What are Deductions and Exemptions Tax laws for NRIs?
Section NRI Taxation under the Indian Income Tax Act, 1961, is applicable for people who are earning outside the home country India. It is of paramount importance to note that rules, regulations, perks, liabilities and exemptions of these people is vastly different to Income Tax laws applicable to residents of India. In the following paragraphs we shall deal in detail with about how you can determine your residential status and then we shall talk about deductions and exemptions for NRIs.
How do I Determine My Residential Status?
Your residential status determines your tax liability in India. According to the Indian Income Tax law, people are generally divided into two categories for tax purposes.
Criterion for being a resident of India
Section 6 (1) of the Income Tax Act, 1961, lays down two sets of parameters to determine if a particular individual is Indian citizen or not. If the person meets any of the following two criteria, he/she will be deemed a resident of the country
An individual is in the country for 6 months (182 days to be more precise) or more in a financial year. The same is applicable to a Person of Indian Origin (PIO) who is on a visit to India. A PIO is a person whose parents or grandparents were born before the country was partitioned.
An individual is in India for more than two months (60 days) in a financial year or lived for a whole year (365 days) or more during the last four years preceding immediately the current year.
Deductions and Exemptions for NRIs
Similar to resident citizens of India, NRIs too are eligible to claim several of the deductions listed under income tax rules and section 80C.
Deductions under Section 80C
NRIs too can enjoy the benefits of deductions under Section 80 in a way similar to Indian residents. For FY 2017-18, a maximum deduction of up to INR 1.5 lakhs is allowed under Section 80C for NRIs from their gross total income.
Deductions available to NRIs under Section 80C are enumerated as following:
Other Deductions that are allowed
In addition to deduction allowed under Section 80C, an NRI is also qualified to demand rebate under different other existing Income tax laws which are discussed as following:
Deduction for a House Property purchased in India and Income received from it
Like an ordinary Indian citizen, the NRI too is eligible to lay claim to all the benefits and deductions from income from a house purchased in India.
Provision for Deductions allowed under Section 80D
NRIs are well within their rights to claim a deduction of INR 30,000 for premium they pay on health insurance. For senior citizens it has been increased to INR 50,000 from April 1, 2018. A deduction not exceeding INR 25,000 is allowed for premium paid on health insurance for spouse and dependent children. Also, deduction for insurance of either or both parents up to 50,000 is allowed if parents are senior citizens and 25,000 if they are not.
Provision for Deductions allowed under Section 80E
Under this Section, NRIs are allowed to claim deduction for any interest they are compelled to pay for educational loans they have taken. The loan can be for own higher education or that of the NRI’s spouse, children or for a person whose the NRI is a legal guardian.
Provision for Deduction under Section 80G
Under this Section, NRIs are allowed to claim a rebate for donations they make to social causes inside the country.
Provision for Deduction under Section 80 TTA
Like ordinary Indian residents, NRIs too can demand a deduction on income accruing from interest on savings account in a bank, post office or a co-operative society. The maximum limit is up to INR 10,000.