For Non-Resident Indians juggling financial obligations across two countries, tax season often brings more confusion than clarity. Recognising this recurring challenge among the NRI community, Ashutosh Financial Services organised a session on 16th December 2021 in Rajkot titled “Benefits for NRI Under Indian Income Taxation & Other Regulations.” The initiative reflects a belief that has guided the company’s outreach efforts for years: financial confidence grows out of financial understanding, and NRIs, who often manage assets and income across borders, need clear, practical guidance more than most. The session was conducted by Daxesh Kothari and was aimed specifically at an NRI audience grappling with questions around double taxation, fund repatriation, and estate planning back home.
A large part of the session centred on the Double Taxation Avoidance Agreement, commonly known as DTAA, which India has signed with more than 89 countries including the United States, the United Kingdom, the UAE, Canada, Australia, and several African nations. The core idea behind DTAA is straightforward: income should not be taxed twice, once in the country where it is earned and again in the country where the person resides. Two competing principles usually decide who gets to tax that income first. Under the residence rule, a country can tax a person’s global income simply because they live there. Under the source rule, the country where the income was actually generated claims the right to tax it. DTAA agreements resolve this overlap, and importantly, NRIs are allowed to choose whichever framework, the treaty or the Indian Income Tax Act, works out more favourably for them.
The session also unpacked what happens when someone is considered a tax resident of two countries simultaneously, a situation that arises quite often for NRIs settled in the US. A person holding a US Green Card, for instance, is treated as a US tax resident regardless of where they actually live, while also qualifying as an Indian tax resident under domestic rules. When this overlap occurs, a mechanism called the tie-breaker rule steps in. It works through a sequence of tests: first checking where the person’s permanent home is, then their centre of vital interests, followed by habitual abode, and finally nationality. Once residency is settled, the compliance path differs depending on the outcome. Someone confirmed as an Indian resident and non-resident of the US, for example, needs to file specific US tax forms and obtain a Tax Residency Certificate from Indian authorities, while the reverse scenario requires its own separate set of filings.
Another practical area covered was tax deduction at source, or TDS, on income earned by NRIs in India. The presentation clarified that TDS on property sales by NRIs must be calculated on the entire sale consideration, not merely the profit portion, unless the NRI has proactively obtained a lower or nil deduction certificate. This distinction matters because many NRIs unknowingly overpay tax at the point of sale and only recover the excess later through a refund, which ties up funds unnecessarily.
The discussion moved on to income categories that carry favourable treatment. Certain receipts, such as interest earned on NRE accounts, agricultural income, and specific gifts, remain fully exempt from Indian income tax. Capital gains also benefit from targeted relief, particularly when the proceeds are reinvested in specified bonds or a residential property under sections such as 54, 54EC, and 54F. Separately, Chapter XIIA of the Income Tax Act offers a special, somewhat lower tax regime for NRIs on income from specified assets purchased using convertible foreign exchange, along with relief that adjusts long-term capital gains for currency fluctuation rather than penalising NRIs for rupee depreciation.
The session also touched on the practical side of managing money across borders, including the ability to transfer funds from an NRO account to an NRE account or repatriate them abroad up to a specified annual limit, provided applicable taxes have been settled. On the estate planning front, NRIs were encouraged to consider drafting a separate Will specifically for their Indian assets, executed with the formalities required under Indian succession law, since this avoids unnecessary disclosure of foreign holdings and simplifies the process for heirs.
Finally, the presentation addressed how India’s shift to faceless income tax administration affects NRIs directly, particularly through the Annual Information Statement, which consolidates a person’s financial transactions against their PAN and requires careful cross-checking before filing returns.
Sessions like this one reflect why financial literacy remains an ongoing priority rather than a one-time exercise, especially for a community managing wealth and obligations across different legal systems. Ashutosh Financial Services continues to organise such educational initiatives, aiming to help NRIs navigate these complexities with greater clarity and confidence.
