Grow NRI Lecture Notes

Introduction

• Presenter: Caruna
• Topics covered:
  • NRI status determination
  • Taxable income for NRIs
  • Eligible tax exemptions and deductions
  • NRI tax forms
  • Special provisions like DTAA (Double Taxation Avoidance Agreement)

Determining NRI Status

• Residency Status Questions:
  • Were you in India for at least 182 days during the financial year?
  • Were you in India for 60 days in the previous year and 365 days in last 4 years?
• Legal Framework:
  • Income Tax Act 1961
  • FEMA Act

Taxable Income for NRIs

• Types of Income:
  • Earned in India: Income received or gained through efforts or investments in India (salaries, wages, profits).
  • Accrued in India: Income due but not received (interest, rent, dividends).
• House Property:
  • Subject to taxes even if income deposited abroad.
  • 30% deductions on property taxes and home loan interest.
  • Principal repayment can be claimed under Section 80C.
  • Tenant must deduct a TDS of 30%.
• Other Sources:
  • Bank Deposits: Interest from FDs or savings is taxable; NRE or FCNR accounts are tax-free.
  • Business Income: Taxable cash flow from business ventures.
  • Investment Income: 20% tax on specific investments; no filing if TDS is deducted.
• Capital Gains:
  • Long-term (held >24 months) taxed at 20%.
  • Short-term (held <24 months) taxed at 30%.

Tax Forms for NRIs

• ITR2: For most income sources.
• ITR3: For business income.

Tax Saving Strategies

• Exemptions:
  • Interest: NRE/FCNR accounts are tax-free.
  • Government Bonds and Savings Certificates: Offer tax exemption on interest.
  • Capital Gains Exemption: Reinvestment in property/other investments or 54 EC bonds.
• Deductions:
  • Section 80C: Limit of 1.5 lakhs.
    • Life insurance premiums, education fees, home loan principal, ULIPs, ELSS funds.
  • Section 80D: Health insurance premiums (up to 25,000 or 50,000 for senior citizens).
  • Section 80E: Interest on education loans.
  • Section 80G: Donations to eligible charities.
  • Section 80TTA: Savings account interest up to 10,000.

Deductions Excluded for NRIs

• Cannot open new PPF accounts; can maintain existing ones.
• Restrictions on National Savings Certificates, Post Office 5-Year Deposits, Senior Citizen Savings Scheme.

Double Taxation Avoidance Agreement (DTAA)

• Prevents double taxation on income.
• Sets taxation rules between countries.
• Can offer tax credits or exemptions.
• Includes provisions for tax cooperation between countries.

Conclusion

• Understanding NRI status is crucial for determining tax liabilities.
• Various income sources and tax forms applicable.
• Explore exemptions, deductions, and DTAA for tax efficiency.

Disclaimer: Tax laws and rates can change. Consult a certified tax professional before filing taxes.