Tax Liability

What is the basis of taxability of income of any person in India?

Ans. The taxability of income of any person in India is based on his / her Residential Status under the Act and scope of total income determined thereof, which is explained in the ensuing questions (Refer Chapter 12 for details on Determination of Residential Status in case of individuals).

What is the scope of total income chargeable to tax of a NR in India?

Ans. Following income earned by NR is liable to tax in India:

i. Income earned from any source in India is taxable in India viz.; Interest income from investments in India; Capital Gains from investments in India; Income from employment exercised in India and Income from Immovable Property located in India;

ii. Any other income received or deemed to be received in India; and
iii. Income deemed to accrue or arise in India.

Any income other than above (i.e. foreign sourced) may not be taxable in India.

Also the beneficial tax treaty rates may be considered in India depending upon the residency of the individual in the other country and the provisions of tax treaties.

What is the scope of total income chargeable to tax of a RNOR in India?

Ans. Following income earned by RNOR is liable to tax in India:

i. Income earned from any source in India is taxable in India viz; Interest income from Investments in India; Capital Gains from investments in India; Income from employment exercised in India and Income from Immovable Property located in India;
ii. Any other income received or deemed to be received in India;
iii. Income deemed to accrue or arise in India; and
iv. Income earned outside India from business controlled or profession set-up in India is taxable in India.

Any income other than above may not be taxable in India.

What is the Income tax liability of a ROR in India?

Ans. For a person who is ROR in India, she/he shall be liable to tax in India on her/his global income subject to foreign tax credit and benefits available as per tax treaties. He/ she will also have an obligation to report foreign assets.

For the definitions of the terms ‘NR’, ‘RNOR’ and ‘ROR’, please refer Chapter 12: Residential Status.

How can NRI pay taxes in India?

Ans. NRI can pay taxes in India as under:

i. Advance Tax – The tax liability in India is paid in instalments (at prescribed percentage of tax liability, mentioned in the Act) during the FY on the basis of estimate of taxable income in India;

ii. Tax Deduction at Source (TDS) – When an NRI earns any taxable income in India, the payer is liable to withhold the amount of tax applicable on the said income and pay the balance amount of income to the NRI. The taxes so withheld are paid to the Government of India on behalf of the NRI. A table documenting the withholding rate of tax applicable in case of income of NRI is explained in ensuing question; ?

iii. Self-Assessment Taxes (SAT) - After end of the FY, NRI may also pay taxes after undertaking a Self-Assessment of his income.

What are the withholding tax rates applicable to a NRI in case of any tax payable arising on income in India for the FY 2018-19?

Ans. The following are the withholding tax rates applicable to NRIs on the income computed in accordance with the provisions of the Act subject to the benefits under the DTAA, if any, between India and the country of residence of the NRI:

Sr. No.

Type of Assets

Tax Liability

Basic Rate of Tax*

1

Interest on Banking a/c

 

 

 

a

NRO Savings Bank a/c

Taxable

30%

 

b

NRE Bank a/c

Exempt

Nil

 

c

FCNR Deposit a/c

Exempt

Nil

2

Immovable Property

 

 

 

a

Capital Gains

 

 

 

 

I

LTCG

Taxable

20%

 

 

II

STCG

Taxable

30%

 

b

Rental Income

Taxable

30%

3

Equity Shares and Units of Mutual Fund

 

 

 

a

Capital Gains on equity shares sold after April 1, 2018

 

 

 

1

STT paid on both sale and purchase of shares (Listed)

 

 

 

 

I

LTCG

Taxable

10%#

 

 

II

STCG

Taxable

15%

 

2

STT not paid (not listed on Recognized Stock Exchange.)

 

 

 

 

I

LTCG

Taxable

10%

 

 

II

STCG

Taxable

30%

 

b

Capital Gains on Units of Mutual Fund sold after April 1, 2018

 

 

 

1

STT paid on sale (Listed equity oriented Mutual Funds)

 

 

 

 

I

LTCG

Taxable

10%#

 

 

II

STCG

Taxable

15%

 

2

STT not Paid (not listed on Recognized Stock Exchange and Debt oriented Mutual Funds)

 

 

 

 

I

LTCG

Taxable

10%

 

 

II

STCG

Taxable

30%

 

c

Dividend Income

Exempt

Nil

4.

Other Securities

 

 

 

a Listed on Recognized Stock Exchange

 

 

 

 

I

LTCG

Taxable

20%

 

 

II

STCG

Taxable

30%

 

b Unlisted

 

 

 

 

I

LTCG

Taxable

10%

 

 

II

STCG

Taxable

30%


#The said Capital Gain income is exempt up to an aggregate amount of Rs.1,00,000/- and above that is charged at 10%.

*Rate of taxes shall be increased by applicable rate of surcharge and Health and Education Cess on income tax as given below -

Surcharge: In case of aggregate income paid or likely to be paid is as follows –

10% of income tax

I

Exceeds Rs. 50 lakh but upto Rs.1 crore

II

Exceeds Rs. 1 crore

15% of income tax

Health and Education Cess on income tax

4% of income tax and surcharge

What are the slab rates applicable in case of taxable income earned by a NRI during FY 2018-19?

Ans.

Slab Rates applicable in case of NRI [irrespective of whether being Senior Citizen of India or otherwise] for FY 2018-19 (i.e. 1 April, 2018 to 

31 March, 2019)

Total Income
(Aggregate of all the sources of income taxable in India)

Basic Rate of tax**

Upto Rs. 2,50,000/-

Nil*

Rs. 2,50,001/- to Rs. 5,00,000/-

5% of the amount by which the income exceeds Rs. 2,50,000/-

Rs. 5,00,001/- to Rs. 10,00,000/-

Rs. 12,500/- plus 20% of the amount by which the income exceeds
Rs. 5,00,000/-

Above Rs. 10,00,000/-

Rs. 1,12,500/- plus 30 % of the amount by which income exceeds
Rs. 10,00,000/-

*If NRI is having only STCG from Equity shares or Equity oriented Mutual fund (on which STT is paid), there is no benefit of basic exemption available. In such case basic rate of Tax @ 15%** is applicable.

*If NRI is having only LTCG from Equity shares or Equity oriented Mutual fund, there is no benefit available of above basic exemption of Rs. 2,50,000/-. However, such gain is not taxable up to an amount of Rs. 1,00,000/-. In such case, basic rate of Tax @ 10% is applicable on capital gains over and above Rs.1,00,000/-.
**Plus surcharge as applicable at 10%/15% on income tax and Plus Health and Education Cess (at 4%) on income tax and surcharge amount.

In case of Mr. A, a NRI seafarer, employment services are rendered outside India on board of foreign ship and salary has been received in India in his NRE Bank a/c directly. Will the said income be liable to tax in India?

Ans. It is understood that salary income received in NRE Bank a/c by Mr. A may be regarded as income received in India, which may be liable to be taxed in India. However, it has been clarified by the Government recently that in case of NRI seafarers on board of foreign ship, salary received in NRE Bank a/c in India shall not be included in Total Income taxable in India.

When Indian income of a NRI is taxed in both India as well as in the country of his residence, what recourse is available to NRI from such double taxation of income?

Ans. In the given case, it is seen that there is double taxation of income. In such a situation, taxes paid on such income in the source country (i.e. India, in the present case) may be claimed as credit while paying taxes in the resident country as per DTAA between India and country of residence of NRI and/or as per domestic tax laws of the resident country of NRI.