New Rules for NRI in India: Essential Tax Updates

It is important to understand the new rules for NRI in India. These changes affect how NRIs can manage their money from abroad. Knowing these rules helps the NRI follow the law and make the most of their earnings in India. Let’s discuss the main changes and why it is good for NRI to keep up with them. This can help them handle their finances better and avoid any problems. 

Tax New Rules for NRIs in India

Indi has made key changes to its tax rules for non-resident Indians (NRIs). These changes make tax rules clearer and help NRIs follow them better. Now, NRIs can understand how to manage their taxes and avoid mistakes easily. Here’s everything about the new rules for NRI in India you should know:

Taxation of NRIs in India

If you live outside India but earn money there, you need to know about taxes. As an NRI, you only pay taxes on money you make in India. This includes pay for work done in india, money from renting out property in India, and any business you run in India. 

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You also get some special tax breaks:

• Interest Income: Money you earn as interest from NRE and FCNR bank accounts in India is not taxed. This helps you save more.
• Tax Breaks: You can get tax breaks for things like insurance and home loan payments in india. But, some other savings options available to people living in India might not be available to you.

New Tax Regime for NRIs

The latest tax regime for NRIs offers changes that simplify taxation but limit deductions. Here’s a quick breakdown of the new rules compared to the old system:

• Option to Choose: NRIs can choose between the new and old tax regimes, which allows flexibility based on their financial plans and potential tax liabilities.
• New Tax Slabs: The new tax regime introduces lower tax rates but removes many deductions.
  • Income up to ₹2.5 lakh: No tax (same as the old regime)
  • Income between ₹2.5 to ₹5 lakh: 5% tax
  • Income between ₹5 to ₹10 lakh: 10% tax
  • Income between ₹10 to ₹15 lakh: 20% tax
  • Income above ₹15 lakh: 30% tax 
• Fewer Deductions: The new regime offers lower tax rates but limits the availability of deductions such as housing loans, tuition fees, and more. 
• Simplified Tax Filing: With fewer exemptions and deductions, the new regime simplifies the tax filing process for NRIs.

Tax Deduction at Source (TDS) for NRIs

Tax Deduction at Source (TDS) applies differently to various income sources for NRIs. Here’s a simple breakdown of how TDS works for different types of income:

• Rental Income: TDS on rent received by NRIs is 30%. The tenant is responsible for deducting this amount before making the payment. 
• Interest Income: 
  • Interest earned on NRO accounts is subject to a 30% TDS
  • Interest from NRE and FCNR accounts is not only tax-free but also exempt from any TDS
• Capital Gains: 
  • Short-term capital gains:
    •  For equities: if you sell your shares within a year of purchase, and the transaction occurs through a recognised stock exchange where securities transaction tax is paid, the TDS rate is 15%.
    • For other assets like property: The TDS rate on short-term capital gains is 30%.
  • Long-term capital gains:
    • For property: If you sell the property after holding it for more than two years, the long-term capital gains tax is 20% with indexation benefits.
    • For equities: Gains from selling shares held for more than a year are taxed at 10% on gains exceeding ₹1 lakh. No indexation benefit is available for equities, and no TDS is available if transacted on a recognised stock exchange with securities transaction tax paid.
• Salary Income: If an NRI earns salary income in India, the TDS rates follow the applicable tax slab rates based on the income level.

Lower Deduction Certificate (LDC) for NRIs

A Lower Deduction Certificate (LDC) is important for NRIs who earn income in India. It lets you pay less tax upfront on your Indian income. This certificate is useful if your actual tax due is less than what is normally deducted at the source (TDS). 

Benefits of an LDC for NRIs: Having an LDC means less money is taken out of your income as tax. This helps you keep more money now rather than waiting for a tax refund. 

How to Apply for an LDC

1. Gather Documents: You need proof of your earnings and tax statements.
2. Fill Out the Form: Get the form for an LDC from the Income Tax Department’s website.
3. Submit the Form: Send your form and documents to the tax officer who handles TDS.
4. Wait for Approval: The officer will check your details and can issue the LDC. 

Tax Compliance for NRIs

As an NRI, staying on top of your tax responsibilities is crucial. Here’s a simple guide on what you need to do and the deadlines you should not miss:

Important Filings:

1. Income Tax Return (ITR): If you have income in India, like rent from property, salary for services provided, or earnings from investments, you must file an ITR.
2. Deadline: The last day to file your ITR is usually July 31st of each year. Sometimes, the government may extend this deadline.

Consequences of Missing Deadlines:

• Late Fees:  Filling your tax return after the due date can lead to a late fee. This fee depends on how late you file.
• Penalties: Incorrect filings or not filing at all can attract penalties. These might be as simple as fines or as serious as legal action for major offences.
• Tax Notices: If there are any mistakes or missing information in your returns, you might receive a notice from the tax authorities.

Additional Points:

• Interest on Delayed Payment: If you pay your taxes late, you might also need to pay interest on the due amount.
• Financial Restrictions: Not following income tax rules for NRI in India can affect your other financial activities, like buying property or getting loans.

Steps to Stay Complaint:

• Always keep track of the income tax guidelines from the Indian Income Tax Department.
• Consider consulting a tax expert if you are unsure about the rules or if your tax situation is complex. 

Avoiding Double Taxation

Double Taxation Avoidance Agreements (DTAAs) are treaties between two or more countries that help taxpayers avoid being taxed twice on the same income. India has these agreements with many countries, which is great news for NRIs.

How NRIs Can Benefit from DTAA?

1. Check if a DTAA Exists: First, see if India has a DTAA with the country where you live. You can find this information on the Income Tax Department’s website or consult a tax professional. 
2. Understand the Terms: Each DTAA has specific terms and conditions. They usually define which country has the right to tax particular types of income. 
3. Claim the Benefits: When you file your tax returns in India, you can claim exemptions or credits for the taxes you have already paid abroad, reducing your total tax burden. 

How Does NoBroker Assist You with New Rules for NRIs in India?

Understanding the new rules for NRIs in India can be straightforward with NoBroker. We offer legal services to help you manage any challenges you face. Whether you need a power of attorney or other legal assistance, our experts are ready to support you. With NoBroker, you can ensure that all your legal needs in India are met efficiently. Contact us today for help that makes a difference!

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