As an NRI who is planning to invest in an NRI account, there are plenty of options available. However, at the same time, there are plenty of factors you need to keep in mind, one of which includes the taxation.
Here are a few rules you will need to keep in mind when it comes to the NRI accounts and taxations:
• If you have an NRI account that accrues income, you will need to pay an income tax on it. Therefore, if you have an NRO account that is used for income earned in India such as salary, rental income, interest income from FDs or capital gains on assets sold in India, it will be taxed. However, if the income of an NRI is more than the basic exemption limit for the year, then you can file your returns in India. You can also claim tax refunds or carry forward your losses by filing these returns.
• If you are an NRI who is returning to India permanently after spending considerable years abroad, the foreign income you earn will not come taxable in India immediately. In this case, if you have been a non – resident for a period of nine consecutive years, you will remain a resident but not an ordinarily resident (RNOR). This is a transitional status which not only defines your status to a fully fledged resident but also for tax purposes. Until you become a resident, which normally takes around two years, the foreign income that is earned will not be taxed, unless it is from a business or profession based in India.
• If you have fixed deposit NRI account, you are liable to pay TDS. However, TDF will not be deducted at a higher rate if you can provide alternative documents without your PAN
• In you return to India and get the status of an Ordinary Resident Indian for a particular year, then you will be accountable to disclose all your foreign assets and foreign income in your tax returns. If you fail to do so, there are stringent penalties you will be liable to pay, as per the Undisclosed Foreign Income and Assets Bill of 2015, for not doing so. Therefore, such an income will not be taxed under the normal IT Act but rather under the provision of this new legislation on accounted funds.
• As an NRI, you cannot open a public provident fund account. However, if you already have a PPF account before becoming an NRI, you can continue to use and operate the account, until it reaches the period of maturity. Once this period is met, you will have the option to remit the proceeds of the funds in the country of your residence, without extending the tenure of the account. In the event that you are unable to attend the account, it will be considered as "extended without contribution".
Here are a few rules you will need to keep in mind when it comes to the NRI accounts and taxations:
• If you have an NRI account that accrues income, you will need to pay an income tax on it. Therefore, if you have an NRO account that is used for income earned in India such as salary, rental income, interest income from FDs or capital gains on assets sold in India, it will be taxed. However, if the income of an NRI is more than the basic exemption limit for the year, then you can file your returns in India. You can also claim tax refunds or carry forward your losses by filing these returns.
• If you are an NRI who is returning to India permanently after spending considerable years abroad, the foreign income you earn will not come taxable in India immediately. In this case, if you have been a non – resident for a period of nine consecutive years, you will remain a resident but not an ordinarily resident (RNOR). This is a transitional status which not only defines your status to a fully fledged resident but also for tax purposes. Until you become a resident, which normally takes around two years, the foreign income that is earned will not be taxed, unless it is from a business or profession based in India.
• If you have fixed deposit NRI account, you are liable to pay TDS. However, TDF will not be deducted at a higher rate if you can provide alternative documents without your PAN
• In you return to India and get the status of an Ordinary Resident Indian for a particular year, then you will be accountable to disclose all your foreign assets and foreign income in your tax returns. If you fail to do so, there are stringent penalties you will be liable to pay, as per the Undisclosed Foreign Income and Assets Bill of 2015, for not doing so. Therefore, such an income will not be taxed under the normal IT Act but rather under the provision of this new legislation on accounted funds.
• As an NRI, you cannot open a public provident fund account. However, if you already have a PPF account before becoming an NRI, you can continue to use and operate the account, until it reaches the period of maturity. Once this period is met, you will have the option to remit the proceeds of the funds in the country of your residence, without extending the tenure of the account. In the event that you are unable to attend the account, it will be considered as "extended without contribution".
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