The tax implications for the Non-Resident Indians (NRIs) based on the source of their income is as follows:
Income earned in India
As per Income Tax Act, NRIs are only taxable for their Indian income i.e. the income arised/accrued or received in India. Thus, it will be taxable in India.
Example- Rental income from property let-out in India, Interest income on Non-Resident Ordinary (NRO) Account, etc.
Income earned outside India
Income earned by the NRI outside India, will not come under the ambit of Income Tax Act, and thus will not be taxable in India.
Example- Salary income earned abroad, etc.
Additionally, if the above is seen from the perspective of Residential status,
- NRIs will be taxed on their global income in the country in which they are Tax resident.
Example- Mr. A, a citizen of India has been a tax resident of the US for the past 2 years. His Indian income – Interest income from NRO Account and rental income from property let out are liable to tax in the US along with his US income – salary from a US-based company.
- This means that their Indian sourced income will be subject to tax in both the countries – India and the country which they are tax resident of.
- In such cases, the Non-resident Indians (NRIs) can avail the benefits of the Double Taxation Avoidance Agreement (DTAA) between India and the country which they are a tax resident of.
Disclaimer: We do not purport to give any professional advice through this answer. The interpretation is solely based on the facts of the specific matter and may be used for any purpose only after seeking appropriate professional advice.
