Non-Resident Individual is an individual who is not a resident of India for tax purposes. In order to determine whether an Individual is a Non-Resident or not, his residential status is required to be determined under Section 6 of the Income Tax Act, 1961 as given below:
An individual will be treated as a Resident in India in any previous year if he / she satisfies any of the following conditions:
1. If he / she is in India for a period of 182 days, or more during the previous year or
2. If he / she is in India for a period of 60 days or more during the previous year and 365 days or more during 4 years immediately preceding the previous year.
An individual who does not satisfy both the conditions as mentioned above will be treated as Non-Resident in that previous year.
However, in respect of an Indian citizen and a person of Indian origin who visits India during the year, the period of 60 days as mentioned in (2) above shall be substituted with 182 days. The similar concession is provided to the Indian citizen who leaves India in any previous year as a crew member or for the purpose of employment outside India.
The Finance Act, 2020, w.e.f. Assessment Year 2021-22 has amended the above exception to provide that the period of 60 days as mentioned in (2) above shall be substituted with 120 days, if an Indian citizen or a person of Indian origin whose Total Income, other than Income from Foreign Sources, exceeds ₹ 15 lakh during the previous year.
The Finance Act, 2020 has also introduced new Section 6(1A) which is applicable from Assessment Year 2021-22. It provides that an Indian citizen earning Total Income in excess of ₹15 lakh (other than income from foreign sources) shall be deemed to be Resident in India if he/she is not liable to pay tax in any country.
1. ITR-2 – Applicable for Non-Resident Individual
This return is applicable for Individuals (whether Resident or Non-Resident) and Hindu Undivided Family (HUF) not having income under the head Profits and Gains of Business or Profession, and who is not eligible for filing ITR-1.
2. ITR-3 – Applicable for Non-Resident Individual
This return is applicable for Individuals (whether Resident or Non-Resident) and Hindu Undivided Family (HUF) having Income under the head Profits and Gains of Business or Profession who is not eligible for filing ITR-1, 2 or 4
Forms Applicable for NRIs
1. Form 12BB
Particulars of claims by an employee for deduction of tax (u/s192)
Provided by An Employee to his Employer(s) with Details/Evidence or particulars of HRA, LTC, Deduction of Interest on Borrowed Capital, Tax saving Claims / Deductions for the purpose of calculating Tax to be Deducted at Source (TDS).
2. Form 16
Details of Tax Deducted at Source on Salary (Certificate u/s 203 of the Income Tax Act, 1961) Salary paid, Deductions / Exemptions and Tax Deducted at Source for the purpose of computing tax payable / refundable
3. Form 16A
Certificate u/s 203 of the Income Tax Act, 1961 for tax TDS on Income other than Salary Provided by Deductor to Deductee as a Tax Deducted at Source (TDS) Certificate issued quarterly that captures the amount of TDS, Nature of Payments and the TDS deposited with the Income Tax Department.
4. Form 26AS
Tax Deducted / Collected at Source
(It is available on the Income Tax e-Filing Portal: Login > e-File> Income Tax return > View form 26AS)
5. AIS- Annual Information Statement
Details provided in the form (It can be access in services menu after logging on to Income Tax e-Filing portal) — Tax Deducted / Collected at Source SFT Information Payment of taxes Demand / Refund Other information (Like; Pending/Completed proceedings, GST information, Info received from foreign govt. Etc
Path to Access AIS: Go to e-filing portal>login>Services>AIS
6. Form 10E – Form for furnishing particulars of Income for claiming relief U/S 89(1) when salary is paid in arrears or advance
Provided by Employee to the Income Tax Department
Details provided in the form include Arrears / Advance Salary Gratuity Compensation on Termination Commutation of Pension
7. Form 3CB-3CD
Submitted by Taxpayer who is required to get his accounts audited by an Accountant u/s 44AB
Details provided in the form
Report of Audit of Accounts and Statement of Particulars required to be furnished u/s 44AB of the Income Tax Act, 1961
To be furnished one month before the due date for furnishing the return of income under sub-section (1) of section 139.
8. Form 3CEB
Submitted by a Taxpayer who is required to obtain a report from an Accountant u/s 92E for entering into an international transaction or specified domestic transaction.
To be furnished one month before the due date for furnishing the return of income under sub-section (1) of section 139.
Details provided in the form include Report from an Accountant, relating to international transaction(s) and specified domestic transaction(s).
9. Form 3CE
Submitted by a Taxpayer who is required to obtain a report from an Accountant u/s 44DA for receipt of specified incomes from specified persons.
To be furnished one month before the due date for furnishing the return of income under sub-section (1) of section 139.
Details provided in the form include a Report from an Accountant, relating to receipt of income by way of royalty or fees for technical services from Government or an Indian concern.
Regime Choice for AY 2023-2024
Non-Resident Individuals can opt for the old tax regime or the new tax regime with lower rate of taxation (under Section 115BAC of the Income Tax Act).
The taxpayer opting for concessional rates in the new tax regime will not be allowed certain exemptions and deductions (like 80C, 80D, 80TTB, HRA) available in the existing tax regime.
Note: The rates of surcharge and Health & Education cess are same under both the tax regimes.
Surcharge, Marginal Relief and Health and Education cess
Surcharge is an additional charge levied for persons earning income above the specified limits, it is charged on the amount of Income Tax calculated as per applicable rates.
10% – Taxable Income above ₹ 50 lakh – Up to ₹ 1 crore 15% – Taxable Income above ₹ 1 crore – Up to ₹ 2 crore 25% – Taxable Income above ₹ 2 crore – Up to ₹ 5 crore 37% – Taxable Income above ₹ 5 crore Maximum surcharge on income by way of dividend or income under the provisions of 111A, 112A and 115AD is 15%.
Marginal relief is a relief from surcharge, provided in cases where the surcharge payable exceeds the additional income that makes the person liable for surcharge. The amount payable as surcharge shall not exceed the amount of income earned exceeding ₹ 50 lakh, 1 crore, 2 crore or 5 crore respectively.
Health and Education cess @ 4% shall also be paid on the amount of income tax plus surcharge (if any)
Investments / Payments / Income on which NRIs can get Tax Benefit
Section 24 (b) – Deduction from income from house property on interest paid on housing loan & housing improvement loan. In case of self- occupied property, the upper limit for deduction of interest paid on housing loan is ₹2,00,000. However, this deduction is not available for people opting for the New tax Regime.
Maximum allowable Interest on loan u/s 24(b) is as given below –
Self-occupied
On or after 1st April 1999-Construction or Purchase of House Property-₹2,00,000
On or after 1st April 1999-For Repairs of House Property-₹30,000
Before 1st April 1999 Construction or Purchase of House Property-₹30,000
Before 1st April 1999-For Repairs of House Property-₹30,000
Let-out
Any time-Construction or Purchase of House Property-Actual value without any limit
Tax deductions specified under Chapter VI-A of the Income Tax Act
These deductions will not be available to a taxpayer opting for the new tax regime u/s 115 BAC, except for deduction u/s 80CCD (2) and 80JJAA which will be available under the new tax regime as well:
80C, 80CCC and 80CCD (1)
Deduction towards payments made to:
80C
Life Insurance Premium Equity Linked Tax Saving Scheme (ELSS) Unit Linked Insurance Plan (ULIP) Tuition Fees Housing Loan Principal Other various items
80CCC
Annuity plan of LIC or other Insurer towards Pension Scheme
80CCD (1)
Pension scheme of Central Government
Combined deduction limit of ₹ 1,50,000
80CCD (1B)
Deduction towards payments made to Pension scheme of Central Government, excluding deduction claimed under 80CCD(1)
Deduction Limit of ₹ 50,000
80CCD (2)
Deduction towards contribution made by an employer to the Pension Scheme of Central Government
If employer is a PSU, State Government or Others
Deduction limit of 10% of salary
If employer is Central Government
Deduction limit of 14% of salary
80D
Deduction towards payments made to Health Insurance Premium and Preventive Health check-up
For self / spouse or dependent children
₹ 25,000 (₹ 50,000 if any person is a Senior Citizen)
₹ 5,000 for Preventive Health check-up, included in above limit
For parents
₹ 25,000 (₹50,000 if any person is a Senior Citizen)
₹ 5,000 for Preventive Health check-up, included in above limit
Deduction towards medical expenditure incurred on a Senior Citizen, if no premium is paid on Health Insurance coverage
For self / spouse or dependent children
Deduction limit is ₹ 50,000
For parents
Deduction limit is ₹ 50,000
80E
Deduction towards interest payments made on loan for higher education of self or relative
Total amount paid towards interest on loan taken
80EE
Deduction towards interest payments made on loan taken for Acquisition of Residential House Property where the loan is sanctioned between 1st April 2016 to 31st March 2017
Deduction limit of ₹ 50,000 on the interest paid on loan taken
80EEA
Deduction towards interest payments made on loan taken for Acquisition of Residential House Property for the first time where the loan is sanctioned between 1st April 2019 to 31st March 2022 and deduction should not have been claimed u/s 80EE
Deduction limit of ₹ 1,50,000 on the interest paid on loan taken
80EEB
Deduction towards interest payments made on loan for purchase of Electric Vehicle where the loan is sanctioned between 1st April 2019 to 31st March 2023
Deduction limit of ₹ 1,50,000 on the interest paid on loan taken
80G
Deduction towards donations made to certain funds, charitable institutions, etc.
Donation are eligible for deduction under the below categories:
Without any limit
100% deduction
50% deduction
Subject to qualifying limit
100% deduction or 50% deduction
Note: No deduction shall be allowed under this section in respect of donation made in cash exceeding ₹2,000/-.
80GG
Deduction towards rent paid for house and applicable only for whom HRA is not part of salary.
Least of the following shall be allowed as deduction:
Rent paid reduced by 10% of total income before this deduction ₹ 5,000 per month 25% of total income before this deduction
Note: Form 10BA to be filed for claiming this deduction.
80GGA
Deduction towards donations made for Scientific Research or Rural Development.
Donation are eligible for deduction under the below categories:
Research Association or University, College or other Institution for:
Scientific Research Social Science or Statistical Research
Association or institution for
Rural Development Conservation of Natural Resources or for afforestation
PSU or Local Authority or an association or institution approved by the National Committee for carrying out any eligible project
Funds notified by Central Government for:
Afforestation Rural Development
National Urban Poverty Eradication Fund as setup and notified by Central Government
Note: No deduction shall be allowed under this section in respect of donation made in cash exceeding ₹ 2,000 or if gross total income includes income from Profit / Gains from Business / Profession.
80GGC
Deduction towards Donations made to Political party or Electoral Trust
Deduction of total amount paid through any mode other than cash.
80IA
Undertaking engaged in Developing, Maintaining and Operating any Infrastructure Facility (only Indian Company), Industrial Parks (any Undertaking), any Power Undertaking, Reconstruction or Revival of Power Generating Plants (Indian Company) shall be entitled to claim deduction
(subject to conditions)
100% of profit for 10 consecutives AY falling within a period of 15 / 20 AY beginning with the AY in which Assessee develops / begins operating and maintaining infrastructure facility
No deduction shall be allowed to any enterprise which starts the development or operation and maintenance of the infrastructure facility on or after the 1st April 2017.
(No deduction shall be allowed if development, operation, etc. started after specified dates for specified business)
80IAB
Deduction in respect of Profits and Gains by an Undertaking or an Enterprise engaged in development of Special Economic Zone
(subject to conditions)
100% of profit for 10 consecutives AY out of 15 AY beginning from the year in which a Special Economic Zone has been notified by the Central Government
No deduction to an Assessee, where the development of Special Economic Zone begins on or after 1st April 2017
80IB
Deduction towards Profits and Gains from specified business. 100% of profit for 10 years from the AY in which it is approved by prescribed authority (if approved after 31st March 2000 but before 1st April 2007)
The deduction under this section is available to an Assessee whose gross total income includes any Profits and Gains derived from the business of:
Industrial Undertaking including an SSI in J&K
Commercial Production and Refining of Mineral Oil
Processing, Preservation and Packaging of Fruits or Vegetables, Meat and Meat Products or Poultry or Marine or Dairy Products; Integrated Business of Handling, Storage and Transportation of Food Grains;
(subject to conditions)
Indian Company with scientific and industrial research and development as its main object and approved by prescribed authority shall be entitled to claim deductions
100% / 25% of profit for 5 / 10 / 7 years as per conditions specified for different types of undertakings from the AY in which it is approved by prescribed authority (if approved before 1st April 1999)
80IBA
Profit and Gains derived from Developing and Building Housing Projects
100% of profit subject to various conditions specified
80IC
Deduction in respect of certain Undertakings in Himachal Pradesh, Sikkim, Uttaranchal and North-Eastern states
(subject to conditions)
100% of profits for first 5 AY and 25% (30% for a Company) for next 5 AY to manufacture or produce specified article or thing
80IE
Deduction to certain Undertakings set up in North – Eastern states
(subject to conditions)
100% of profits for 10 AY subject to various conditions specified
80JJA
Deduction in respect of Profits and Gains from Business of Collecting and Processing of Biodegradable Waste
(subject to conditions)
100% of profits for 5 AY where the Gross Total Income of an Assessee includes any Profits and Gains derived from the Business of Collecting and Processing or treating of Biodegradable Waste
80JJAA
Deduction in respect of Employment of New Workers / Employees, applicable to Assessee to whom Section 44AB applies (subject to conditions).
30% of additional employee cost for 3 AY, subject to certain conditions
80TTA
Deduction on interest received on Saving Bank Accounts by Individual (other than Senior Citizen) / HUF.
Deduction limit of ₹ 10,000/-
Conclusion
Non-Resident Individuals (NRIs) navigating the complexities of Income Tax Filing for the Assessment Year 2023-2024 need to be aware of their residential status under Section 6 of the Income Tax Act, 1961. Understanding the applicable forms and returns is crucial.
Additionally, understanding the intricacies of surcharge, marginal relief, and Health & Education cess is crucial for accurate tax planning. NRIs should consider investments that offer tax benefits, such as those under Section 24(b) for interest on housing loans and Chapter VI-A deductions.
In a dynamic tax landscape, NRIs can navigate the intricacies effectively by staying informed and seeking professional advice. The key is to make informed choices that align with their financial objectives and ensure compliance with the prevailing tax regulations.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
