TAX ON NRI NON RESIDENT SPECIAL PROVISIONS

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Impact of residential status on the taxability of income

Resident Income:Worldwide Income Taxable

NOR(not ordinary resident)
  •  Income received in India 
  • Income accruing or arising in India
  • Income deemed to accrue or arise in India
  •  Income from business or profession controlled wholly or partly in India
Not resident(NR)
  • Income received in India
  • Income accruing or arising in India
  • Income deemed to accrue or arise in India
Special provisions relating to NRs
1. Tax exempt incomes for NRs/NRIs
In following cases investment income is exempt from tax for NRs/NRIs :
  • Interest earned by a person resident outside India from non-resident external (NRE) accounts
  • Interest earned by an NR or NOR from foreign currency (non-resident) (FCNR) accounts
  • Interest on notified securities, bonds, annuity certificates and savings certificates issued by the Central Government 
  • Interest on bonds issued by local authorities and notified by the Central Government in the official gazette 
  • Dividends received from Indian companies and from specified mutual funds 
  • Long-term capital gains from the transfer of equity shares in a company or units of an equity oriented fund provided such transaction has been subjected to securities transaction tax.

2. Computation of capital gains in the case of NRs

  • Any income arising from the transfer of a capital asset is chargeable to tax under capital gains in the year of the transfer. Capital gains are specified as either short term or long term depending on the holding period of the capital assets.
  • Short-term capital gains are included in total income and are taxed at the progressive slab tax rate of an individual, except for short-term capital gains resulting from specified securities traded on a recognized stock exchange in India (and on which Securities Transaction Tax is paid), which are taxed at a fixed rate of 15% plus applicable cess. \
  • Gains by an NR on the sale of assets (i.e., shares and debentures of an Indian company) acquired in foreign currency are computed differently.
  • Capital gains are computed by converting the full value of consideration, expenses incurred in connection with the transfer, and the cost of acquisition in the same foreign currency as was initially utilized for purchase. This conversion takes care of exchange-rate fluctuations.
3. Relevant provisions relating to NRIs and PIOs
  • Further, separate tax provisions have been prescribed for NRIs under the act in respect of long-term capital gains (Para A) or investment income (Para B) derived from foreign exchange assets.
  • A foreign exchange asset is a specified asset acquired by an NRI out of convertible foreign exchange.
  • NRIs also enjoy other benefits such as exemption from filing their return of income and the continuation of benefits under the special tax regime discussed in Paragraphs C & D.
Specified assets are:
  • Shares, debentures and deposits of public companies
  • Shares of private companies
  • Securities notified by the Central Government
  • Other notified assets (no such asset has yet been notified).
A. Income from long-term capital gains
Where long term capital gains arise from transfer of specified assets, the applicable tax rate will be 10% (plus applicable cess) on net capital gains.

From gains on such transfers, only expenses incurred in connection with the transfer are allowed as a
deduction to determine net capital gain. The valuation under these provisions is not in foreign currency.
Therefore, exchange-rate fluctuations are not considered.

Capital gains arising on the transfer of specified assets are completely exempt from tax if the following
conditions are fulfilled:
  •  The asset transferred must be long-term capital assets
  • Net consideration must be invested in specified assets
  • Investment should be made within six months of the transfer
  • Where only a portion of net consideration is reinvested, proportionate exemption is allowed
  • New asset must be held for at least three years.
B. Investment income
No deductions are permitted from income earned on investments. However, this income is taxed at a
preferential rate of tax of 20% (plus applicable cess), as against the maximum marginal rate of 30% (plus
applicable cess).

C. Exemption from filing return of income
The due date for filing both income tax and wealth tax returns is 31 July, i.e., within four months of the end
of the fiscal year (31 March).

NRIs have the option of not filing a tax return if:
  • Their total income consists only of investment income and/or long-term capital gains 
  • Tax has been deducted at source on such income.

D. Continuation of special benefits
These provisions shall continue to apply to investment income even after NRIs become resident, provided
they furnish a declaration along with their tax returns.

NRIs may completely opt out of the special provisions mentioned above by filing a written declaration along
with their tax returns.


  • Special benefits relating to global depository receipts (GDRs)
There are special benefits relating to income from GDRs. The provisions apply to:
  • Interest and dividends 
  • Long-term capital gains on bonds or shares issued abroad by Indian companies and purchased inforeign currency.
The tax rate on gross income, plus applicable cess, is 10%. Gross income means that no deduction is
allowed for:
  • Business expenses
  • Expenses on transfer
  • Other expenses
  • Deduction on account of specified payments or income.
Transfers outside India between NRIs, inter se, are not subject to capital gains tax in India.
How to check residential status read here

COMMENTS

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SECURITIES (MNP) (TDS)2007-08 ` 01.07.12 01.09.2008 01.10.2012 06.07.2009 07.08.2012 1 PERCENT EXCISE ITEMS LIST 1 sep 1% excise 10 year nsc 10(10C) 1000 court cases judgements supplied to ITO 1000 rupee note 11-2008 11-2010 130 items 14.08.2008 15 august 150 Rs coin 15g 15h 18-12-2009 192(1A) 192A 194 I 194A 194c from 01.10.2009 194H 194j 194LC 1981-2007 2% cst 2% excise 2004 2008 2008-09 FY 2010 206AA 234A 234B 234C 234c interest calculator 234E 23AC 23ACA 23B 24C 24q annexure II 25 paisa coin 271(1)(c) 271B 271H 272B 27A 280 280 challan 281 282 283 29 AUGUST 29.04.2010. 29/08/2008 29/2008 service tax 2g meaning use 3 idiots 30 MARCH 31st March 32-2010 33 of 2009 35(2AA) 35(2AB) 3CD 3g meaning use 40(b) 43B 44 AB EXEMPTED INCOME 44AA 44AB AGRICULTURE 44AB new limit 44AB NON RESIDENT 44ad 46/2012 45/2012 49C 5 day week 5 years post office deposit 5/2011 50 paisa coin 54b 54EC 54ee 54f 54gb 5th paycommission punjab 6 % excise 6 crore advance limit 6/2005 69/2010 6th cpc 6TH PAY COMMISSION 70% of pan etds 7th Central Pay Commission 8 tips to save tax 80C 80ccc 80CCD 80cce 80CCF 80CCG 80d 80DDB 80EE 80G 80GG 80GGA 80GGB 80ggc 80tta 80U 85% of pan etds 86/2008 DATED 13-08-2008 87A rebate 89(1) 89(1) relief calculator 9.5 % rate for private epf 92E 95% of pan etds 98 dated 04/01/08 aadhaar aakash tablet aam admi aar Aayakar Sampark Kendra abatement abolished ACCOUNT PAYEE DRAFT Accounting ACCOUNTING CODE accounting code for services ACCOUNTING FOR GOVT GRANTS accounting standards ACES ADD IN Add-Ins additional relief in budget 2010 adjustment of advance FBT with advance Tax advance rullings advance salary ADVANCE TAX CALCULATOR advance tax challan ADVANCE TAX CUT OFF AMOUNT ADVANCE TAX DATES AFFIDAVIT AG Projects Technologies Ltd RT age 80 addition pension aibea wage revision aibea wage revision latest news aiboa aiboc aiboc wage revision AIG AIR airline ticket booking tds airlines all is well allowances allownces alphabet of inspiration alteration on check 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DEPRECIATION ON INTANGIBLE ASSETS depreciation rate depreciation rate 2009-10 DETAIL AFTER E FILLING DETAIL OF TIN Determination of value DIFFRENT TYPE OF TAXES digital signature din direct payment in bank account DIRECT SUBSIDY direct tax bill direct tax changes in budget direct tax code direct tax code 2009 Disability insurance discussion Paper distribution of salary dividend distribution tax dividend striping dnd do not call. document identification number document ientification number documents required for service tax registration domestic transfer pricing donation dot double taxation dow jones download download 89(1) relief calculator download direct tax code 2012 download form 16A download fvu download idfc INFRA BONDS FORM draft reply drawback rates dtaa dtc DUE DATE AY 2010-11 due date ay 2011-12 due date extended due date extended to 31.08.2012. due date for service tax return due date form 16 due date form 16a due date June due date march tax due date of return 2008-09 due date pf esi due date to deposit tds DUE DATES DUE DATES CALENDAR DUE DATES CALENDER DUE DATES INCOME TAX DUE DATES SERVICE TAX DUE FAMILY PENSION DULICATE PAN DUPLICATE TAN dvat e book Income Tax rules e book on service tax E ERA OF TAXES e filing do and don'ts e filing of audit report e filing processing status e filing software excel free e filing through evc e filing utilities e mode for notice to shareholder e notice to share holder e payment of epf E PAYMENT OF EXCISE DUTY e payment of income tax E PAYMENT OF SERVICE TAX e payment of tds E STAMP DUTY e tutorial for TAN registration E-1 FORM E-1 SALE e-commerce E-FILE SERVICE TAX RETURN e-Intermediary e-payment from friends account E-PAYMENT OF SERVICE TAX e-payment of taxes E-SEVA BY ICAI e-TDS/TCS statements earn from home earned leave Easy Exit Scheme ebay EBOOK EBOOK ON SERVICE TAX economic survey economic survey 2010 economic survey 2011 economic survey 2012 Edible Oils EDITABLE INCOME TAX FORM education cess EDUCATION LOAN eet EFFECTIVE DATE CST RATE REDUCTION effective date of allowncs efiling errors efiling free efiling income tax return efiling of excise return efiling registration problem Electricity act ELECTRONIC FOREX TRADING Electronic Verification Code (EVC) elegent card on holi ELSS EMANAGEMENT OF TAXES EMI CALCULATOR empanelment as branch auditor EMPLOYEE PROVIDENT FUND employee state insurance employee state insurance act 1948 employee state insurance act Limit employer e sewa eMudhra Consumer Services entries r off in 50 paisa entries rounded off in rs ENTRY TAX entry tax punjab epf epf challan epf claim epf e passbook EPF FAQ epf int rate 11-12 epf interest exemption epf interest rate epf interest rate for fy 2010-11 epf limit epf online EPF ONLINE CHALLAN GENERATION epf statement EPF TRUST epf withdrawals epfo equal monthly installments equity funds ER-1 ER-2 er4 form online error in etds return error in st-3 esi esi contribution esi limit 10000 esi limit 15000 esi limit from 01.05.2010 esi return ESOP ETABF ETAX etcs etds etds correction etds defualts etds due date ETDS FVU 3.1 ETDS PAYMENT ETDS Q4 ANN II etds retur with insufficient pan etds return ETDS RETURN DUE DATES etds return less deduction of tax. 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