If you have recently landed a job in a foreign country, it is very common to wonder whether you will be required to pay any kind of tax on the funds you send to India. Read this post to find a detailed answer to this common query.
After months and years of hard work, you have finally landed your dream job in a foreign country. You might be feeling super excited about your future, but there also can be all the different kinds of questions running in your mind. A lot of people moving to a foreign land wonder whether they would be required to pay any sort of taxes on the funds they send to their family in India.
Are you thinking about the same? Let us have a look at whether or not your foreign earnings will be taxed in India-
Taxation on Foreign Earnings Sent to India
In simple words, NRI’s are not required to pay any tax on the funds they send back home. As you will already be paying taxes on your income in the country of your current residence, there is no need for paying any additional taxes when you send the same to India.
Irrespective of whether you send funds directly to the bank account of your family members in India or open an NRE (Non-Resident External) bank account for transfers, you will not be required to pay any taxes.
Taxation on Foreign Earnings Sent for Investment
If you are sending money to India from a foreign country and the money will be invested either in real estate, equity market, mutual funds, etc. you will be required to pay applicable taxes. However, India has DTAA (Double Taxation Avoidance Agreement) with several countries with the help of which you can pay lower taxes as per the DTAA rates.
Moreover, you can also take advantage of NRE bank account. For instance, if you want to use a money transfer to send Rs. 50,000 to your father in India who will then invest the same in a resident FD account, you can consider the option of opening an NRE FD account. With resident FDs, the returns or interest is taxed as per the IT laws. But the interest earned from the NRE account is tax-free.
NRIs with Income Sources in India
NRIs with income sources in India, like income from house property, rental income, capital gains, interest, dividends, business, etc., will have to file income tax returns in India if the income is above Rs. 2.5 lakhs in a financial year. Just like resident Indians, you are allowed to make use of all the deductions and exemptions available as per the IT Act.
You also have the option of opening an NRO (Non-Resident Ordinary) bank account to park your Indian income. However, the interest you earn from the NRO account is taxable, and there are limitations on repatriation.
Select a Cost-Efficient Money Transfer Service
While NRIs are not required to pay any taxes on the money sent to India for personal use, you will be required to pay a fee for using fund transfer services. So, make sure that you select a transfer service that has low transfer fee and offers highly competitive exchange rates.
Prefer a reputable Indian bank for your transfers as they are known to be cost-effective, quick, and safe. Also, try to know more about NRE and NRO accounts as they can offer considerable benefits to the NRIs.
Disclaimer: “The contents of this article is meant merely for informational purpose. Any reliance placed on such information is therefore strictly at one’s own risk.”