TAX FREE INCOME FOR NRIs UNDER I.T. ACT. 1961
NRIs CORNER - TAX FREE INCOME FOR NRIs UNDER I.T. ACT. 1961
Well an NRI, and for that reason every NRI, has a twin identity, one under Foreign Exchange Laws and another one as defined under the I. T. Act, 1961. Do excuse if this sounds like a bollywood movie hero playing twin role," Ram Aur Shyam".
NRIs residential status under the Income Tax Act, 1961 is defined by the virtue of the number of days of his stay in India as discussed under the chapter of "NRI- Definitions "
NRIs are granted certain tax exemptions if they are defined as or fulfill the criteria of "NON RESIDENT" under the Income Tax Act, 1961. These tax free incomes are :
1. Interest earned on Saving Certificates etc.
2. Interest earned on Non Resident (Non Repatriable) [NRNR] Deposit .
** Note - w.e.f. 1st April,2002 banks can not accept fresh nor renew NRNR deposits. Upon maturity Interest on NRNR deposits and principal amount can be transferred to Non Resident (External) [ NRE] account at the option of account holder.
3. Interest earned on Foreign Currency Non Resident (Bank) [FCNR(B)] Deposit which technically is exempt under Section 10(4)(ii) too being covered by the definition of an NRE deposit under the FERA 1973 in case of a " Non Resident " or "Resident but Not Ordinarily Resident" as per the provisions of Income Tax Act, 1961.
4. Interest earned on Foreign Currency Non Resident (Bank) [FCNR(B)] Deposit continued until maturity by a Non Resident Indian (NRI) who has returned to India for taking up employment , business, vocation i.e. for permanent settlement provided he is a " Non Resident " or "Resident but Not Ordinarily Resident" as per the provisions of Income Tax Act, 1961. Overseas income of NRIs.
5. Dividend income from Indian Public/Private Company, Indian Mutual Fund and from Unit Trust of India is exempt from tax in India at par with residents.
6. Long-term capital gains arising on transfer of equity shares traded on recognized Stock Exchange and units of equity schemes of Mutual Fund is exempt from tax at par with residents, provided Security transaction tax is paid.
7. Remuneration or fee received by non-resident / non-citizen / citizen but not ordinarily resident 'consultants', for rending technical consultancy in India under approved programme including remuneration of their employees, and income of their family members which accrue or arise outside India.
8. Interest on notified bonds.