• Stay in India for 182 days or more in a Financial Year.
• Stay in India for 60 days or more in a Financial Year and 365 days or more in the four years preceding that Financial Year.

If these conditions are not met, you will be classified as a Non-Resident (NR) for tax purposes. However, you can still be deemed a resident if:

• You are not liable to pay taxes in any other country for specified reasons.
• Your income sourced in India exceeds ₹15 lakh in that Financial Year.

How is Resident Status Classified for NRIs?

Residents are classified into:

• Ordinarily Resident (OR)
• Not Ordinarily Resident (NOR)

You are classified as NOR if you meet any of these criteria:

• Deemed resident.
• Non-resident for at least nine out of the ten preceding Financial Years.
• Stayed in India for less than 730 days in the seven years preceding the current one.
• Indian citizens or Persons of Indian Origin (PIO) coming to India for more than 120 days but less than 182 days with income sourced in India exceeding ₹15 lakh.

If none of these NOR criteria are met, you will be classified as an OR.

What Types of Income are Taxable for NRIs in India?

1. Income Earned and Accrued in India:

• Dividends from Indian companies.
• Rental income from property in India.
• Capital gains from Indian investments.

2. Income Earned Abroad but Received in India:

• Dividends from foreign companies.
• Rental income from overseas property.
• Capital gains from foreign investments.

What Types of Income are Non-Taxable for NRIs in India?

Income earned, accrued, and received entirely outside India, such as:

• Dividends deposited in a foreign bank account.
• Rental income kept in a foreign bank account.
• Capital gains from foreign investments deposited outside India.

What are the Tax Regimes and Rates for NRIs in India?

India operates two tax regimes:

• Old Tax Regime: The primary income threshold for taxation is ₹2.5 lakh.
• New Tax Regime: The primary income threshold for taxation is ₹3 lakh and is the default regime.

Which Tax Regime is Better for NRIs?

Choosing between the old and new tax regimes depends on your financial situation and the nature of your income. Here are some key considerations:

Old Tax Regime:

• Allows various deductions and exemptions.
• Suitable if you have significant deductions under Section 80C, 80D, etc.

New Tax Regime:

• Offers lower tax rates with no deductions or exemptions.
• Simpler and might be beneficial if you do not have substantial deductions.

What are the Special Provisions and Agreements for NRIs?

India has Double Taxation Avoidance Agreements (DTAA) with over 90 countries, preventing NRIs from being taxed twice. NRIs should check if their resident country has a DTAA with India to benefit from exemptions or lower tax rates.

Are There Surcharge and Cess Rates for NRIs?

Yes, a surcharge is imposed on the base income tax when taxable income exceeds ₹50 lakh. The rates vary based on income level and nature of income.

Additionally, a health and education cess of 4% is levied on the total of the base income tax and surcharge, applicable to all income levels in both regimes.

What are the Special Tax Provisions for NRIs?

Certain incomes are taxed at special rates:

• Long-term capital gains on listed shares, equity mutual funds, and specified securities: 10%
• Long-term capital gains on unlisted shares and other securities: 20%
• Short-term capital gains on listed shares and equity mutual funds: 15%
• Income from investments: 20%

Are NRIs Required to Make Advance Tax Payments?

Yes, NRIs must pay advance tax if their estimated income, after TDS, exceeds ₹10,000 in a financial year.

What are the Advance Tax Due Dates and Penalties?

Advance tax is payable in instalments. Failure to pay or shortfall results in a 1% interest charge per month. For the first three instalments, interest is calculated for three months each, while for the fourth instalment, it is for one month. Post-March 31 defaults incur an additional 1% interest per month until payment completion, with subsequent taxes to be paid as self-assessment before filing returns.

Conclusion

Deciding which tax regime is better for NRIs involves evaluating your income sources, potential deductions, and the simplicity you prefer in tax filing. The old regime might be more suitable if you have substantial deductions, while the new regime offers lower rates with fewer complexities. As the ITR filing deadline approaches, make sure to review your options carefully to optimize your tax obligations in India.