Whether your income is taxable in India depends on your residential status in the country. If you are a “resident”, your global income is taxable in India. If your status is that of an “NRI”, only the income accrued or earned within India is taxable.
Let us look at the various incomes that are considered taxable in India.
1. Income from your Salary
If you or someone on your behalf receive a salary within India, it is subject to Indian Income Tax. Salary credited to your Indian account is taxable by the Indian Tax Laws. The tax deducted is as per the current tax slabs. Although you are an NRI, because you render services within the country, your salary arises within India. Again, e.g., your employer is the Government of India, and you are a citizen of the country, any services rendered beyond the country is also taxed in India. However, Ambassadors and Diplomats are exempt from Indian Tax.
Insight: Arpit was deputed in China on a project from an Indian-based firm. He required his salary to cater to a humongous home loan and medical expenses of his parents. Since the salary was liable to be taxed in India, according to Income Tax regulations, he preferred receiving it in China.
2. Income from your property
If you hold or own a property in India, it is taxable by Indian Income Tax Law. Be it on rent or vacant, all properties are taxed as per the property tax calculations of a resident. However, you are also entitled to certain benefits as listed below:
Insight: Lorena owns a property in Goa. She has rented the property because she lives abroad in Bangkok. Lorena received the payment of rent in her bank account in Bangkok. However, because her house is in India she will still have to pay property tax within India.
3. Payment of Rent to NRI
If your tenant in India is paying a rent, s/he must remember to deduct a 30% TDS. You can receive this payment at your bank account in India or in your country of residence. Your tenant must submit Form 15CA online. In certain cases, a certificate from a CA in Form 15CB must be accompanied by Form 15CA. The CA certifies the following:
DTAA if applicable
Other details of payment
Your tenant does not need the additional 15CB if:
The payment does not exceed a single transaction of Rs. 50,000 and/or a total of Rs. 2, 50,000 in a financial year.
Lower TDS must be deducted by order of AO or certificate received under Section 197
Transaction falls under Rule 37BB
Insight: Sabaa pays Rs. 30,000 to an NRI property owner. She must deduct Rs. 9,000 (30% TDS) before making the payment. Sabaa must get Form 15CA prepared and submitted online to the IT department.
4. Income from other sources
Income such as interests from savings accounts and FD’s held in India are taxable in India. Although FCNR and NRE accounts are tax-free, interests on NRO account is taxable.
5.Income from Profession or Business
If you have any income from a profession or business set up and controlled in India, your earnings are taxable.
6.Income from Capital Gain
Any earnings from the transfer of capital asset present in India is taxable in the country. Again, Capital gains on shares, securities, or investments in India, are also taxable in India.
If you sell a property leading to long-term capital gain, the buyer will deduct a 20% TDS. Nevertheless, you can claim capital gains exemptions if you invest in a house (Section 54), or in bonds (Section 54EC)
Read more Income Tax rules for NRIs