Other Allowable Deductions for NRI to claim under Income Tax Law

There are many deductions which an NRI can claim under section 80C but these are not the only deductions NRI’s are eligible for. NRI’s are eligible to claim various other deductions under the income tax law and they are as follows –

Other Allowable Deductions for an NRI

Deduction from House Property Income for NRIs

NRI’s can claim deduction on the income tax paid on the purchase of house property in India. NRI’s are also allowed deduction on interest paid on home loan.

Deduction under Section 80D

Deductions under section 80D allow NRI’s to avail deduction on premium paid for health insurance. This deduction is allowed up to the limit of Rs. 50000 for senior citizens and up to Rs. 25000 in case of self, spouse and dependent children.

Deduction under Section 80E

Deductions under section 80E allow NRI’s to avail deduction on payment of interest on educational loan. This loan can be taken by NRI’s for higher education of themselves, their spouse or their children. Education loan may also been taken for the student for whom the NRI is a legal guardian. There is no limit specified by the government to be claimed as deduction under this section. Maximum deduction is available for 8 years or till the amount of interest is paid (whichever is earlier). The deduction is not applicable on the repayment of the loan.

Deduction under Section 80G

Deductions under section 80G allow NRI’s to avail deduction up to 100% or 50% for donations or for social cause with or without restriction.

Deduction under Section 80TTA

Deductions under section 80TTA allow NRI’s to avail a deduction of Rs. 10000 on income from interest on savings banks account. Non-resident Indians can also claim a deduction on income earned from interest on savings bank account up to a maximum of Rs. 10,000 like Indian residents. It is allowed on savings bank deposits, post office and a cooperative society.

Deductions not allowed to NRI

Investments under Section 80C

  • NRI’s are not allowed to open PPF accounts. Every individual needs to be an Indian resident in order to maintain PPF account.
  • Post office 5-year deposit scheme
  • Senior citizen savings scheme
  • Investments in NSCs

Investment under RGESS (Section 80CCG)

This scheme was introduced in the year 2013-14 with the name of Rajiv Gandhi equity savings scheme. The main purpose of introducing this scheme is to influence the retail investors to invest in equity markets. The deduction allowed is 50% of the amount or Rs. 25000 invested in equity shares (whichever is lower) after satisfying the certain conditions. The maximum permissible limit is Rs. 50000. However, this deduction is not available for NRI’s.

Deduction for the Dependent or Disabled persons under Section 80DD

Deduction under this Section allows individuals to avail deduction on medical treatment of a dependent person or a person with disability. This deduction is not available for NRI’s.

Deduction for the senior citizens or super senior citizens under Section 80DDB

Deduction under section 80DDB allows deduction on medical treatment of a disabled person and is available to Indian residents only not to NRI’s.

Deduction for the Disabled persons under Section 80U

Deduction under section 80U allows the taxpayer to avail deduction on his or her disability as defined in the Section. However, it is not available to NRI’s.

Exemption on Sale of Property for an NRI

There are many exemptions which an NRI can take on sale of property. Long term gains earned by an NRI (when the property is held for 3 or more than 3 years) are subject to TDS deduction at 20%. As long as capital gains are concerned, NRI’s are allowed to claim deductions under Section 54, Section 54EC & Section 54F. At the time of filing income tax return, NRI can take exemption benefit and can claim refund in lieu of TDS deducted on Capital gains.

Exemption under Section 54

This exemption is available on long term capital gains earned by selling of house property.

Exemption under Section 54F

This exemption is available on capital gains earned by selling of any asset other than house property.

Exemption under Section 54EC

This exemption is applicable in the case when capital gains are reinvested into specific bonds after the sale of first property.

In case you are not very much interested in reinvesting your profits you earned from sale of first property into another property, then you are having the option to invest them in bonds. You can invest your profits into bonds up to Rs. 50 Lakhs issued by National highway authority of India (NHAI) or rural electrification corporation.

In order to claim exemption

  • In order to claim this exemption, the owner of the house has 6 months to invest those profits into bonds and he must do this before the tax submission deadline.
  • 2) In order to claim this exemption, you need to redeem the invested money after 3 years of sale but it cannot be done before the lapse of 3 years from the date of sale. The tenure of 3 years has been increased to 5 years from FY 2018-2019.

The exemption under section 54EC has been restricted to the capital gain arising from transfer of long term capital assets like land, building or both. Previously, the exemption was available on transfer of any capital asset.

For Non-deduction of TDS on capital gains, an NRI has to mandatorily invest and show relevant proof to the buyer. An NRI can also claim the excess TDS deducted at the time of filing income tax returns.