Tax on Business Income earned by NRI in India

As an NRI (non-resident Indian), you may be subject to taxes on business income earned in India

The Income from Business and Profession shall be taxable as per the income tax slab rates, which are the same as that of the resident taxpayers.

Suppose you are an NRI who owns a small business of textiles in India that generates an annual income of ₹10 lakhs (1 million).

In the first place, you need to determine your residential status. As per the Income Tax Act, you will be considered an NRI if you spent less than 182 days in India during the financial year (April 1 to March 31).

Next, you need to calculate your taxable income in India by subtracting eligible deductions from your business income. Deductions may include business expenses such as rent, salaries, depreciation on assets used for business purposes, and other expenses related to running the business.

And you have a total of ₹2 lakhs as applicable deductions for the financial year, which makes your taxable income in India ₹8 lakhs (₹10 lakhs - ₹2 lakhs).

Once you have determined your taxable income, you will need to calculate your tax liability. As an NRI, your business income will be taxed at the slab rates.

So, your taxability in India as per the old regime would be as follows,

Particulars Amount
Total Income ₹10,00,000
Less: Deductions ₹2,00,000
Taxable Income ₹8,00,000
Tax Payable ₹72,500
Cess at 4% ₹2900
Total Tax Liability ₹75,400

Now, since you’re an NRI, you would be subject to TDS at the rate of 31.2% on your business receipts, for which you can claim credit for the TDS deducted while filing an ITR.

If you are taxed on your business income both in India and in the country of your residence, you may be eligible for relief under the double taxation avoidance agreement (DTAA) between India and your country of residence.

Which ITR Form should NRI fill out?

NRI receiving income business or profession is required to file Form ITR-3. The return must be filed by July 31st of the following financial year.

Read more about Income Tax for NRI and Foreign Income - Learn by Quicko.

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