How is tax calculated for income earned by NRIs?

The taxability of income in India depends on the residential status in India, source of income and place of receipt of income. Residential status is determined on the basis of physical presence of a person in India during a financial year (FY), which includes working days and non-working days and the preceding 10 financial years. For Indian citizens, even if they do not become resident by virtue of physical presence in India, they are not resident by virtue of domicile or residence or absence of liability to pay tax in any other country or territory for any other reason but can become ordinarily resident. Other criteria of similar nature, if source income of India exceeds 1.5 million. The housing situation is dynamic and fresh assessment is required for each financial year.

A person who qualifies as resident and ordinarily resident (ROR) is taxable in India on his worldwide income and is required to report all foreign assets in the India income tax return. Further, to report in respect of each foreign asset the income earned from such foreign asset during the relevant financial year, along with the nature of income and the head of income under which such income is offered to be taxed in the India income tax return Needed.

A person qualifying as non-resident (NR) or resident but not ordinarily resident (RNOR) is taxable on the following: income accruing or arising in India; income deemed to accrue or arise in India; income received or deemed to be received in India; Income accruing or arising outside India, if the income is derived from business or business setup controlled in India (for RNOR).

As you have been outside India for the last four years, it is likely that you may qualify as a non-resident of India, assuming your India income is less than 1,500,000. As a non-resident, salary earned for employment outside India and salary received outside India will not be taxable in India. If salary income for employment outside India is received directly in India, it will be taxable in the country.

Your personal income in India like interest income from banks, dividend income from shares, mutual funds etc., rental income from house property in India will be taxable in India. You have to deposit income tax in four installments (15% by 15th June, 45% by 15th September, 75% by 15th December and 100% by 15th March) or before filing the tax return. Self-Assessment Tax with interest up to 31st July.

Sonu Iyer is the Tax Partner and People Advisory Services Leader at EY India.