Here's all about Income Tax Deductions available to an NRI

Tax rules on deductions and exemptions for non-resident Indians are not similar as that of individuals. Not all deductions are available to NRIs, which are generally available to resident individuals. Non-resident Indians have to pay tax and file a return in India if their income from sources in India exceeds Rs. 2,50,000 so it is important that NRIs are aware of all the income tax deductions available to them. Following are the income tax deductions available to NRIs.

Deductions under Section 80C

Most of the deductions under Section 80 are also available to NRIs. A maximum deduction of up to Rs 1,50,000 is allowed under Section 80C from gross total income for an individual. The deductions allowable to NRIs are:

NRIs can avail deduction in respect of tuition fees incurred on the education of two children in India.
A deduction can be claimed for repayment of a principal sum of Home Loans.
Stamp duty, registration fees, and other expenses incurred for the purpose of purchase of house property are also entitled to section 80C deduction.
NRIs can make investment on the following instruments such as EPF (Employees provident fund), VPF (Voluntary provident fund), ULIPs (Unit-linked insurance plans), ELSS (Equity linked savings scheme), 5-year tax-saving fixed deposits (FDs) of banks, Mutual funds pension plans , NABARAD (National Bank for Agriculture and Rural Development) Rural Bonds and life insurance premium.
Deduction from House Property Income – Deduction up to a maximum of INR 2,00,000 for interest paid on a home loan for a house which is vacant

Deductions under Section 80D

NRIs are allowed to claim a deduction on the payment of health insurance premiums of the immediate family members and dependents. If health insurance is taken for oneself, spouse and dependent children, a deduction of Rs.25000 per annum is available. An additional deduction of Rs25000 is available if a premium is paid to dependent parents per annum. If either of the parents is senior citizens then a deduction of rs.30000 is available instead of rs.25000 Up to a maximum of INR 5000 for preventive health check-ups

Deduction under Section 80E

Under this Section, NRIs can claim a deduction of interest paid on an education loan. This loan may have been taken for higher education for the NRI, or NRI’s spouse or children or for a student for whom the NRI is a legal guardian. There is no limit on the amount which can be claimed as a deduction under this Section. The deduction is available for a maximum of 8 years or till the interest is paid, whichever is earlier. The deduction is not available on the principal repayment of the loan.

Deduction under Section 80EE

Under this section, a deduction is available to first time home buyers. A deduction can be claimed for home loan interest. It is allowed for interest paid on home loan up to maximum Rs 50,000 per financial year. This deduction is over and above the Rs 2 lakh limit under section 24 of the income tax act.

Deduction under Section 80G

NRIs are allowed to claim a deduction for donations for social causes under Section 80G.

Deduction under Section 80TTA

Non-resident Indians can claim a deduction on income from interest on NRO savings bank account up to a maximum of Rs 10,000 like resident Indians. This is allowed only on deposits in savings account (not time deposits) with a bank, co-operative society or post office. The interest is already exempt from NRE savings bank account.

Following are the deductions NOT available to NRIs

Some Investments under Section 80C:

Investment in PPF is not allowed

(NRIs are not allowed to open new PPF accounts, however, PPF accounts which are opened while they are a resident are to be closed as soon as their residential status changes.)

Investments in NSCs
Post office 5-year deposit scheme
Senior citizen savings scheme

Investment under RGESS (Section 80CCG)

Deduction under Section 80CCG or Rajiv Gandhi Equity Savings Scheme was introduced in effective assessment year 2013-14. The main purpose behind this deduction was to increase retail investor participation in equity markets. Upon satisfaction of certain conditions the deduction allowed is lower of 50% of the amount invested in equity shares or Rs 25,000. This deduction is not available to NRIs.