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Income Tax for NRI in India

Incometax

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June 13, 2018

Income tax NRI

The NRIs (Non-Resident Indians) are confused when it comes to taxation issues especially related to rented income, a sale of real estate and other investments etc. Here is a complete guide to explain about tax implication for NRIs.

One of my friends has recently moved to Canada. He has income from property in India. Apart from that, he has income from other sources in India. He wants to know about the applicability of income tax for NRI. He is also confused about filing Income tax return. So, in this post, let’s try to address common tax related queries asked by NRI.

Who is considered as NRI?

Residential rule for NRI is changed in Budget 2020.

An individual or manager of HUF who is non-resident in India in 7 out of 10 preceding years will be regarded as “not ordinary resident” in India.

NRI who is a citizen of India if visiting India for more than 120 days in a year will lose his non-residential status (earlier this limit was of 182 days). In the simple words if Indian national wants to claim NRI status he cannot stay in India above 120 days. (4 months). This means you need to stay minimum 245 days abroad for claiming your NRI status.

For residential status only above condition is added, remaining conditions remain same.

In addition to above condition, if person is not staying in India for greater than 60 days in the financial year or 365 in preceding four financial year status can be claimed as NRI.

If these conditions do not get satisfied residential status will be ordinary Resident. The flow chart of explaining NRI status is given below.

NRI Status India

Also Read – RNOR Status NRI can save Tax up to 3 Years

Income Tax for NRI – Taxable Income of an NRI

Your resident status will decide your income tax liability in India. If your status is ‘resident’ your global income is taxable in India. If your status is ‘NRI’ your income earned in India is taxable in India.

Following incomes are taxable for NRI –

Income from Salary

If you are NRI and you receive a salary in India or someone receives it on your behalf, you are liable to pay income tax on such salary. This means if you render service outside India and accept a salary in India, you need to pay income tax on salary income.

E.g Mr.Suresh Works in IT firm. IT firms take a project in Dubai and depute Mr.Suresh for project work. Mr.Suresh opt to take a salary at India. Mr.Suresh is liable to pay tax on salary income.

Rental Income

The most common source of income of NRI is rental income. Most of NRI rent out their properties and receive monthly rental income. Any income arising from rental property for NRI is taxable in India. This income is taxed as per income tax slab rates.

A tenant who pays rent to an NRI needs to deduct TDS at 30%. A tenant needs to prepare 15CA and submit it online to the income tax department. This is irrespective of payment is made in bank account located in India or at abroad.

Income from Other Sources

Income from any other sources in India is taxable for NRI. Few examples of other sources include interest income earned on NRO bank account, fixed deposit etc. The interest earned on NRE or FCNR account is not taxable.

In short as an NRI you need to sum up all income originated in India or received in India. If your total income in India is crossing income tax threshold limit you need to pay Income tax.

Also Read – To do list for NRI before leaving India

Income from Business and Profession

NRI is also liable to pay tax on any income arising due to business and profession in India. This means if you have business setup in India or controlled in India you are liable to pay tax.

Long term Short term capital Gain – Income from Capital Gain

NRI is also liable to pay long-term capital gain tax and short-term capital gain tax. This means any capital gain arising due to a transfer of capital asset which is situated in India shall be taxable in India. However, the certain special tax treatment is offered for specific investments. The tax rate applicable on such investment is 20% provided NRI has no other income except special investment during the financial year. The special investment includes following investment type.

Shares in Indian companies
Debentures issued by a public-listed Indian company
Deposits with a bank and public companies
Central government securities

Deduction for such investment is not considered under 80C for NRI. However, in case of long-term capital gain, one can avail an exemption on the profit under section 115F.

Deduction and Exemptions Applicable to NRI

After looking at a taxable income of NRI, let’s take a look at deduction and exemptions applicable to NRI.

Most of the deductions under 80 C are allowed to NRI. Some examples are insurance premium, children tuition fees, principal repayment for a home loan, ULIP investment and Investment in ELSS.
NRI is also allowed to claim deduction under 80D for a premium paid for health insurance policy.
NRI can claim a deduction for the interest payment on education loan. The loan may be for the higher education of NRI or for spouse and children.
Another deduction which is allowed to NRI is under section 80G which is for the donation made under a social cause.
NRI can also take benefit of 80 TTA. It is towards interest income on saving bank account. The maximum limit is Rs.10000.

Also Read – Top 5 Best Investment Options for NRI in India

When NRI is required to file Income Tax Return?

One of the most frequently asked question by NRI is – Do I need to file Income tax return? Well, NRI needs to file Income Tax Return under following conditions –

If Total Income is crossing taxable limit during a financial year. This means as per current rule if total income of NRI in India is above 2.5 Lakh, one need to file Income tax return.
If TDS is deducted from your Income and you are looking for refund as your income is below taxable limit.
If you have Short term Capital Gain (STCG) or Long term Capital Gain(LTCG) from sale of assets or investments in India even if your income is below basic exemption limit.
Suppose you want to carry forward and set off any losses against gains.
If you want to claim tax benefit under tax treaty even though your income in India is below threshold limit.

How to Download Aadhaar Update History from UIDAI website?

Information

Shitanshu Kapadia

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June 7, 2018

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You can now easily access Aadhaar Update History for download. UIDAI has introduced a new feature for downloading Aadhaar update details. At times, we modify our Aadhaar information such as address, mobile number, or other demographic data. To view the alterations made on your Aadhaar card, you can obtain Aadhaar Update history from the UIDAI site.

The Aadhaar Update history is helpful in many ways. Firstly when you apply for various services such as passport, visa and other sundry jobs you can use this facility to ascertain residence history for the past few years. Secondly, it also helps you to verify that if any unauthorized update has taken place or if someone has wrongly updated your Aadhaar.

It will also give you residence proof along with history. Suppose currently you are staying in Surat and after a few years you moved to Mumbai. You have an updated card with a Mumbai address, then with the help of downloading the Aadhaar update history, you can give proof that you were earlier living in another city.

Apart from this, if you have changed your name due to any specific reason you will be able to get proof online in update history.

This is a very good step to empower people. It will also eliminate a need for maintaining a physical copy of address proof. You can download history anytime online and use it for various services.

The update history shows date-wise update details made in address, name, and other demographic details. You can even see the addition and deletion of mobile or email. Here is step by step process to download the Aadhaar Update History from the UIDAI website.

How to Download Aadhaar Update History from UIDAI website?

Step 1

Visit UIDAI portal on the home page you will find the language selection. On selection of language you would be redirected to the page. In the top menu, you will find a link called “Aadhaar Update History”. Click on this link to download the history.

Step 2

On clicking this link you will be taken to a new page where you need to login using your Aadhaar number and captcha code. After entering Aadhaar and Captcha details click on “Send OTP” button. You will get OTP (one-time password) on your registered mobile number. The OTP is valid for 30 minutes. Enter the OTP and click on the submit button for validation.

Step 4

Upon successful login you will be able to see the service tab dashboard. One of the services on this dashboard is Aadhaar Update History.

Aadhar Update History Download

Step 3

On clicking Aadhaar update history you will be able to see all historical Aadhaar updates done by you at a single place. It will also show the date on which the modification was carried out. The update history screen looks like below.

download aadhaar update history

If your Aadhaar is seeded with an e-mail address, UIDAI will send an e-mail indicating update history is downloaded. It is an additional security feature to know who has viewed or downloaded updates.

Benefits of downloading Aadhaar Update History

The benefits of downloading the Update history are given below.

Address History online which can be viewed as and when required with a click of the button.
Along with address history, you will be able to see other demographic change detail.
You can use this history as a proof for various services including passport, visa etc.
You can verify if anyone has modified information wrongly or not.

Hope you will find this information useful. If you have any query about downloading Aadhaar Update History please post it in the comment section.

If you find this article useful, do share it with your friends on Facebook and Twitter.

5 Saving Investment Options for Emergency Fund

Financial Planning

Shitanshu Kapadia

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June 5, 2018

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emergency fund

Building an emergency fund is one of the prime requirement of the financial planning. An unexpected job layoff, a sudden critical illness or disability due to an accident are few examples of emergency situations where you badly need money. To some extent, you can use your credit card to address the emergency. But a credit card is not to be seen as a replacement of setting up an emergency fund.

You have to keep at least six months of expense aside as an emergency fund. The size of fund varies from individual to individual. Suppose you have medical insurance that provides cashless benefits you can avoid emergency fund for a medical emergency. Similarly, if you have other earning family members who can take care of household expense in the emergency, you can avoid building an emergency fund.

I strongly recommend building contingency fund so that you can handle any adverse financial situation and you need not take debt such as personal loan or loan from relatives. If you are ready to build an emergency fund and looking for options to stack your cash which can be easily accessible here are 5 Investment Options for Emergency Fund. You should not stick to one investment option. You should divide your fund and park at multiple places which are accessible easily.

Please note that while building an emergency fund returns are not important. Accessibility of fund at short notice or 24×7 is important.

5 Saving Investment Options for Emergency Fund

Saving Account

Keeping money in saving account is foolishness as it offers only 4% return. However, for the emergency fund, you can keep park at least 20% of the emergency fund in a saving bank account. As you can access saving bank account fund 24×7 using a debit card. But please note that daily cash withdrawal limit is most of the cases is Rs.40000. If 4% interest rate is not acceptable, you can open saving bank account in the bank which offers higher interest rate such as Kotak Saving Bank Account.

Auto Sweep in Account

Another best investment option for the emergency fund is an auto sweep in account. Auto sweep in account convert excess of a fund in a fixed deposit which earns better interest rate 6 to 7%. However, accessing auto sweep account in the emergency is not an easy job.

Fixed Deposit

If you don’t want to take the hassle of opening auto sweep account you can opt for a fixed deposit account. Fixed deposit offers nearly equivalent returns compared to auto sweep account. You can break fixed deposit at very short notice. However, you need to visit a bank to break fixed deposit.

Short Term Debt Fund

Short Term Debt Funds are superior compared to bank FDs in terms of returns. Best performing debt fund can give return up to 8-10%. You can plan to invest in short term debt fund for emergency fund. Exit load is applicable for debt fund. Redemption of unit take time up to 2-3 days.

Liquid Funds

Another investment option for an emergency fund is liquid or short-term debt fund. A liquid fund offers slightly higher return compared to saving the bank and comes without lock-in period. There are many fund house (Example – Reliance anytime money) that offers ATM card. You can use ATM card to withdraw money anytime. Please note that withdrawal limit is Rs.50000 or 50% of the balance whichever is lower.

Apart from above 5 best investment options, you can invest your money in PPF and EPF. PPF allows closure of account after 5 years to address medical emergency or higher education. Similarly, you can withdraw money from EPF for the specific purpose. The time required for withdrawal of fund from EPF and PPF is high.

Conclusion – You should establish the emergency fund by investing your money in various investment options mentioned above. Please consider your household expense, EMI, insurance premium, and other expenses while deciding fund amount. Don’t forget to review your emergency fund at least once in a year.

Education Loan or Student Loan for Higher Studies in India and Abroad

Personal Finance

Shitanshu Kapadia

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June 4, 2018

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education loan

As you are reading this post, I assume that you are looking for an education loan or student loan for higher studies in India or abroad. Whatever may be the case in this post, I will help you to know everything about education loan or student loan.

Education is the most powerful weapon which you can use to change the world. It is the passport for better future. Many parents dream that their child earns a higher education and graduate from the premium institute in India like IIMs, IITs and AIIMS. But with skyrocketing cost of higher education, very few can afford to fund higher education from own pocket.

Majority of financial planner advice parents to plan separately for higher education. Many parents even invest their money in mutual funds, equity and fixed deposit for the child education. But regardless of all this, it may be possible that parents may face challenges to funding higher education of the child. An education loan is helping hand for the parents to fulfill their dream of providing higher education to children.

Also Read – How to find Best Child Education Investment and Saving Plan?

What is Education Loan or Student Loan?

An Education Loan provides funds to the student for paying for university tuition, books, and living expenses. As this loan is given to student it is also known as a student loan. Almost every bank in India offers education loan to the student. However, features and benefits are different. This loan is given for funding education in India and even abroad.

Who can apply for Education Loan?

A Student can apply for education loan. Parents, spouse or sibling can be co-applicant. A student should have valid proof of securing admission in coursework, in India or abroad. A maximum amount offered for studies in India and abroad is different. It varies from bank to bank.

What types of courses are covered under Education Loans?

An Education loan can be taken for full time, part time and vocational courses conducted by AICTE/UGC approved universities. It includes Graduation, Post-Graduation, Diploma programs, Engineering courses, Management courses, Medical, Hotel management and other professional courses.

Eligibility Document and collateral requirement for Education Loan

The basic eligibility requirement for education loan is given below.

The applicant must have completed higher secondary level schooling.
The applicant of education loan must be Indian resident.
He/she must have secured admission to recognized university and course that are covered under education loan.
If loan applicant is NRI, he/she should have a valid Indian passport.
Collateral or security enforceable in India has to be provided by the student (if applicable).
The age of co-applicant should be minimum 21 years or above.

Documents required for applying for education loan is given below.

Admission letter
Fee Structure
ID and Address Proof
Copies of highest education qualification degree/mark sheet
Salary slip and ITR returns for the co-applicant
Passport/Visa copy, airfare details for abroad studies

Also Read – Cost of Child Education – Planning and Calculator

Margin Money

Margin money is an additional money student needs to pay from his/her own pocket for education, the remaining money is paid by the bank. Say if you are in need of loan amount 10 Lakh and a bank is ready to finance 90% of the loan (9 Lakh) remaining 1 Lakh you need to arrange by yourself.

There is no margin money requirement for loan amount up to 4 Lakh. For loan above this amount, 5% margin is required for domestic studies and 15% margin for overseas study.

Disbursement

The disbursement of education loan happens directly to the account of college/university based the on applicable fee structure.

Interest rate and repayment

The interest rates of education loan vary from bank to bank. The interest rate range is 11.5%-15.1%. The repayment of loan starts after completion of course. Some bank provides an extension for six months to one year for starting repayment. The repayment period is 5 to 8 years. Prepayment and partial prepayment is allowed. A simple interest is charged during the course period.

Also Read – Credit Cards for Students Travelling Abroad

Income Tax Benefit of Education Loan

Section 80E is applicable for the education loan. The maximum amount deduction permissible under section 80E is Rs.1,50,000. This amount is over and above deduction allowed under section 80C.

Please note that the principal amount repayment does not qualify for any deduction. Only interest paid on repayment is allowed for deduction. The deduction is allowed only for the individuals paying interest on the loan for himself, spouse or children. The deduction is allowed for maximum 8 years.

Different Types of Education Loans

Education loans are classified in various categories based on types of education and domestic or overseas studies.

Student Loan Scheme – For Indian national to pursue higher study in India or abroad

Scholar Loan Scheme – For the selected list of premium institutes

Student Skill Loan – For vocational education and a special type of training

Student Loan for Overseas – For Higher education outside India.

Points to consider before taking Education Loan

You should consider following points before taking education loan.

Lookout for bank charges processing, pre-payment, and late payment.
Compare interest rate applicable to the loan.
Check for collateral requirement applicable to the loan.
Look at margin money requirement for loan.
Take a look at moratorium period (wait period)
Know income tax benefit applicable to education loan.

Conclusion –

Please note that Interest rate applicable to this types of loan is very high. Consider taking education loan if it is extremely necessary. Don’t opt for education loan just for income tax benefits. It is your first loan so, you have to be careful about repayment as your first credit score is dependent on this loan.