NRI Earnings and Income Tax

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NRI Earnings and Income Tax
Words: 293 | Date: Mon, 9 Aug 2010

Reserve Bank Of India, with the view to encourage non resident Indians to invest more in the home town and to have foreign exchange flowing into the country, has made income earned in NRE accounts non taxable.

There are two ways that a non resident Indian can earn income. Firstly, through rental income from his buy to let property which gets deposited to his NRE account. Since NRE bank accounts are on a repatriation basis, you can transfer your earnings abroad. All non resident Indians can enjoy income tax exemption on NRE accounts. However, income held in NRO accounts are made taxable.

Secondly, this is an attempt to encourage non resident Indians to invest more in Indian companies. As any investment for an NRI can be made through NRE accounts, having income tax exemption will encourage them to make more investments. You can invest in shares, mutual funds, debentures and other certificate of deposits.

Insurance policy is another way to enjoy tax exemption. However, you must pay out the insurance premiums in the foreign currency held by you overseas. Or you can choose to pay in the form of resident foreign currency account with the Indian banks. You can pay through cheques, which are drawn on account either maintained by your parent or spouse held in your own name or in both of your names. This way, you can avoid any foreign exchange conversion rate. If you choose to pay from your accounts held abroad, it involves a lot of cost.

As per 2008-2009 income tax rules, the income tax exemption is applicable for an income level 1,50,000Rs for an NRI. Senior citizens have an exemption of 2,25,000 but this does not cover NRI senior citizen.
Kirthy Shetty, Expert Author.
Get related information on Tax on NRI Income, NRO Savings

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