DEDUCTIONS U/S 80C AVAILABLE TO NON RESIDENT INDIAN (NRI)

DEDUCTIONS U/S 80C AVAILABLE TO NON RESIDENT INDIAN (NRI)

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DEDUCTIONS U/S 80C AVAILABLE TO NON RESIDENT INDIAN (NRI)

There are various deductions a taxpayer can claim from his total income which would bring down his taxable income and thereby reduce his tax outgo. Individual or a HUF can claim deduction under section 80C of Rs 1,50,000.

There are no ceilings on deductions u/s 80C for individual schemes, unless the rules of the schemes provide for their own limits.

Deductions u/s 80C available to NRI’s:

Sr. No. Deduction Availability
1. Life Insurance premium Yes
2. Tuition fee payment Yes
3. Principal repayment on loan for purchase of house property Yes
4. Unit Linked Insurance Plan (ULIP) Yes
5. Contribution/ Investment in PPF No
6. Investment in National Saving Certificate No
7. Post office 5 year deposit Scheme No
8. Senior citizen saving scheme No
9. Tax savings deposit Yes
10. Sukanya Samriddhi Scheme No
11. Stamp duty and registration fees Yes
12. NABARD Bonds No
13. Provident Fund No
  1. Life Insurance Premium:

NRI can claim premium paid on insurance policy as deduction under section 80C of Income Tax Act.  The deduction can also be claimed in respect of children and spouse. To claim deduction u/s 80C of Income Tax Act, the premium should be less than 10 % of the sum assured.

  • Tuition fee payment:

NRIs can claim the deduction for the tuition fees paid by them to any school, college, university or other educational institution situated within India for the purpose of full time education of their children. This includes payments for play school, pre-nursery and nursery. 

 The deduction is available for a maximum of 2 children. If there are more than 2 children, then deduction can be claimed for those 2 children whose tuition fee is more.

  • Principal repayment on loan for purchase of house property:

If NRIs are having housing loan in their name then can claim deduction for repayment of principal amount of loan taken for buying or constructing residential house property. The deduction is for a maximum of Rs. 150000 for a particular financial year.

The interest component of loan can be claimed u/s 24(a) under the head “Income from House Property.”

  • Own Residential House: maximum deduction of Rs. 200000/-
  • Let out property: No limit for deduction
  • Unit Linked Insurance Plan (ULIP):

NRI can have option of investing in mutual funds and they can claim the deduction under 80C for the amount invested in mutual fund. It must be noted that some investment scheme under mutual funds are not eligible for deduction under 80C where as some are allowed like investment in ULIPS is also allowed as a deduction under Section 80C. This includes contribution to Unit Linked Insurance Plan of LIC Mutual Fund e.g. Dhanraksha 1989 and contribution to Other Unit Linked Insurance Plan of UTI.

  • Contribution/ Investment in PPF:

Public Provident Fund (PPF) is all time best scheme for investment.  It is currently offering interest at the rate of 8.00%. The interest earned by the assessee is tax free. Normal maturity period is 15 years. A person can contribute a minimum of Rs. 500 under the scheme and maximum Rs. 1, 50,000. NRIs are not allowed to open PPF account in India if they have account which was opened while they were resident then they are allowed to maintain it but deduction cannot be claimed for the contribution made in that account.

  • Investment in National Saving Certificate:

It is a type of Fixed Deposit with post office. Remember the maximum deduction for NSC is limited to Rs.100000.Further Interest received at the rate of 8.10 % on NSC which is not taxable. NRIs are not allowed to make investment/ purchase National Savings certificates.

  • Post office 5 year deposit Scheme:

It is similar to bank fixed deposits. Only five years Post Office Time Deposit (POTD) is eligible for tax saving. Interest on POTD is Taxable. The rate of interest varies depending on the duration of deposit.

NRIs are not allowed to make investment in Post Office 5 Year Deposit Scheme.

  • Senior Citizen Saving Scheme:.

Time deposits are nothing but fixed deposits also known as tax saving deposits. Conditional it must be made with a scheduled bank or under senior citizen savings scheme with a lock in period of minimum 5 years. The rate of interest on deposit is 8.7% p.a. the interest on such deposits is taxable under the head income from other sources. The NRIs are not allowed to make investment in Senior Citizen Savings Scheme.

  • Tax savings deposit:

Time deposits are nothing but fixed deposits also known as tax saving deposits. Conditional it must be made with a scheduled bank or under senior citizen savings scheme with a lock in period of minimum 5 years. There is no facility of premature withdrawal of deposit. The interest earned is tax free. A assessee can claim maximum of Rs. 150000 amount for deduction. Deduction is available to individuals, members of Hindu undivided family (HUF), senior citizens and NRIs.

  1. Sukanya Samriddhi Scheme:

‘Sukanya Samriddhi Account’ can be opened at any time from the birth of a girl child till she attains the age of 10 years, with a minimum deposit of Rs 1000. A maximum of Rs 1.5 lakh can be deposited during the financial year. Interest on this account is fully exempt from tax in the year of accrual as well as in the year of receipt. NRI’s are not permissible to open Sukanya Samriddhi account for daughters it is available only for resident individual in India. Interest rate is 8.5% p.a.

  1. Stamp duty and registration fees:

The deduction is also allowed for stamp duty, registration fees and other expenses incurred by the NRI for purpose of transfer of such property. The NRI can claim a maximum of Rs 150000 of deduction for the payment/ expenses incurred on stamp duty or registration.

  1. NABARD Bonds:

Investment in NABARD bonds (National Bank for Agriculture and Rural Development) can help you avail deduction under section 80C for a maximum amount of Rs.150000. Interest earned is tax free. Non-resident is not allowed to invest in NABARD scheme and they cannot avail the deduction too. Resident individual can invest in NABARD bonds and avail the deduction of a maximum of Rs. 150000 under section 80C of Income Tax Act.

  1. Provident fund (PF) & Voluntary provident fund (VPF):

Provident fund is automatically deducted by employer from salary. Both the employer and employee contribute to provident scheme. If the employee thinks that the contribution made to provident fund is not enough then he can contribute under voluntary provident fund scheme where he/she earn interest at the rate of 8.75%. This is tax-free. Anyone except NRI can contribute to VPF (Voluntary Provident Fund).

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