Benefits and More about NRI Taxation

NRIs or non-resident Indians, are taxed more strictly than residents and tax deduction for them are as follows --

Deductions under Section 80C

  • If the Premium for insurance of the life of a NRIs spouse or offspring is less than 10% of the sum assured, then the premium payment can be allowed deductions under Section 80C.
  • Fees paid for full time education of 2 children to any educational institution in India.
  • The payment of EMI of a loan for purchase of house property the stamp duty , registration fees and other expenditure incurred for this and in transfer of a house to a non-resident Indians, is also allowed tax deduction
  • If a NRI invests in ULIP linked Insurance plans of LIC Mutual Fund (Dhanraksha 1989) or in ULIPs of UTI.
  • A maximum amount of INR 2, 00,000 if paid as interest for home loan on a vacant house or if money got from house property is used for education purposes.

Section 80D: Allows deduction (up to Rs. 15,000 in cases of insurance for spouse, self, dependent children and Rs. 20,000 for senior citizens) on premiums paid for the health insurance and money used for Preventive health check -ups up to the amount of INR 5000. Additionally, the Non-resident Indian can get tax deduction for insurance for parents to Rs. 20,000 in case the parents are senior citizens, while in the later case the deduction is up to Rs. 15,000.

Section 80E allows deduction on –Interest paid on loan for higher education of self, spouse, children or a dependent student, there is no maximum limit on amount but it should be for 8 years or complete interest paid whichever is earlier. Deduction is not valid on principal repayment amount.

Section 80G allows deductions for NRIs if donations have been made as per section 80G of the Income Tax Act.

Section 80TTA allows deductions for non-resident Indians to a maximum amount of INR 10,000 on interest earned on savings bank account.

As NRIs cannot use forms 15G and 15H to avoid TDS and if it exceeds tax liability NRIs will have to file a Tax return along with proof of investment and income to avail tax refund. Under Section 54 and 54F the NRI can avail stipulated tax benefit on long term capital gains.