An individual who as per the Income Tax Laws qualifies to be a Non-Resident Indian or NRI is taxed for the income earned or received in India.
Tax implication on NRIs for the different income earned/ received in India
1. Rental Income: Any income earned as rent in India attracts Tax in India. The country of residence of the NRI may also tax this income. However if India has DTAA (Double Taxation Avoidance Agreement) with your resident country then in this case. For instance, if you happen to be a UK citizen who also qualifies as a Non Resident Indian (NRI), then there exists a DTTA agreement between India and the UK and as per its provisions for tax paid in India you are entitled to make claim for foreign tax credit against your tax liability in your country of residence.
2. Income realized from sale proceeds of a property in India: Any income realized from selling a property held in India attracts tax implications in the year of sale.
Point to note: With effect from April 1, 21017, any immovable property that is held by its owner for over 24 months qualifies to be a long-term capital asset ( earlier this period was 3 years or 36 months ) and on it long term capital gains or LTCG tax is charged.
Computation of LTCG= Sale proceeds of the property- Cost of acquisition adjusted for indexation - any cost incurred on property transfer or renovation Such computed Long term capital gains are taxed @ 20% any surcharge if applicable plus educational cess. Surcharge however is charged basis the total income on which tax is to be determined.
LTCG tax payable as per the provisions of the Income Tax is allowed exemption to the extent it is invested in Government of India floated bonds or in case a residential property is purchased from the same amount within a period of 2 years or constructed in 3 years time from the date of transfer of title. In case when the LTCG are not invested to realize exemption benefit, amount can be deposited in the Capital Gains Account Scheme with the bank. If the entire amount is not deposited, LTCG tax is chargeable on the entire amount.
How you can pay-off capital gains tax?
Two options are available to a person who needs to clear his Capital Gains Tax liability 1. Capital Gains Tax can be paid as an advance tax in four installments. 2. As a self-assessment tax with interest before filing of tax return in India by 31st July. In case when the property had been in your ( an NRI individual) possession for less than a period of two years, Short term capital gains is computed as the difference between the amount of sale proceeds less cost of acquisition. For STCG, indexation benefit is not available. And STCG tax is charged depending on the applicable slab rate.
3. Pension Income: If you as a foreign national who happens to be a NRI receive pension from the Government of India for your rendered services, then such pension amount is taxable in India. However, you can claim the same to be exempt when filing your income return in your country of residence depending on the provisions laid down.