Mohit has a three-bedroom apartment in Noida which is rented out for Rs 35,000 a month. He also has a share in agriculture land that was once owned by his father and uncles. He gets income from the land too.
The rental income from the flat and from land is deposited in Mohit’s bank account in India.
Does Mohit need to pay tax on this income in India? Is income earned by NRIs on assets in India taxable?
As per the Indian Income Tax Act 1961, all income earned or accrued from any asset in India is taxable in the country. Mohit will need to pay income tax on both – rental income from the flat as well as income from agriculture land.
It doesn’t matter whether the income is earned by a resident Indian or a non-resident Indian.
It is mandatory to file income tax returns if the total income earned in India exceeds Rs 200,000. Mohit’s income from the Noida flat alone is Rs 420,000. So he need to file the returns and pay tax.
Mohit’s income from agricultural land is exempt from tax. So he will not have to pay any tax on agricultural income. However, income from agricultural land will need to be declared in the income tax returns.
Because Mohit’s income is less than Rs 5 lakh, he can file his IT returns either in paper form or electronically. For those whose income exceeds Rs 5 lakh duriing 2013-14, cannot file paper returns. They will need to file their income tax returns electronically.
As per a directive issued by the Central Board for Direct Taxes (CBDT), all persons, whether resident Indians or NRIs, whose income exceed Rs 5 lakh per annum, will need to file their returns electronically. This rule is applicable from this financial year – 2014-15.
The due date for filing returns for 2013-14 financial year is 31 July 2014.
Do NRIs have to pay advance tax on income in India?
Any person, whether resident or NRI, whose tax liability is likely to exceed Rs 10,000 in any assessment year is required to pay advance tax.
Failing to pay advance tax will attract an interest of 1 percent per month.
Can I claim exemption for my income in India?
Yes, Indian government is kind to allow exemption for certain types of income, in a bid to encourage savings and investment.
The exempted income includes:
Dividends and long-term capital gains from equity shares and equity mutual fund
Interest received on the NRE and FCNR accounts
For rental properties, an ad hoc deduction of 30% of net annual value is excempt as repairs and maintenance expenses
For rental properties, mortgage interest is also exempt
What if I sell my apartment in India?
If the apartment is more than three years old, long term capital gains tax will be applied on it, unless you use the sale proceeds to buy another property (either land or house). The long term capital gains tax is quite heavy – 20 percent of the transaction amount.
Can I transfer house sale proceeds to US?
An NRI who sells his house/land in India may repatriate funds received from sale to the United States, as long as he has paid tax in India. Income from sale of immovable property attracts long term capital gains tax. So non resident Indian will need to pay the tax and obtain a certificate from a chartered accountant.
Who is an NRI as per income tax rules?
India’s tax department will consider you a non-resident Indian if:
- You lived outside India for 182 days or more during the previous year.
- You did not live in India for more than 60 days during the previous year; and again for a combined 365 days or more during the previous four years prior to the previous year.