer to 31%.
There Is An Income Requirement for Filing Taxes
Although NRIs are subject to taxation like regular Indian residents, that doesn’t necessarily mean they have to end up filing tax returns unless they meet a certain income threshold. So, for example, if you’re an NRI and make 250,000 rupees or less per year, or roughly 3,277 dollars, you don’t have to file a tax return, although it might be pertinent to do so for various financial reasons.
Income Tax Is Still A Thing
Even though tax returns are potentially optional, income tax technically isn’t. In addition to paying taxes on various forms of income, such as through assets or rentals, any money you acquire through working in the state of India is subject to tax, with tax percentages ranging from 5% to 30%, depending on which bracket you fall into.
Savings Accounts Aren’t Allowed
One tricky thing about being an INR is that you don’t have access to the same financial tools as other people do. For example, savings accounts have to be converted to NREs (non-resident external rupee accounts) or NROs (ordinary non-resident accounts); refusing to do this can result in some pretty substantial fees, which you are legally required to pay off.
This can cause some pretty big issues with your finances, so if you work in another country and are considering currency conversion, like USD to INR, it’s best to keep this in mind.
Figuring Everything Out
When it comes to working or staying in multiple countries frequently, dealing with all the complexities can be daunting, especially related to INR provisions. Hopefully, though, you now know how to navigate the process easier. Luckily, you have money transfer agencies such as Western Union to help you send money to people worldwide.