The Indian Income Tax Act is a complex document that lays down the rules and regulations governing the taxation of income earned by individuals and organizations in India. One of the key provisions of the Income Tax Act is Section 114B, which deals with the taxation of income earned by non-resident Indians (NRIs). In this blog post, we will discuss everything you need to know about Section 114B of the Income Tax Act.
Introduction to Section 114B
Section 114B was introduced by the Finance Act of 2018 and is applicable from April 1, 2018. The section deals with the taxation of income earned by NRIs who visit India for a certain period during the financial year. The section is aimed at ensuring that NRIs pay their fair share of taxes on income earned in India during their stay.
Applicability of Section 114B
Section 114B applies to NRIs who visit India for a period of 120 days or more during the financial year. The section applies to all types of income earned by NRIs in India, including salary, rent, interest, capital gains, and business income. The section also applies to income earned outside India by NRIs who are residents of India but visit India for 120 days or more during the financial year.
Calculation of Tax Liability
Under Section 114B, NRIs are required to pay tax on the income earned in India during their stay based on the number of days spent in the country. The tax liability is calculated as follows:
- If an NRI spends 120 days or more in India during the financial year, they will be considered a resident for tax purposes, and their global income will be taxable in India.
- If an NRI spends less than 120 days in India during the financial year, they will be considered a non-resident for tax purposes, and only the income earned in India will be taxable.
Tax Rates
The tax rates applicable to NRIs under Section 114B are the same as those applicable to resident Indians. The tax rates for the financial year 2022-23 are as follows:
- For income up to Rs. 2.5 lakh: Nil
- For income between Rs. 2.5 lakh and Rs. 5 lakh: 5%
- For income between Rs. 5 lakh and Rs. 7.5 lakh: 10%
- For income between Rs. 7.5 lakh and Rs. 10 lakh: 15%
- For income between Rs. 10 lakh and Rs. 12.5 lakh: 20%
- For income between Rs. 12.5 lakh and Rs. 15 lakh: 25%
- For income above Rs. 15 lakh: 30%
Penalties for Non-Compliance
Non-compliance with Section 114B can result in penalties and fines. NRIs who fail to disclose their income earned in India during their stay can be subject to penalties and fines under Section 271F of the Income Tax Act. Failure to file income tax returns can result in a penalty of up to Rs. 10,000 under Section 234F of the Income Tax Act.
Conclusion
Section 114B of the Income Tax Act is an important provision that applies to NRIs who visit India for a certain period during the financial year. The section ensures that NRIs pay their fair share of taxes on income earned in India during their stay. NRIs should be aware of the provisions of Section 114B to avoid penalties and fines for non-compliance.
Read more useful content:
- section 234e of income tax act
- section 286 of income tax act
- section 90a of income tax act
- section 40a(7) of income tax act
- section 226(3) of income tax act
- section 24 of income tax act
Frequently Asked Questions (FAQs)
Q. Who is considered an NRI for the purpose of Section 114B of the Income Tax Act?
An individual who is not a resident of India as per the provisions of the Income Tax Act is considered an NRI.
Q. What is the duration of stay in India that makes an NRI liable to pay taxes under Section 114B?
An NRI who visits India for a period of 120 days or more during the financial year is liable to pay taxes on the income earned in India during the stay.
Q. Is an NRI’s global income taxable in India under Section 114B?
If an NRI spends 120 days or more in India during the financial year, they will be considered a resident for tax purposes, and their global income will be taxable in India.
Q. What are the tax rates applicable to NRIs under Section 114B?
The tax rates applicable to NRIs under Section 114B are the same as those applicable to resident Indians.
Q. Can NRIs claim exemptions and deductions while filing income tax returns under Section 114B?
NRIs can claim exemptions and deductions while filing income tax returns under Section 114B, subject to the conditions and limitations specified in the Income Tax Act.
Q. What are the penalties for non-compliance with Section 114B?
NRIs who fail to disclose their income earned in India during their stay can be subject to penalties and fines under Section 271F of the Income Tax Act. Failure to file income tax returns can result in a penalty of up to Rs. 10,000 under Section 234F of the Income Tax Act.
Q. Is it mandatory for NRIs to file income tax returns under Section 114B?
NRIs who earn income in India during their stay are required to file income tax returns under Section 114B if their income exceeds the exemption limit specified in the Income Tax Act.
