In case of a resident taxpayer, all income would be taxable in India, irrespective of the fact that income is earned or has accrued to the taxpayer outside India. However, in the case of non-resident Indians (NRIs), all income that accrues or arises outside India would not be taxable in India.
Bank Account Interest
NRI’s use Non-Resident External (NRE) account to transfer foreign earnings to India. Income from interest on balances standing to the credit of NRE Accounts is exempt from tax under Section 10(4)(ii).
However, when a Non-Resident Ordinary (NRO) Account is used to manage the income earned in India, then the interest earned in an NRO account is taxable in the hands of an NRI.
A Foreign Currency Non-Resident (FCNR) account enables an NRI to maintain a fixed deposit in India in freely convertible foreign currencies for one to five years. FCNR deposit accounts offer tax benefits on tax-free interest generated in India. The benefits of an FCNR account include tax-free returns in India and the ability to convert to Indian currency.
If you are a Non-Resident Indian (NRI) gifting assets or money to family members in India, you should be aware of India’s gift tax and restrictions.
Taxation of Gifts
Gifts from family are completely excluded from income tax, regardless of amount. Gifts from maternal and paternal relations, as well as the spouse’s parents and grandparents, are free from gift tax. This includes siblings, children, grandchildren, and other close relatives.
Gifts received on the occasion of marriage are completely tax-free under the gift income tax exemption regulations. In addition, donations received through inheritance or a bequest are free from the gift income tax exemption.
Gifts from non-relatives are tax-free up to Rs 50,000. If the sum exceeds this limit, the entire amount is taxable as ‘income from other sources.’
NRIs are taxed in India on gifts received from non-relatives if the total value crosses Rs 50,000 in a given year, unless excluded under certain circumstances such as marriage, inheritance, or will.
Sale revenues from immovable property can be remitted up to USD 1 million per year; larger amounts require RBI permission. This may be subject to gift tax on Indian property.
Cash gifts over Rs 2 lakh may result in penalties under Indian law.
Agricultural revenue in India is exempt from income tax. However, if an NRI has non-agricultural income, the tax burden is determined using partial integration, which means that agricultural revenue is factored into rate determination. NRIs must disclose agricultural revenues over ₹10 lakh yearly, with suitable documentation.
Any income by way of dividend referred to in section 115-O received by a non-resident is exempt u/s. 10(34). Any income received in respect of the units of a Mutual Fund specified u/s. 10(23D) or from the Administrator of the specified undertaking as defined; or from the specified company is exempt u/s. 10(35).
Any income by way of long-term capital gains on sale of equity shares on a recognised stock exchange or on repurchase of units of equity-oriented funds on which Security Transaction Tax (STT) is paid is exempt u/s. 10(38).