What is the taxation procedure for NRI?

The taxation process for NRIs (Non-Resident Indians) may seem complicated, but it can be simplified into a few essential steps:

1. Determine Residential Status: Your tax liability depends on the time you spend in India. If you stay for 182 days or more in a year, you're considered a resident and taxed on global income. Otherwise, you’re taxed only on income earned in India.

2. Filing Income Tax Returns: NRIs must file returns if their income exceeds the basic exemption limit. The specific form required depends on the type of income you earn, so ensure you use the correct one.

3. Tax Rates: NRIs are generally taxed at the same rates as residents. However, they benefit from Double Taxation Avoidance Agreements (DTAAs), which prevent them from being taxed twice on the same income—once in India and once in their country of residence.

4. Exemptions and Deductions: NRIs can claim exemptions and deductions under the Income Tax Act. For example, Section 80C offers deductions for investments like PPF or LIC, and Section 80D allows deductions for health insurance premiums.

Example 1 : If an NRI earns ₹10 lakhs from investments in India and invests ₹1.5 lakhs in tax-saving schemes, they can reduce their taxable income to ₹8.5 lakhs by claiming deductions under Section 80C.

Example 2 : An NRI working in the US who receives rental income from a property in India must file a return in India and pay taxes on that income.

NRIs should stay on top of their tax status and file returns correctly. It’s always helpful to consult a tax expert to navigate international tax laws.

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