Friday, January 15, 2016

Is NRI's Overseas Income Taxable in India? Which Source of Incomes are Taxable?

Whether global income of NRI is taxable or not depends on NRI's residential status in India for that financial year e.g. from 1st April to 31st March. If NRI's tax status is "resident" in the financial year than your global income is taxable in India, which includes income earned abroad + income earned in India. But, if your residential status is non-resident for a financial year than income earned on overseas is not taxable in India but any income earned or accrued in India is taxable in India e.g. interest earned on NRO fixed deposit.


If you are not sure how to determine your residential status for a given year see this flowchart. In general, if you stay outside of India for more than 182 days in a given financial year than you become NRI for that year though there are a lot of subtle points e.g. whether you leave India for Employment or social visit. Remember, when you fill immigration form on International airport, there is a column for the purpose of visit, always mark the correct purpose there.



Which income is taxable in India for NRIs



Since income tax in India depends upon individual's residential status e.g. whether he is resident or non-resident, there are sources of income on which NRIs need to pay tax in India. In general, any income earned or accrued in India is taxable in India e.g.
  1. Interest earned on NRO fixed deposits
  2. Rental income from house property in India
  3. Salary received in India or Salary in lieu of Service provided in India
  4. Short term capital gains on money invested in Indian stock market or Mutual fund
  5. Interest earned on NRO saving account
These are some examples of the source of income which are taxable in India for NRIs. On the other hand, interest earned on NRE and FCNR fixed deposit is tax-free in India. They are also not included in your taxable income and bank also doesn't deduct TDS on them.

On the other hand, bank deduct TDS @ 30.9% on NRO fixed deposits. You can lower the TDS rate by taking benefit of DTAA and you can also claim a refund by filing your income tax return for given financial year. Remember, basic exemption limit is 2.5 lakh and if you do investments e.g. PPF, NPS or buy life insurance then you can always save tax.

Here is a nice summary of NRIs source of income which is taxable in India:


Does Global income of NRI is taxable in India? Which are?










That's all about whether NRIs global income is taxable in India or not. If you are NRI then Yes, it's not taxable but even if you are staying outside India but your status is resident then your global income is taxable in India. This is mostly the case with software professionals and test engineers visiting onsite for a short term of 3 to 6 months. Make sure you plan your visit to the foreign country if you can to save tax, given financial year starts at 1st April and ends at 31st March.



2 comments:

  1. For FY 2015-16, I've stayed in India till 15th OCT 2015 and then left for an employment opportunity abroad. Is my global income earned between 16th OCT to 31st MAR. 2015 taxable in India?

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    Replies
    1. @Satyansh, since you stayed only 167 days on overseas on financial year (days between 16th oct to 31st march), you will not be considered NRI for income tax purpose, hence your global income between 16th Oct 15 and 31st March 2015 is taxable in India. If you have paid the tax overseas you can claim the rebate via DTAA though.

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