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Tax in india

What every Non Resident Indian needs to know on their Tax Implications in India

by Holistic Leave a Comment | Filed Under: Tax planning

In income tax parlance, individuals who are permanent residents of India are known as resident individuals. It is the duty of all such citizens to pay taxes on the income that they earn and file income tax return each year.

However, it is the non-residents or those who are not ordinarily resident in India, who have this nagging doubt as to whether they should file income tax returns and avail of tax benefits and tax refunds on their investments in India. It is likely that they are holding a PAN card and are eligible to file tax returns.

Let us take a look at the various aspects of tax related issues for non-residents or not-ordinarily-resident individuals.

Filing Tax Return

If a non-resident in a particular year does not have any income or if the income is below the taxable limit in India, then he or she does not have to file tax return for that year. This information will help such individuals in the form of some relief and ease their worry. It is not mandatory as per the law of the land to file return in such cases.
If such an individual is a PAN holder and if some income accrues to them during the financial year, then they can file return after paying the tax as applicable.
 

Tax Deduction at Source (TDS)

It is quite likely that the non-resident individual receives some income from his or her investments in India, after applicable tax has been deducted at source against the individual’s PAN by the paying authority. In such cases, it is quite possible that the income so received or the total of similar other incomes received, when clubbed together, may not qualify for being taxed. However the paying authority may still have deducted tax at source.

In such situations the non-resident has the option to claim a refund of such tax deducted from the income tax department. The procedure to claim such refund is through the filing of income tax return which will prove that the amount earned by the individual is lower than the limit of taxability in the country.

Benefits available to non-residents

Non-residents would do well to acquaint themselves with the tax laws applicable in the country in that particular year so that they can benefit from the same. It should be heartening to know that the rules applicable for the resident individuals are also extended to their non-resident counterparts. The limit of taxable income remains the same for both categories.

Here is a quick look through the tax slabs applicable for the Financial Year 2021-22:

    i. For individuals below the age of 60 years the tax-free income slab is 2.5 Lakhs.
    ii. For individuals between the age of 60 and 79 years the tax-free income slab is 3.0 Lakhs.
    iii. For individuals between the age of 80 years and above the tax-free income slab is 5.0 Lakhs.

All these tax slabs are applicable for both the resident and non-resident individuals. Accordingly the non-resident individual can claim tax exemptions and refunds based on the same, while filing the tax return.
It is possible that even when the income received by the individual with non-resident status is greater than the basic exemption limit, he or she could still get a refund if the tax deducted at source on the collective investment-returns is greater than the amount of tax liable to be paid.

Conclusion

It is always advisable that individuals with non-resident status apply and get a valid PAN so that they can avail of the tax exemption benefits in the same manner as resident individuals.

 
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