Paying taxes to the government is one of the most vital duties of every citizen as by paying taxes, you contribute not just to the country’s economic progress but also its infrastructural development. NRIs are also subjected to Indian tax laws and regulations if they are involved in business, or they have an account which is actively engaged in transactions in India. However, the government has made some amendments which provide many tax benefits for NRIs.

If you are an NRI, you are subject to different exemptions provided by the government. The subsequent sections mention such six provisions as per current laws that give tax benefits to NRIs:

1. Deductions Allowed Under Section 80C (Maximum up to Rs 1.5 lakhs)

Life Insurance Premium Payment: You can claim deductions on the premium paid for life insurance for NRI up to Rs 1.5 lakhs if the policy is on your name or your spouse’s name or your children’s name. However, the Life Insurance Premium paid for NRI must be less than 10% of the total assured. Many insurance organisations offer different life insurance plans for NRIs, such as term plans, ULIPs, investment plans etc., and you can choose one that suits your needs the best.

• Children’s Tuition Fee Payment: The tuition fees that have been paid to any reputed educational institution say any school or college within India for full-time education are tax deductible. However, the exemption is made available solely for two children in a family.
• Principal Repayments on Loan on A Purchase of House Property in India: An NRI can claim a deduction for repayment of the principal of any loan which you have taken for buying property or constructing a residential house in India. The exemption is also allowed for stamp duty, registration fees etc. related to the transfer of property in India.

2. Deductions Allowed Under Section 80D

You can get the deduction on premium paid towards health insurance up to Rs 25,000 for insurance of self, spouse and kids. If you are a senior citizen, you can also avail deduction of up to Rs 50,000 against this head. Besides this, you can claim a deduction for insurance of parents up to Rs 50,000 if your parents are senior citizens and Rs 25,000 if the parents are not senior citizens. Also, within the limits as detailed above, a deduction of up to Rs 5,000 is also available for preventive health check-ups.

3. Deductions Allowed Under Section 80E

Under the provision of this section 80E, you can claim a deduction of interest paid on education loan which is taken for higher education for self, spouse, children or a student for whom you are the legal guardian. The amount that can be claimed does not have an upper limit; however, this deduction is only available for a maximum of 8 years or till the time interest is paid, whichever is earlier.

4. Deduction Allowed Under Section 80TTA

A deduction on income collecting from interest on savings bank account can be claimed up to a maximum of Rs 10,000.

5. Special Tax Provisions for NRE Account

FEMA (The Foreign Exchange Management Act) guidelines specify that NRIs cannot have saving bank accounts in their name in India. Thus, it is mandatory that you open an NRE/NRO account.

NRE account can be any kind of account, including current, savings, recurring or fixed deposit accounts. You can only deposit foreign currency in this NRE/NRO account, which gets converted into Indian rupees currency at the time of deposit. The money from this NRE/NRO account may be repatriated at any time. The interest collected in this account is not taxable. What is more, is this account can be maintained for up to 2 more years after an NRI shift back to India.

6. Other Tax Benefits

Usually, long-term capital gains, i.e. if a property is sold after being held for more than three years, are taxed at the rate of 20%. However, you can claim exemption from this tax under the sections 54, 54EC and 54F which have special provisions for reinvestment of the capital gain.

You can also avoid double taxation by seeking relief under provisions of Double Taxation Avoidance Agreements (DTAA). Generally, there are two methods to claim tax relief under the DTAA

1) Exemption method

2) Tax credit method.

Under the exemption method to claim tax benefits, NRIs are taxed in just one country and exempted in the other however in the tax credit method, the income of a person is taxed in both the countries and tax refunds can be claimed in your residence country. However, it is vital to note that for availing any tax benefits under the DTAA you need to obtain a Tax Residency Certificate.