The Tax Laws that Affect NRIs

The tax laws that affect NRIs and their investments, business and income in India are given below

  • The Income Tax Act, 1961: It deals with the levy, assessment, collection of tax, appeal etc. It is supplemented by the Income tax rule, 1962.
  • The Wealth Tax Act, 1957: It regulates the levy and collection of wealth-tax of individuals, HUF and companies. It is also supplemented by the Wealth Tax Rules, 1957.
  • Finance Act: Every year, the Parliament passes a Finance Act, which lays down the rates of Income-tax and Wealth-tax for a particular financial year or the assessment year. Amendments to the various direct tax laws are also passed through the Finance Act and sometimes, through a Direct Tax Law Amendment Act.
  • Circulars: The Central Board of Direct Taxes, New Delhi is the apex administrative body for the different tax laws. It often issues circulars, interpreting the provisions of the law, which give relief and grant tax concessions. These circulars are binding on the different tax authorities.
  • Notifications: The Government of India issues notifications, which are published in the Official Gazette e.g. granting special exemption etc.

Relevant Points for NRIs

  • Income tax is payable by any tax payer on the total income as computed and approved by the assessing officer under the provision of the Income-tax Act.
  • Only Indian income is liable to Income-tax in India in the case of Non-resident Person.
  • There is no Income-tax in India on a foreign income merely because it is remitted to India during that year.
  • In the case of a person who is resident but not ordinarily resident in India, no income-tax is payable by him in the income which accrues or arises to him outside India, unless it is derived from a business controlled or a profession set up, in India.