Should NRI Pay Income Tax in India From the UK?

Confused about income tax for NRIs living in the UK? This article will explain what taxes NRIs need to pay on income earned in India and provide guidance on filing taxes. Find out the Indian income tax rate for NRIs and more.
Published on:
January 19, 2023
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Should NRI Pay Income Tax in India From the UK?

The Indian Income Tax Act of 1961 governs the taxation of income in India. It is the primary legislation through which the Indian government collects taxes. It is applicable to all individuals, companies and organizations, both resident and non-resident. Non-resident Indians (NRIs) are subject to tax in India on their income earned or deemed to be earned in India. This article will discuss the implications of the Income Tax Act on NRIs and how they can pay tax on their income in India from the UK.

What is an NRI?

A Non Resident Indian (NRI) is an Indian citizen who lives outside India for employment, business or other purposes. In accordance with the Income Tax Act, any individual who has been residing outside India for more than 182 days in a financial year is considered as a non-resident.

What Income of NRI is Taxable in India?

Under the Indian Income Tax Act, the following incomes of an NRI are taxable in India:

  • Income from a business or profession controlled or set up in India
  • Income from salary if the services are rendered in India
  • Income from house property located in India
  • Income from capital gains arising from the transfer of a capital asset situated in India
  • Income from other sources located in India

What is the Tax Rate for NRIs?

The tax rate for NRIs is the same as that for resident Indians. The tax rate applicable to income earned by NRIs depends on the amount of income earned. Taxable income up to Rs. 2.5 lakhs is exempt from tax. For income between Rs. 2.5 lakhs and Rs. 5 lakhs, the tax rate is 5%, and for income between Rs. 5 lakhs and Rs. 10 lakhs, the tax rate is 20%. For income above Rs. 10 lakhs, the tax rate is 30%.

How to Pay Tax in India from the UK?

There are two ways for NRIs to pay income tax in India from the UK:

  • Directly transfer the tax amount from NRI’s UK bank account to the Indian Income Tax Department.
  • Make the payment through a third party such as a company or a bank in India.

What is the TDS for NRIs?

The TDS (Tax Deducted at Source) rate for NRIs is the same as that for resident Indians. The TDS rate is applicable on the income from salary, interest, dividend, rent etc.

The TDS rate for salary income is usually 10%. However, the TDS rate may be different depending on the amount of income and the type of income. Interest income is taxed at 10%. Dividend income is taxed at 10%. Rent income is taxed at 30%.

What are the Benefits of Paying Tax in India From the UK?

There are several benefits of paying tax in India from the UK:

  • Tax savings: Paying tax in India from the UK can help NRIs to save on their tax liability.
  • Tax rebate: NRIs can claim a rebate on the taxes paid in India.
  • Tax deduction: Paying tax in India from the UK can help NRIs to avail tax deductions on the income earned in India.
  • Tax credits: NRIs can avail tax credits on the taxes paid in India.

What Are the Documents Required for Filing Tax in India from the UK?

The documents required for filing tax in India from the UK are as follows:

  • PAN (Permanent Account Number)
  • Aadhaar card
  • Bank account details
  • Documents pertaining to the income earned in India
  • TDS certificate (if applicable)

What is the Procedure for Filing Tax in India From the UK?

The procedure for filing tax in India from the UK is as follows:

  1. Determine the tax liability: Determine your tax liability by calculating your taxable income and the applicable tax rate.
  2. Prepare the documents: Gather the required documents and fill out the required tax forms.
  3. File the return: File the return with the Indian Income Tax Department.
  4. Make the payment: Make the payment of the tax due through a third party such as a company or a bank in India.

Conclusion

Non-resident Indians (NRIs) are subject to tax in India on their income earned or deemed to be earned in India. The tax rate applicable to income earned by NRIs depends on the amount of income earned. NRIs can pay tax in India from the UK by directly transferring the tax amount from their UK bank account or through a third party such as a company or a bank in India. Paying tax in India from the UK can help NRIs to save on their tax liability and avail tax credits and deductions. The documents required for filing tax in India from the UK are PAN, Aadhaar card, bank account details, documents pertaining to the income earned in India, and TDS certificate (if applicable). The procedure for filing tax in India from the UK involves determining the tax liability, preparing the documents, filing the return, and making the payment.

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