Various tax concerns for NRIs in India

August 16, 2018

Are you an NRI who would be willing to invest or has already invested in immovable property in India? Here’s how your income will be taxed.

First of all, before understanding the tax policies, it is important to understand the residential status. For this refer to the section 6 of the Income Tax act, 1961.

After making the investment in immovable property in India, the following provisions will be relevant in understanding the taxability of income earned from such investments.

Under the Double taxation avoidance agreements, the tax credit could be claimed for the taxes paid in India, from the country of residence.

  • Calculating The Capital Returns

India has the right to tax the income arising out of the sale of immovable property which is situated in India.

If the property is held for more than 24 months, than it would become long term capital gain, so the tax rate will be 20%. If the property is held for less than 24 months than the tax will charged as per the tax rate applicable to NRIs for the short term capital gains.

  • Calculating the Rental In-Flow

The rental income of NRIs is also taxed, but there are certain deductions which could be claimed such as municipal taxes, standard deduction of 30% and deduction on interest amount, of the loan taken to acquire or construct the property.

  • Exemptions Available for Capital Returns

There are certain exemptions from capital gains which could be claimed by NRIs under section 54, 54EC , 54F. For claiming deduction under section 54 and 54EC, the investment should be made in House property, out of the income acquired after sale of the property. Under the section 54EC the investment should be made in NHAI and REC bonds. These investments should be made within the prescribed time limit.

  • File Return Laws

If the income of the NRI exceeds the 2,50,000 INR limit, then they need to file a return of income by July 31. If the total income of the NRI is just from the rental income, then they have to file a return even if the income is below 2,50,000 INR. It is not mandatory to file a return for them but it should be done in order to claim refund, if the tax is paid by the tenant to the government.

  • Allowable Deductions

There are certain deductions given under the Income Tax Act, 1961 from section 80C to 80TTA. These deductions can also be claimed by NRIs and reduce their burden of income tax. For example, if an NRI has taken a housing loan, then he can claim deduction on the repayment of the principal amount up to Rs 1,50,000.


From the above given provisions, it can be seen that the Indian tax policies are not that hard for the NRI’s, they are more or less, same as for the residents. Furthermore, they could also claim certain deductions which makes investment a whole more profitable.

Understanding these terms can help NRIs maintain a legally correct status and enjoy the tax benefits that are on offer.

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