Income Tax for NRI – Taxable income, Exemptions and Deduction FY 2021-22

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India has one of the largest diasporas, with more than 18 million people living in foreign countries. Many of the NRIs living overseas have income sources in India. Like resident Indians, such NRIs are also required to pay income tax in India.

Also, NRIs are entitled to enjoy certain tax deductions and exemptions. Here are some of the most important things you must know about the tax slabs, exemptions, and deductions for NRIs in FY 2021-22.

1. What are the NRI Income Tax Slabs for FY 2021-22?

The NRI tax slabs for FY 2021-22 are as follows:

Income Tax Slabs Tax Rate
Up to Rs. 2.5 lakhs Nil
Rs 2.5 lakhs to Rs 5 lakhs 5%
Rs. 5 lakhs to Rs. 7.5 lakhs 5%
Rs. 7.5 lakhs to Rs. 10 lakhs 15%
Rs. 10 lakhs to Rs. 12.5 lakhs 20%
Rs. 12.5 lakhs to Rs. 15 lakhs 25%
Rs. 15 lakhs and above 30%

For resident Indians, the tax slabs vary for individuals based on their group. However, no such rules apply to NRIs. The same tax rates apply to NRIs of all age groups. Whether an NRI is 30, 65, or 85 years old, the same tax rate applies to all. Health and education cess @4% of the income tax is also applicable.

1. What is Income Tax Surcharge for NRIs?

Like resident Indian taxpayers, NRIs are also subject to tax surcharge if their Indian income for the financial year is above Rs. 50 lakhs. The surcharge is divided into slabs based on the income level.

Income Surcharge Rate
Above Rs. 50 lakhs 10% of the income tax
Above Rs. 1 crore 15% of the income tax
Above Rs. 2 crore 25% of the income tax
Above Rs. 5 crore 37% of the income tax

3. What are the Tax Deductions and Exemptions available for NRIs?

Here are some of the tax deductions NRIs can take advantage of for reducing their tax liabilities in India.

  • Section 80C: Investments in ELSS, 5-year FD, EPF, ULIPs, premium payment of life insurance, principal repayment of home loan, etc.
  • Section 80D: Deduction of up to Rs. 25,000 on health insurance premium.
  • Section 80E: Deduction on interest paid on education loan with no upper limit.
  • Section 80TTA: Interest income of up to Rs. 10,000.

4. What is Taxable Income for NRIs?

Here are various NRI incomes that come under the purview of the tax laws in India:

  • Salary
  • House property
  • Rental payments
  • Interest income from FD and savings accounts
  • Capital gains

5. Should NRIs File Tax Returns?

Any individual with an income of above Rs. 2.5 lakhs should mandatorily file tax returns. The rule applies to resident and non-resident Indians. NRIs should complete their income tax filing process before 31st July every year unless the government extends it.

Also, if the tax liability of any NRI exceeds Rs. 10,000 in a financial year, it is mandatory for them to pay advance tax. Interest penalty under Section 234B and 234C is applicable otherwise.

Higher Tax Savings with Smart Investing

Insurance providers in India offer an extensive range of products, like health insurance, life insurance, retirement plans, etc., eligible for tax deductions under different sections of the IT Act. NRIs can invest in such products to save taxes and build a financially secure future.

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