How NRIs can Save Tax in India?

The main aim of earning is to save, enjoy and pay taxes honestly to help India grow as a nation which is a force to reckon with. However; one can achieve that aim also by using available tax rebate schemes available and one must use them as money saved is money earned.

Tax Implications for NRIs in India

It is important to note that income earned by an NRI outside India is not taxed here. Please note that as an NRI; you need not pay tax on the interest income in a non-resident external (NRE) account or foreign currency nonresident (FCNR) account. However be wary of taxation in the country in which you are earning income and pay taxes according to that country tax structure. The income which is exempt in India may be taxed abroad and thus do use the services of a taxation advisor to be on the right side of law.

Do I have to File Returns as an NRI in India?

Case 1 : No Income in India

As an NRI, one need not file income tax return if he or she does not have any income in India.

Case 2 : Income Earned in India

If you have income in India through capital gains, rent, dividend or interest which is beyond the threshold limit of exemption,  you will be required to file tax returns.

Deductions available for NRIs on Income Earned in India

• Deduction can be claimed to an extent. As of now in year 2011-12 , an NRI (male, below 60 years) whose income exceeds 1.8 lakh and a person above 60 years who earns more than 2.5 lakh should file returns in India.
• NRIs can invest in pension plans, life insurance policies and tax-saving mutual funds to save taxes.
• The repayment by an NRI towards principal amount of home loan is eligible for deduction up to 1 lakh, while the interest payment is also allowed as a deduction.
• NRIs can buy a health insurance policy here for themselves, their family and dependent parents , and claim deduction up to 35,000 for the annual premium paid.
• Interest paid on educational loan can be claimed for deduction .
• Invest in tax-saving bonds to get deduction.
• Capital gains up to 50 lakh earned from selling a capital asset can be invested in bonds of NHAI or REC to save on taxes
• Investment income foreign currency bonds, are subject to tax at 20% as against the maximum rate of 30%.
• NRIs can invest in such assets and benefit from the lower rate.
• An NRI can avail of lower tax rates on interest income through beneficial treaty provisions.

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