NRI Taxation: A Complete Overview

Tax Exemptions for NRIs

There are several types of income that are exempt from taxation. Learn moe about nri taxation in india.

Accounts with NRE/FCNR interest

Certificates and bonds issued by the government and notified to the government of their interest earnings

Dividends from domestic Indian companies

In the long run, capital gains from listed equity shares and equity-oriented mutual funds can be significant

Sections and conditions apply to exempting capital gains:

Capital Gains Account Scheme of 1988 stipulates that Section 54 applies if you sell a house property and use the proceeds or part thereof to buy another property or deposit it in a federation or other bank.

If you sell an estate other than a house and incur capital gains, this exemption can be claimed on the purchase or construction of a new house in proportion to the sale proceeds.

Bonds issued by the Rural Electrification Corporation and the National Highway Authority of India are subject to Section 54EC – Long-term capital gains. Since these have a redemption value, selling them before three years is not a good idea. The maximum amount for such investments in 2014 is 50 lakhs, depending on the budget

Note that all of these exemptions are subject to the current tax laws.

Tax Deductions for NRIs:

The taxation of NRIs is stricter than that of residents. The following methods can be accommodated under tax deductions:

NRIs are allowed to deduct under Section 80C

Insurance coverage is only available to NRIs, spouses, and children of NRIs. The sum assured must not exceed 10% of the premiums paid for life insurance.

The tuition fee in India is the cost of educating two children full time at an institution

An NRI can deduct stamp duty, registration fees, and other expenses related to transferring a house property to them for tax deduction purposes.

LIC Mutual Fund’s Unit-Linked Insurance Plans (Dhanraksha 1989) or UTI’s Unit-Linked Insurance Plans

A vacant house can be deducted for interest paid on a home loan up to a maximum of INR 2,00,000 from its property income

Allowed deductions for NRIs under Section 80D

Aside from premiums for the immediate family, dependents will also pay premiums

Up to a maximum of INR 5000 for preventive health check-ups

In accordance with Section 80E, NRIs may deduct interest paid on education loans taken for themselves, their spouses, children, or dependent students for up to eight years or until the loans are repaid. There is no cap on interest rates

Only NRIs who have made the appropriate donations according to Section 80G may claim deductions under Section 80G through donations.

Savings bank account interest is deductible up to 10,000 rupees by NRIs under Section 80TTA

Investing the proceeds of the sale into another house or specific bonds can result in an exemption if the property has been owned for more than 36 months. When a new bond or property is less valuable than the proceeds, a tax exemption may be available

Tax Returns for NRIs:

NRIs do not have to include income from investments and long-term capital gains in their taxable income as discussed above. Income from these sources is subject to tax deductions at source. There may also be other sources of income that must be declared and taxable according to prevailing tax laws.

Investments and long-term capital gains may, however, result in TDS exceeding the individual’s tax liability. For a refund or exemption, a tax return must be filed.

The Income Tax Department of India’s online portal is the preferred method for NRIs to file their tax returns.

The Complete Picture of NRI Taxation:

Understanding whether one is actually an NRI is essential in light of FEMA’s guidelines. To avoid paying excess taxes, one should take into account the above exemptions and deductions. If the TDS exceeds their tax liability, NRIs must file a tax return with proof of investment and income to receive a refund if they don’t use forms 15G and 15H.

NRIs can also be subject to double taxation, so they should ensure they understand and gather proper proof of their tax paid in India so that they can take advantage of the Double Taxation Avoidance Agreement signed between India and many nations.


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