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India NRI Tax

Are you on your way to become a Non-Resident Indian for taxation purposes? Or are you already one? Whatever the case, you need to be aware of taxation laws.

Why are we telling you this? For one, so you don’t end up breaking the law. Second, you don’t end up making bad financial decisions. What we’ve got for you here is a macro view of the scheme of things that apply to you as a NRI.

What laws affect Indian NRI?

Before we jump to the nitty gritty details, let’s take a look at what taxation laws affect you.

The Income Tax 1961: Yes, this mother of all Acts will apply to you too. It deals with assessment and levy of taxation.

The Wealth Tax Act 1957: As the name suggests, this act deals with the ‘wealth tax’, or the tax that is levied on your non-productive wealth.

Finance Act: This Act is the answer to all your queries regarding new rates, laws, etc. which apply for the FY that you are looking out for. It gets passed in the Parliament every year.

Circulars and Notifications: From time to time, the government issues circulars and notifications regarding taxation laws, provisions, reliefs, concessions or revisions.

How will you be taxed if you have income in India?

If you have income in India, the individual or the company responsible for making your payment will be required to deduct Tax Deducted at Source (TDS). In order to get the exact % of TDS deduction, you must refer to the latest Finance Act. Here is a snapshot of TDS rates for certain common income sources from the Finance Act 2011:

  • Investment Income 20%
  • Long Term Capital Gain 10%
  • Short Term Capital Gain 15%
  • Interest received in foreign currency 20%
  • Income earned by way of fees for Technical services 20%
  • Winnings from lotteries, games, etc 30%
  • Winnings from horse races 30%
  • Other income 30%

How will the Wealth Tax affect you?

A wealth tax will be levied on your net non-productive wealth exceeding Rs. 30 lakhs. The rate of levy is 1%. So watch out if you have non-productive assets like a guest house (except a home used for residential or commercial purposes), motor cars (except for ones used in business or as stock-in-trade), jewellery, furniture, aircrafts, boats, cash in excess of Rs. 50,000, etc.

Tip: What you should know about wealth tax is that if you are planning to return to India on a permanent basis, the assets and monies brought by you within an year’s time of your return will not be subject to wealth tax. You’d want to look this up in detail if you are planning a move anytime soon!

This was a snapshot of certain elements of the Indian Taxation system that will affect you as an NRI. So know these laws, be on top of your game and maximize your savings and investments.

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