Taxation of NRI

19 Oct 2022

Taxation of NRI

  1. This special provision for NRI is OPTIONAL, i.e.  the NRI can chose to pay tax at normal rate applicable or at special rates.

  1. NRI means a non resident who is an Indian citizen or Person of India Origin.

  1. Person of Indian origin means the person or either of his parents or grandparents was born in undivided India.

  1. Taxation of Invest income or Long term Capital Gain (LTCG) on foreign exchange(FOREX) asset:

  1. Following assets shall be treated as FOREX asset:

i) Shares of Indian Company

ii) Debenture of Indian Public company

iii) Deposits with an Indian Public company

iv) securities of Central government

v) Any other asset notified by the Central Govt.

  1. Rate of tax

i) On LTCG-10%

ii) On investment income-20%

  1. Exemption on LTCG on FOREX

  1. LTCG shall be exempt if net consideration is utilized for acquisition of other FOREX Asset or Saving Certificate within 6 month from the date of transfer

  2. Amount of exemption

=    LTCG x Cost of Acquisition of new Asset     

      Net consideration on sale of FOREX Asset

  1. While calculating Capital gain indexation of cost of acquision is not allowed.

  2. Deduction under chapter VI-A (i.e. from section 80C to 80U is not allowed against the LTCG

  3. A NRI is not require to file ITR if the person has only Invest income or Long term Capital Gain (LTCG) on foreign exchange(FOREX) asset and TDS already being deducted on such income.

  1. Any other income of An NRI shall be taxable normal tax rate.

  1. Above provisions apply even after NRI becomes Resident. For this the person need to file a declaration with Income tax return for Assessment year in which the person becomes Resident.

Manojit Das