Income Tax for NRI's (Non Resident Indians)

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India NRI Tax implies the taxes that are exempted from the interest income of the non-residential Indians. NRIs are those who are either born and brought up outside India, in some other country but have an Indian origin or those who are born in India but reside in some other foreign country.

The recent survey shows that the number of existing NRIs is more than 30 million, excluding countries such as Pakistan, Bangladeshi, Roma diaspora, and Sri Lanka. Of late, the Government of India has issued a new scheme of 'Overseas Citizenship of India (OCI)' that confirms a dual citizenship to the non-residential Indians for the very first time after the independence in 1947. The NRIs are also considered Persons of Indian Origin (PIO). The non-residential Indians not only enjoy a series of privileges ensured by the FERA and RBI but also the schemes that falls under the Income Tax Act. The Income Tax Act, 1961 has not only covered some of the domestic tax laws, but also various treaties signed on the basis of Authority for Advance Rulings, Model Tax Convention of the Organization for Economic Co-operation and Development (OECD) and its Statement, and Court judgments.

Global trade in India has not only been a strong boost for the Indian economy but has also opened up many opportunities with regard to the entry of foreign subsidiaries to the conglomerates in India. A number of MNCs are set up as a consequence of this. Section 5 and section 6 of the Income Tax Act, 1961 determines the tax implications of the residential status of such overseas subordinates. The NRI Tax is charged on the income interest of the NRIs, and this persists at a fixed rate on the gross earning and this tax service is not subjected to any deduction of expenses.

Some particulars of India NRI tax statistics are listed below:
  • Foreign companies are required to pay 20 percent interest rate on borrowing the foreign currency from the Indian government or any other Indian concern.
  • Non-residents are also liable to pay 20 percent interest on borrowing foreign currency from the Government of India or any other Indian firm.
  • NRIs are subjected to pay 10 percent interest while entering into a bond with an Indian company if such bonds are issued under the schemes forwarded by the Central Government. These are called Foreign Currency Convertible Bonds and are usually taken as a conglomeration or demerger.
  • Under the Securities Contracts (Regulation) Act of 1956, the foreign institutions are liable to pay 20 percent interest, based on the income from securities that are enlisted in any well-reputed stock exchange in India.
  • Apart from these special schemes issued by the Government of India designed exclusively for the non-residential Indians under India NRI Tax, the income tax rate remains the same. Income tax is charged on the net income at a normal rate.

Last Updated on 6/22/2015

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