NRI taxation: Know the income tax rates

Understanding surcharge and cess (health and education) on NRI taxable income

The surcharge is an additional tax levied on your base income tax when your taxable income crosses ₹50 lakh. Additionally, you are liable to pay a health and education cess of 4% on income tax as well as the surcharge . These rates are the same for resident Indians and NRIs.

The rate of surcharge based on income level is provided below:

Special tax provisions for NRIs

NRIs are also allowed to benefit from special rate tax provisions for certain income. These are not subject to taxes as per the regular NRI income tax slab rates. These include:

Points to remember regarding special provisions

1) If you face taxation for the same income in your resident country and India, check whether your country has signed a DTAA with India. If so, you can avail yourself of a treaty benefit/Foreign Tax Credit (FTC) in your resident country under the relevant DTAA. You should consult a tax expert to understand the implications of DTAA.

2) You are exempted from taxes on any long-term capital gains from the sale or transfer of specified foreign exchange assets which are acquired in India through inward remittance in foreign currency. However, this is possible only if the net consideration (proceeds) is re-invested into other specified assets, such as: 

- Shares and debentures of an Indian company, 

- Deposits with banks and Indian public companies, 

- National Savings Certificate, etc.

Let us understand the tax calculations, including surcharge and cess as well as special income cases. 

Samuel is an NRI living in Canada. In the past three years, he has earned an annual income from various sources in India, including rental income, dividends from shares held with Indian companies, short-term capital gains on the sale of unlisted shares and interest from Non-Resident Ordinary (NRO) bank accounts. He has no deductions and exemptions to be claimed. For this fiscal year, Samuel’s taxable income is ₹55 lakh, and he wants to know his tax liability under the existing and new tax regimes as per the income tax slab rates. 

Let’s understand how the taxes will be calculated under the existing and new tax regimes for him:

Samuel has to pay taxes of ₹70,12,500, along with a surcharge of ₹16,78,125 and cess of ₹3,47,625. This takes his overall tax liability to ₹90,38,250.

It is, therefore, important to make a note of the applicable surcharge while computing your tax liability as an NRI.

Advance tax payments

Resident individuals below 60 years of age and NRIs are required to pay taxes in advance if their estimated income in a Financial Year after Tax Deducted at Source (TDS) is more than ₹10,000*. To know the due dates for advance tax and the amount of advance tax payable on each instalment, please click here.

Any default or shortfall in the payment of advance tax will attract interest at 1% per month. For the first three instalments, interest needs to be paid for three months and for the fourth instalment, interest needs to be paid for one month**. Any default or shortfall in the payment of interest which continues after March 31, an additional interest of 1% per month needs to be paid till the month the interest is paid off. Thereafter, taxes need to be paid as self-assessment taxes before filing the income tax return.

ICICI Bank is one of the designated banks through which you can make this tax payment. Please click here to know more.

* Section 208 of Income Tax Act, 1961.

**Section 234C of the Income Tax Act, 1961.  

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