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I am an engineer working in Saudi Arabia and have been repatriating my income to India via remittances to my Non-Resident External (NRE) account. How do I report my remittances in the income tax return (ITR)?
—Jaydip Patel
The Indian income tax law does not tax incomes that have been earned by a non-resident outside India, unless they are received directly in India. Once such incomes are received outside India, they cannot be said to be ‘received’ again in India on subsequent remittance to India. Therefore, any inward remittance to the NRE account would not be subject to taxation in India. Accordingly, you are not under any obligation to report the inward remittance in your income tax return.
I am a 45-year-old non-resident Indian (NRI) living in Dubai and have some investments back in India, including fixed deposits and rental properties. What are the current tax regulations for NRIs regarding income earned in India?
—Name withheld on request
Since you have not mentioned the type of fixed deposits that you have opened in India, I will explain the taxation of incomes arising from all three types of deposits that non-residents can open in India. Interest earned on Foreign Currency Non-Resident (FCNR) and Non-Resident External (NRE) deposits is exempt from tax in India whereas interest earned on Non-Resident Ordinary (NRO) deposits is chargeable to tax in India.
The interest earned on NRO deposits would be classified under the head – ‘Income from other sources’ and would be taxable at the respective slab rates irrespective of whether you opt for the old tax regime or the new tax regime.As per certain judicial decisions, interest earned on NRO deposits created with foreign inward remittance could be eligible to be taxed at 20% (plus applicable surcharge and cess) under special provisions that apply to NRIs. If you have opened NRO deposits from inward remittances, you may take professional advice in this regard should you choose to opt for these provisions.
Rent income earned by NRIs from let-out properties is computed and taxed in the same manner as that for a resident. You are allowed deduction for municipal taxes, a standard deduction (equal to 30% of net annual value), and deduction for interest on borrowed capital. Income from house property would be taxable at the respective slab rates again, irrespective of whether you opt for the old tax regime or the new tax regime.
Harshal Bhuta is a partner at chartered accountancy firm P.R. Bhuta & Co.
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Published: 27 May 2024, 05:36 PM IST
