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NRI Taxation: Know the Income Tax Rates

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19 Sep 20246 mins readBy MOFSL

Introduction

India's taxation system is crucial to the country's economic framework. Various taxes are imposed on goods and services consumed within the country, contributing to social initiatives and enhancing public services. Taxes applicable to residents and non-residents include Goods and Services Tax (GST), income tax, property tax, and taxes deducted at source. This article delves into the specifics of income tax for Non-Resident Indians (NRIs), focusing on the NRI Income Tax Slab Rates for the Assessment Year (AY) 2024-25.

Who Qualifies as an NRI?

The Foreign Exchange Management Act (FEMA) outlines the criteria for determining an individual’s residential status. According to Indian Income Tax Law, an individual is classified as a resident if they meet any of the following conditions:

1. They have resided in India for at least 182 days during the financial year.

2. They have resided in India for at least 60 days during the year and 365 days over the preceding four years.

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Exceptions apply for Indian citizens who leave India as crew members of Indian merchant ships or for employment purposes, in which case the 60-day criterion is extended to 182 days.

Taxable Income for NRIs

NRI taxation encompasses various income Indian sources:

1. Salary: Income for services provided in India is taxable regardless of where received.

2. House Property Income: Rental income from Indian properties is taxable. The standard deduction for NRIs is 30%, and deductions under Section 80C are for principal repayment and stamp duty. TDS at 30% is applicable on rental payments.

3. Capital Gains: Income from selling capital assets in India is taxable. Long-term gains are subject to 20% tax, whilst short-term gains are subject to 30% tax with indexation benefits.

4. Income from Other Sources: Interest from NRO accounts is taxable, while interest from NRE and FCNR accounts is tax-free.

5. Business and Profession: Income from a business or profession controlled or established in India is taxable.

Income Tax Filing Requirements for NRIs

A common query among NRIs is whether they need to file Income Tax. According to the current NRI Income Tax Slab Rates, if an NRI’s annual income exceeds ₹2,50,000, they must file an income tax return in India. It is crucial to stay updated with the yearly changes in residential status rules, which impact tax liabilities.

NRI Income Tax Slab Rates for AY 2024-25 (FY 2023-24)

Income tax rates for NRIs vary depending on whether they opt for the Old or New Regime. Here's a detailed breakdown:

Old Regime Slab Rates

 

Income Tax Slab
Old Regime Slab Rates for FY 23-24 (AY 24-25)
Up to Rs. 2.50 lakh Nil
Rs. 2,50,000 -Rs. 5,00,000 5%
Above Rs. 5 lakhs to Rs. 6 lakhs Rs. 12,500 + 20%
Above Rs. 6 lakhs to Rs. 7.50 lakh  Rs. 12,500 + 20%
Rs. 7.50,000 to Rs. 9,00,000 Rs. 12,500 + 20%
Rs. 9,00,000 to Rs. 10,00,000 Rs. 12,500 + 20%
Rs. 10,00,000-Rs. 12,00,000 Rs. 1,12,500 + 30%
Rs. 12,00,000-Rs. 12,50,000 Rs. 1,12,500 + 30%
Rs. 12,50,000-Rs. 15,00,000 Rs. 1,12,500 + 30%
Above Rs. 15,00,000 Rs. 1,12,500 + 30%

 New Regime Slab Rates​​​​​​​

 
Income Tax Slab
New Regime Slab Rates for FY 23-24 (AY 24-25)
Up to Rs. 3 lakhs Nil
Rs. 3,00,000 -Rs. 6,00,000 5% (Rebate u/s 87A available)
Rs. 6,00,001 lakhs to Rs. 9,00,000 10% (Rebate u/s 87A available for taxable income up to 7 lacs)
Rs. 9,00,001 to Rs. 12,00,000  15%
Rs. 12,00,001 to Rs. 15,00,000 20%
Above Rs 15,00,000 30% ​​​​​​​

Note:

Certain exemptions and deductions (such as 80C, 80D, 80TTB, and HRA) will not be available to NRIs who adopt the new tax regime. Only resident taxpayers can claim a total rebate on income up to ₹7 lakh.

Can NRIs opt for the New Tax Regime?

NRIs can choose the New Tax Regime, which provides a higher basic exemption limit of ₹3,00,000. However, NRIs opting for this regime cannot avail themselves of the total tax rebate on income up to ₹7 lakh, a benefit exclusive to residents. Additionally, choosing the new tax regime means forfeiting specific deductions and exemptions.

Surcharge on NRI Income

For NRIs with income surpassing certain thresholds, a surcharge is applicable:

·        10% on income between ₹50 lakh and ₹1 crore

·        15% on income between ₹1 crore and ₹2 crore

·        25% on income between ₹2 crore and ₹5 crore

·        37% on income exceeding ₹5 crore

Note: A maximum surcharge of 15% applies to income from dividends or specific provisions such as Sections 111A, 112A, and 115AD.

TDS on Sale of Property

For NRIs selling property in India:

  • Short-Term Capital Gains: Taxed as per the applicable slab rate, with TDS at 30%.

  • Long-Term Capital Gains: Taxed at 20% (plus surcharge and cess) with indexation benefits.

Deductions for NRIs

NRIs can claim deductions under various sections if they opt for the old tax regime:

  • Section 80C: Investments in ULIPs, life insurance premiums, ELSS, home loan principal repayments, and tuition fees.

  • Section 80D: Premiums for health insurance.

  • Section 80E: Interest on education loans.

  • Section 80G: Donations to charitable organizations.

  • Section 80TTA: Up to ₹10,000 on interest from savings accounts.

Deductions are unavailable: NRIs cannot claim deductions for investments such as NSCs, PPFs, or senior citizen savings schemes.

Navigating NRI taxation might seem tricky, but focusing on a few key points can make it easier. Track your income sources, use available exemptions, and file your returns on time to stay compliant with Indian tax laws. If you're unsure, a tax advisor can offer personalised advice based on your financial situation.

 

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Disclaimer: The stocks, companies, or financial instruments mentioned in this blog are for informational purposes only and should not be considered as investment recommendations. It is advised to consult with your financial advisor before making any investment decisions. Investment in securities markets are subject to market risks, read all the related documents carefully before investing. Investors are strongly encouraged to carefully read the risk disclosure documents prior to participating in market-related investments or trading activities. Due to the volatile nature of financial markets, no guarantees can be made regarding investment returns. Motilal Oswal Financial Services Ltd. does not offer any assured returns on market-linked securities. Please note that past performance of stocks or indices is not indicative of future results.
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