For the purpose of tax-filing, you are considered to be an Indian resident if a) you stayed in India for at least six months (182 days) during the financial year, b) you were in India for 60 days in the previous year or c) you lived in India for a whole year (365 days) in the last four years.
If you do not meet any of the above mentioned conditions, you are termed as an NRI.
If you are an NRI, your income which is earned or accrued in India is taxable in India. On the other hand, if your status is a resident, your global income is taxable in India.
Income earned or accrued in India could be of different forms such as:
Some of the different types of income are explained further.
Income from home located in India is taxable in India, even if you are an NRI. This income is calculated in the same way as it is for a resident.
As an NRI, you can claim a standard tax deduction of 30% and tax benefits for interest paid on home loan, if applicable, from the deemed rent of the property. You can also claim a deduction for principal repayment, stamp duty and registration charges under Section 80C of the Income Tax Act.
Income from home is taxed at slab rates based on total income.
Any capital gain on sale of domestic capital asset is taxable. Capital gains made from selling shares and securities are also taxable.
If you sell a housing property and have made a long-term capital gain, the buyer will deduct tax deduction at source (TDS) at 20%, and deposit the same with the government. However, you can claim capital gains exemption by investing the amount in a housing property again or in capital gain bonds.
If you make long-term capital gains from sale of foreign assets, you will have to pay tax on the same in India. Unlike with Indian assets, benefit of indexation is not available for foreign assets. There are no are deductions allowed under Section 80 either.
If you wish to claim an exemption on the profit, you can do so under Section 115F by reinvesting the profit amount in:
Most of the deductions under Section 80 are available to NRIs as well. For 2017-18, a maximum tax deduction of up to Rs 1.5 lakh is allowed under Section 80C.
The following are the various tax deductions for NRIs:
Tax deduction is available if life insurance policy is bought in the name of an NRI or for their spouse or children. The premium must be less than 10% of the sum assured.
Tuition fees paid to any school, college, university or other educational institution situated within India for the purpose of full-time education of any two children (including payments for play school, pre-nursery and nursery).
Repayment of loan taken for buying or constructing residential housing property in India can be deducted from the taxable income.
NRIs are allowed to claim a deduction for paying health insurance premium. This deduction is available up to Rs 50,000 (effective 1 April 2018) for senior citizens and up to Rs 25,000 for insurance premium of self, spouse, and dependent children. Further, an NRI can claim tax deduction for paying insurance premium of parents (father or mother or both) up to Rs 50,000 if their parents are senior citizens, and Rs 25,000 if the parents are not senior citizens.
NRIs can claim a deduction for paying the interest component of education loan. This loan may be taken for higher education of the NRI, or NRI’s spouse or children or for a student for whom the NRI is a legal guardian. There is no limit on the amount of deduction under this section. It is available for up to eight years or till the interest is paid, whichever is earlier.
Here, NRIs are allowed to claim a deduction for donations for social causes.
NRIs can claim a deduction on income earned from interest on savings bank account up to a maximum of Rs 10,000. This is allowed on deposits in savings account (not time deposits) with a bank, co-operative society or post office.
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