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Income-Tax-Exemption-for-NRIs

Income Tax Exemptions for NRIs

Income Tax Exemptions for NRIs

Income Tax Exemptions for NRIs were introduced by the Government in the Income Tax Act, to provide benefits for overseas citizens of India. The Income Tax allows non-resident taxpayers to avail of various benefits, by ensuring the availability of exemptions on incomes earned by them. Non-Residents are a class among the various divisions of taxable persons under Income Tax in India. In this article, we look at the income tax exemption, tax treatment and other aspects relating to income tax assessments of NRIs in India.

Meaning of NRI for Income Tax Purposes

Section 115C of the Income Tax Act, 1961, defines a non-resident Indian as an individual who is a citizen of India or a person of Indian origin who is not a resident. A person shall be deemed to be of Indian origin if that person or either of that person’s parents or grandparents, were born in undivided India. The following are different categories of NRIs in India:

  • Indian citizens who reside abroad for an unspecified period of time, the purpose of which could be employment, the pursuit of running a business abroad and so on.
  • Indian citizens working abroad on assignment with foreign Government agencies like the United Nations Organization, World Bank and so on.
  • Officials of any Government bodies in India deputed abroad for the purpose of any assignment.

Taxability of NRIs

An assessee who is a non-resident in India is liable to pay tax on the following incomes:

  • Incomes received or deemed to be received in India.
  • Incomes which accrue or arise in India or are deemed to accrue or arise in India.

Income Tax Exemptions for NRIs

The following incomes are exempt from income tax for NRIs:

  • Interest on notified securities or bonds held by a non-resident including income attained through the redemption of such bonds or interest on a non-resident account in any Indian bank, in compliance with the specified rules, in case of an individual.
  • Interest on notified Savings Certificate issued before 1/6/2002 which was purchased in convertible foreign exchange and held by a non-resident who is either an Indian citizen or a person of Indian origin.
  •  Tax payable on royalty or fees for technical services on behalf of a foreign company in pursuance of an agreement entered into before.
  • Tax payable for technical services on behalf of the non-registered person, by the Government or an Indian Concern, on income except for salary, royalty or fee for technical services.
  • Tax payable on income from the leasing of aircraft or the likes of it, based on an agreement or contract entered into after 31/3/1997, but before 1/4/1999, or otherwise, an agreement dated after 31/3/2007 would suffice.
  • Income obtained from foreign companies for rendering technical services in projects related to the security of India.
  • Remuneration or fee received by not-ordinarily resident consultant’s, for providing technical services in India under an approved program.  The income here includes remuneration of their employees and income of their family members which accrue or arise outside India.
  • Interest to foreign banks on any deposits which are approved by the Reserve Bank of India. This provision is specifically for deposits made to a scheduled bank.
  • Interest payable by Government, financial institution, etc. on money borrowed or loans taken from a foreign source.
  • Payments made by the Indian Government to acquire an aircraft on lease from foreign Government or enterprise under an agreement entered into before 1/4/2007.

Taxability of NRI Artists and Performers

Many NRIs are involved in the entertainment industry in India and have achieved tremendous success as artists and performers. Let us now understand the implications of income tax on NRI artists and performers:

  • If an artist performs in India without any consideration, there would be no income and hence no implications of tax.
  • Performances on live-shows and the likes of it are taxable based on the income received.
  • A few notable exemptions are ‘considerations paid to the artist to acquire the copyrights of performance in India for future sales in the country, or the consideration paid to the artist for acquiring the rights for broadcast and telecast overseas’.
  • Endorsement fees for launch or promotion of products are taxable.

To know about the GST changes in the budget 2020, click here.

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