The Indian government offers various tax deductions and exemptions to Non-Residential Indians (NRIs) to encourage NRI investment in India. One such provision is Section 80C of the Income Tax Act, which allows taxpayers to claim deductions. In this blog, we will answer this question- “Can NRI claim 80C deduction?
Who is an NRI?
As per the provisions of the Income Tax Act an individual is deemed to be a resident of India if they meet either of the following criteria:
- They have spent at least 182 days in India during the financial year.
- They have spent a minimum of 365 days in the preceding four years and at least 60 days in the current year.
Anyone who does not fulfill these conditions is classified as an NRI, which stands for Non-Resident Indian.
Are NRIs Obligated to Pay Taxes in India on Foreign Income?
For individuals categorized as non-resident Indians, only the income earned, accumulated, or presumed to be earned within India is liable to be taxed in India. Any income originating from a country other than India is not subjected to taxation within India.
Can NRI Claim 80C Deduction?
A common query among NRIs is whether they are eligible to avail of tax deductions. The straightforward answer is yes. Just like resident Indians, NRIs can also claim different deductions and exemptions from their income in India. Of the total deductions available to NRIs, one such deduction available is under Section 80C. Read further to know more about NRI deduction under Section 80C.
Section 80C Deduction for NRIs
NRIs can avail most of the deductions provided under Section 80. In the financial year 2023-24, NRIs can claim a maximum deduction of Rs 1.5 lakh from their gross total income under Section 80C.
Section 80C Deduction for NRIs: In Detail
The deductions available to NRIs under Section 80C include the following:
Payment of Life Insurance Premiums
NRIs can claim deductions for premiums paid on life insurance policies in their name, as well as in the names of their spouse or children. The premium amount should be less than 10% of the sum assured.
Payment of Tuition Fees for Children
NRIs can claim deductions for tuition fees paid to educational institutions within India for the full-time education of up to two children. This includes fees paid for play school, pre-nursery, nursery, and higher education.
Repayment of Home Loan Principal
NRIs can claim deductions for the repayment of the principal amount on a loan taken to purchase or construct a residential property. Deductions are also allowed for expenses such as stamp duty, registration fees, and other charges related to the property transfer.
Unit-Linked Insurance Plan (ULIP)
ULIPs that include life insurance coverage are eligible for deductions under Section 80C. This includes contributions made to ULIPs offered by LIC mutual fund, such as Dhanraksha 1989, as well as contributions to other unit-linked insurance plans offered by UTI.
Investments in Equity Linked Saving Schemes (ELSS)
ELSS has gained popularity in recent years due to its eligibility for deductions under Section 80C. NRIs can invest in ELSS and claim deductions up to a maximum of Rs 1.5 lakh. ELSS offers the benefit of tax exemption on investment, returns, and capital gains. These funds primarily invest in the equity market in a diversified manner, providing an opportunity for potential earnings.
By availing these deductions, NRIs can effectively reduce their taxable income in India and maximize their savings while making strategic investments.
Other Deductions Available
- Section 80D allows NRIs to claim a tax deduction on the premium paid for health insurance policies.
- NRIs can avail a tax deduction on the interest paid on education loans under Section 80E.
- Section 80G enables NRIs to claim a tax deduction on eligible donations made by them.
- Under Section 80TTA, NRIs can claim a deduction of up to Rs. 10,000 on the interest income earned from savings bank accounts.
NRI Income Tax Slab Rates
Given below are the tax rates which are categorized into slabs based on income levels, with different tax rates applicable to each slab.
Given below is the table for the latest Income Tax Slabs rates for the FY 2023-2024:
A- Existing Tax Regime
| Income Tax Slab | Income Tax Rate |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 – ₹5,00,000 | 5% above ₹2,50,000 |
| ₹5,00,001 – ₹10,00,000 | ₹12,500 + 20% above ₹5,00,000 |
| Above ₹10,00,000 | ₹1,12,500 + 30% above ₹10,00,000 |
B- New Tax Regime
| Income Tax Slab | Income Tax Rate |
|---|---|
| Up to ₹ 2,50,000 | Nil |
| ₹2,50,001 – ₹ 5,00,000 | 5% above ₹2,50,000 |
| ₹5,00,001 – ₹ 7,50,000 | ₹12,500 + 10% above ₹5,00,000 |
| ₹7,50,001 – ₹ 10,00,000 | ₹37,500 + 15% above ₹7,50,000 |
| ₹10,00,001 – ₹ 12,50,000 | ₹75,000 + 20% above ₹10,00,000 |
| ₹12,50,001 – ₹ 15,00,000 | ₹1,25,000 + 25% above ₹12,50,000 |
| Above ₹ 15,00,000 | ₹1,87,500 + 30% above ₹15,00,000 |
NRI Income Tax Calculator
The online NRI Income Tax Calculator is a tool created to help NRIs assess their tax liabilities according to the Union Budget 2023-24. It calculates the taxes owed based on their income. If an NRI falls within the taxable income range, they are required to pay a certain portion of their net annual income as taxes. These taxes can be paid through either tax deduction at source during monthly salary disbursement or by utilizing the income tax returns portal managed by the Central Board of Direct Taxes (CBDT).
Exemptions and Deductions as per Union Budget 2023:
According to the Union Budget 2023, NRI taxpayers are eligible for several deductions and exemptions only if they select the Old Tax Regime. However, if they choose to opt for the New Tax Regime, they cannot claim any deductions, other than standard deduction.
Conclusion
In summary, NRIs who are taxpayers have the opportunity to utilize various deductions and exemptions provided by different sections of the Indian Income Tax Act of 1961. However, as per the Union Budget 2023, taxpayers now have the option to choose between two tax regimes: the New Tax Regime and the Old Tax Regime. If you are an NRI seeking to claim deductions and exemptions, it is advisable to opt for the Old Tax Regime, as the New Tax Regime only allows for standard deduction and does not permit any additional deductions.
Contact SBNRI
For queries related to NRI tax deductions and exemptions, you can CONTACT US. You can also download the SBNRI App to connect with our NRI Tax / investment experts and get end-to-end assistance related to NRI tax filing. SBNRI will also help you get a lower TDS Certificate.
FAQs
Here are the income sources that are subject to taxation in India:
1. Salaries received within India.
2. Salaries earned for services performed in India.
3. Rental income derived from properties in India.
4. Capital gains arising from the transfer of property or assets in India.
5. Income generated from deposits in India.
6. Interest earned on savings bank accounts, and so on.
Dual taxation refers to being taxed twice on the same income in both the country of residence and India. NRIs can avoid dual taxation by ensuring they reside in one of the 90 countries that have entered into a Double Tax Avoidance Agreement (DTAA) with India.
