It’s a well-known fact that even NRIs have some tax liabilities back home. For instance, the incomes they are drawing from India like rents etc come under the ambit of tax. Hence, they need to be more careful while dealing with such matters. Here are some smart ways of tackling taxes matters that NRIs should instantly adopt.
Take Recourse To DTAA To Bypass Double Taxation
Double taxation is something undesirable and NRIs should steer clear of the same. It is to be remembered that India has inked the Double Taxation Avoidance Agreement (DTAA) with many countries. So, Indians living abroad can utilize the provisions of DTTA to avoid paying taxes twice. There are three methods to avoid double taxation:
Through the exemption method, where tax paid in one country offers exemption in other countries
Through the deduction method, where taxes are paid in the country where income is earned and then deducted from the entire global income
Through the Tax credit method that offers relief to the level of tax paid in one country
Activate RNOR Status
This is very significant for the people who have just returned to India. The Resident but Not Ordinary Resident (RNOR) status ensures that a person is only taxed for income generated in India. The income that they earn abroad will not come under the radar of tax authorities. Rent collected from overseas and withdrawals from bank accounts abroad etc are some examples of revenue generated from foreign countries. So, RNOR is a smart strategy that NRIs must employ to spare themselves unnecessary hassles.
Use Deductions Meant For NRIs
NRIs can use deductions to bring down their tax obligations. They should know that whatever deductions are permissible for residents to apply in their cases as well. There are many deductions such as:
- Premiums given for health insurance, to both personal and family members
- The interest given by way of an educational loan
- Donations as per 80G
- Interests paid on loans availed in India
So, NRIs who are planning to come back to India should opt for an insurance policy either for themselves or their family members. In case such individuals want to own a home in India then they should opt for home loans available in the country as well. These are some of the ways people can minimize their tax liabilities.
So, NRIs need to be cautious while dealing with taxes. And it is to be remembered that they have to manage taxes in two countries. This demands awareness of tax stipulations in both countries. Therefore, if they are not confident or assured of dealing with such matters then it is better to take the assistance of a tax advisor for the same. After getting a hang of tax regulations they can manage tax-related matters on their own.
