Who is a Non-Resident?

Generally, under the Income-tax Law, an individual will be treated as Non – resident if he is out of India for a period of 182 days or more in that year.

However it is not that simple to determine residential status, as there are other conditions in Indian Law as well.

Taxpayers who have come from abroad are required to refer to their Tax Professionals to have a clear opinion on their residential status before filing ITR.

Also, in India, residency as per income tax is not based on citizenship.

Top 6 common NRI Income Sources

NRIs may receive beneficial rates or reduce tax liability on different types of income, including the following:

1. Interest on FCNR (Foreign Currency Non-Resident) accounts is fully exempt by law under Indian law.

2. Interest income from NRE (Non-Resident External) accounts is fully tax-exempt.

3. Interest from certain government securities and specific savings bonds may qualify for special tax treatment.

4. Dividends that may qualify for lower taxes or possible exemption under certain provisions of the DTAA.

5. Capital gains on listed shares may allow exemptions or reduced rates under the DTAA, which could be very valuable.

6. For rental income on Indian property and certain sources of other income, Full taxation applies unless there are respective treaty benefits.

How to Get the Benefit

To access special tax benefits, NRIs must strictly adhere to documentation and filing requirements:

• NRIs must obtain a Tax Residency Certificate (TRC) from their country of tax residence, which establishes eligibility for DTAA benefits and reduced tax rates.
• They should submit Form 10F to Indian tax authorities when required, accompanied by a self-declaration confirming their tax residency status.
• Without advance submission of these documents, income payers or banks will apply higher TDS rates, whereas providing proper documentation enables claiming lower rates under applicable DTAAs.
• While filing tax returns, NRIs are required to report and, where applicable, claim relevant treaty benefits under the right heads of income.

Start early process for obtaining TRC for getting Tax Benefit

NRIs often face long delays in obtaining their TRCs or become confused as to the eligible sources of income where there are tax concessions. Close monitoring is also necessary to ensure that the banks apply the correct rates for TDS amounts after the necessary documents have been submitted.

It is recommend that NRIs begin the process as early in each year as possible to avoid complications at the last second and unnecessary deductions of taxes.