Income tax rules for NRIs under new regime in India are a frequent search topic for Indians working abroad, overseas citizens of India, and foreign nationals with income from India. This post explains key income tax rules for NRIs under new regime in India, focusing on residential status, taxable income, TDS and compliance.
Who is an NRI under income tax rules for NRIs under new regime in India
The term NRI for tax purposes is linked to residential status and not just citizenship or FEMA status. Under income tax rules for NRIs under new regime in India, an individual is treated as non resident for a financial year if they do not satisfy the tests for being resident in India under the new income tax act.
Important points are:
- Day wise presence in India during the financial year.
- Cumulative stay in India across a block of previous years.
- Special relaxations or tighter rules for Indian citizens and persons of Indian origin.
Because the tests may change under the new regime, always refer to the latest bare act provisions before concluding your NRI status.
What income is taxable for NRIs
Income tax rules for NRIs under new regime in India generally tax NRIs on income that:
- Is received or deemed to be received in India.
- Accrues or arises or is deemed to accrue or arise in India.
Common examples are:
- Rental income from property in India.
- Capital gains on sale of shares, securities and property in India.
- Interest on NRO bank accounts and certain deposits.
- Salary for services rendered in India or for employment exercised in India.
Usually, foreign income that has no link with India is not taxable in India for NRIs, but double tax avoidance agreements may still need to be examined.
TDS obligations and lower deduction certificates
For most payments to NRIs, income tax rules for NRIs under new regime in India require higher TDS rates than for residents. Payers should:
- Verify residential status and obtain updated overseas address and tax identification numbers.
- Deduct TDS at the rate prescribed for NRI payments such as on property sale or interest.
- Collect necessary declarations and documents where a lower rate or treaty benefit is claimed.
NRIs who expect their final tax liability to be lower than standard TDS may apply for a lower or nil deduction certificate from the assessing officer. This is especially useful in cases of large property sales or redemption of investments.
Using tax treaties and foreign tax credit
Many NRIs are tax residents in countries that have a double tax avoidance agreement with India. Under income tax rules for NRIs under new regime in India, a treaty can:
- Reduce the tax rate on certain types of income such as interest, dividends and royalties.
- Allocate taxing rights between India and the country of residence.
- Provide methods to claim foreign tax credit.
To claim treaty benefits, NRIs must usually obtain a tax residency certificate and meet limitation of benefits conditions. Records of tax paid abroad and related documents should be preserved carefully.
Compliance steps for NRIs
Key compliance requirements under income tax rules for NRIs under new regime in India include:
1. Obtaining PAN if you have taxable income or specified transactions in India.
2. Filing income tax return if income exceeds the basic exemption limit or where filing is otherwise mandatory.
3. Disclosing foreign assets and bank accounts in the return where required for certain residents.
4. Maintaining bank accounts correctly, with separate NRE, NRO and resident accounts.
5. Updating KYC for investments and bank accounts when residential status changes.
Missing these steps can delay refunds and trigger notices.
Official resources and practical help
To stay updated on income tax rules for NRIs under new regime in India, you should regularly check:
- Income Tax Department e filing portal for NRI specific FAQs and help documents.
- CBDT circulars on NRI taxation, residential status and treaty relief.
- RBI and FEMA related guidelines on bank accounts and remittances.
FastLegal can assist NRIs with residential status review, return filing and responses to notices under the new income tax law.
Related: Residential status and global income for NRIs under new income tax law (link: /blog/residential-status-global-income-nri)
Related: Tax implications of selling property in India for NRIs (link: /blog/nri-selling-property-india-tax)
Related: NRE vs NRO vs resident bank accounts tax treatment (link: /blog/nre-vs-nro-vs-resident-account-tax)
