The government receives income from tax. For you and I, however, tax is a portion of our hard-earned income. Many people look for tax-saving strategies to save money. This is a fact that non-residents don’t have to be ignored. They like to keep their hard-earned cash, which is then channelized to the tax authorities of the resident country.
These are some great investment tips for NRIs. These tips can be used by expats to save tax and increase their existing income.
What income is taxable to NRIs?
- Non-residents whose income exceeds the exemption limit of INR 1 lakh per financial year will be subject to tax.
- Taxable income earned by a non-resident in India and India is what he or she earns. This can include the income earned in India from a salary, rental income, interest on savings accounts or fixed deposits, as well as capital gains after the sale of Indian property.
- Non-residents who move to India as a permanent residence would not be eligible for tax payment. However, income earned from India would be subject to tax once the resident status is reestablished. This takes approximately two years. The tax would not be applied after those two years. However, if he/she is a native Indian again, then his/her global income will be taxed.
- It would not be taxable if he/she earned it from abroad.
- The Ordinary Resident Indian (NRI) must find all sources of income and assets within India and abroad when he/she becomes Ordinary Resident Indian. If the rule is broken by hiding them, the person will be subject to severe penalties under the Undisclosed Foreign Income & Assets Bill 2015. The tax would then be levied against the undisclosed asset or unaccounted money.
Tips to determine which bank account is tax-savings for NRIs:
The options for non-residents to deposit their money are three. They can be categorized by their name or function. The expat should be able to clearly see which account is for what purpose.
It’s better not to turn your back on the bank account you choose, but to keep these points in your mind.
- Source of the fund for deposit
- Region/Country of Source and Repatriated Funds
- Deposit funds in a preferred country
- Any plan for repatriation in foreign currency of funds
- India Taxation Procedure
Brainstorm the points above. Next, align your needs and select the consistent account option from the below options.
1. NRE (Non-Resident External):
- They can save funds in Indian currency (INR) with this account type. They can make a deposit in any currency. The funds are convertible.
- Keep in mind, however, that currency conversions would take place at the rate that is prevalent during deposition.
- It would not allow income from India to be deposited there.
- It would not be taxable.
- Both the principal and interest amount are non-taxable and not-repatriable.
Repatriation is the ability to send money back to your country.
- NRIs may open this account separately.
2. NRO (Non-Resident Ordinary):
- The account allows expats to deposit both INR and foreign currency.
- If you wish to repatriate Indian and foreign currency, they can choose this account. This means that they can send money to both their foreign and native bank accounts.
- India would tax the interest on deposits.
- Repatriation is only possible if the deposit is more than $1 million
- You can open the account together.
3. FCNR (Foreign Currency Non Resident):
- This account is the best option for NRI investors because it allows them to save in foreign currency. This would allow the individual to eliminate the loss caused by conversion of foreign currencies at the current rate.
- It will not allow the expat to deposit Indian currency or INR.
- You can open it together, but the account-sharer must be an NRI.
- It is exempted from taxability.
Tips to Get Rid of Tax on Investment in India
- If the non-resident doesn’t have a PAN card, he/she may provide alternative documents as per the revised NRIs taxation policy in Income Tax Act (ITA). Afterwards, the tax would be deducted at the source’s rate.
- It is unfair to tax foreign income earned in India and abroad. Eliminate dual tax. Submit the ‘Residency certificate’ which would be forwarded to the income tax department in the residence country. It is issued at the time the bank account was opened in the residence country. Imagine that I was in the US and opened a bank account at the US bank. The bank authority would issue the residence certificate. The bank authority would issue the residency certificate. These credits will be refunded in the tax bill later.
How do NRIs save tax and invest?
- Invest in mutual funds. It is one of the most popular NRI services for Indian expats.
- Avoid withdrawing mutual fund investments within one year to credit more capital gains
- In a financial year, you should not spend more than INR 100,000 Do not exceed INR 100,000 in a financial year. You will be subject to a high tax.
- Direct investment is better than stocks. This investment is well worth paying high tax.
- To get rid of taxes, invest in equity funds growth schemes
