Taxation for NRIs is conducted stringently than that of resident Indians, but NRIs are entitled to claim several deductions and exemptions from their total income. NRI can claim a deduction of up to 1.5 lakh rupees under section 80C of the Income Tax Act 1961. Tax deductions for NRIs can be described as follows:
Deductions that are allowed for NRIs as per section 80C of Income Tax Act 1961:
Life Insurance Premium Payment: Premium is required to be less than 10% of the sum assured and the insured person must be the NRI himself, spouse, or a child
Tuition fee payment: Fees paid to any educational institution in India for full-time education of children (any two) of the NRI
Principal payment on the loan for the purchase of house property: Payment made towards EMI of a loan for a house property and a stamp duty, resignation fees, and all the expenses incurred in the transfer of house property to an NRI are subjected to tax deductions
Investment in ULIPs: investment in Unit Linked Insurance Plan of LIC Mutual Fund or ULIPs of UTI
Deduction from house property income: Deduction of up to a maximum of 2,00,000 rupees for an interest gained on a home loan for a house (that is vacant)
The deduction that is allowed for NRIs under section 80D of Income Tax Act 1961:
Premiums of health insurance of the NRI’s close family and children
Up to a maximum of 5,000 rupees for health checkups (preventive)
Deductions for NRIs under section 80E of Income Tax Act 1961:
Deduction of interest that is paid on an education loan for the NRI’s own higher education, for a spouse or children or a dependent student
Deductions for NRIs under section 80TTA of Income Tax Act 1961:
Deductions up to 10,000 rupees on interest earned on savings bank account of the NRI
Deductions allowed for NRIs under section 80G:
This deduction is applicable only if appropriate donations are made as mentioned in section 80G of the Income Tax Act 1961
Long-term capital gains for a property that has been held by the NRI for over 36 months are taxable but an exemption can be availed by the investment of the proceeds of the sale in some other house property or specific bonds. If the value of the new bonds or house property is less than the proceeds an exemption instead can be availed.
Though there are various deductions allowed to NRIs, there are a few deductions that are not allowed for NRIs such as:
Investment under section 80C like PPF, investments in National Savings Certificates, post office schemes, SCSS
Deductions under 80DD, 80Uand 80DDB, which are designed especially for differently-abled
