What are the best tax saving investment options for NRIs in 2019? Let’s find out.
Just like all resident Indians, all Non-resident Indians (NRIs) also have income tax liability based on their annual income from one or more resources in India.
This income is irrespective of whether they earned money directly or indirectly in India or is accrued or deemed to have been in India.
Their tax liability in India only includes any income from business transactions and other income generated from all of their assets and investments in the country.
Tax Saving Investment Options For NRIs In India
There is a difference between the tax liability of an Indian and a Non-Resident Indian. Non-resident Indians only have to pay for their income in India only, whereas the income earned outside India is completely tax-free or exempted from the tax liability in India.
Also Read: 3 Best Savings Schemes In India 2018
However, they can still save on taxes if they invest in NRI investment options in India.
The following are top 5 tax saving investment options for NRIs in 2019
1. Utilizing Income Tax Deductions
NRIs, like other Indian taxpayers, are eligible for income tax deductions up to Rs 1.5 lakh under section 80C of the Income Tax Act, 1961. This means that they have to purchase a life or term insurance policy from an Indian insurer.
Similarly, NRIs can save under section 80CCD (1b) by investing in NPS instrument. However, they are not allowed to invest in tax-saving instruments, such as a PPF account, National Savings Certificates (opens in a new tab/window), and other senior citizen saving schemes.
Other options available to NRIs are medical benefits and deductions available under treatment of a family member, self-medical expenses, self-disability, and income from royalty for tax saving.
2. Getting PAN Number
As you probably already know, annual income beyond a certain level is subjected to TDS. Under section 206AA, if NRIs fail to furnish his PAN card while investing in India, they will end up paying higher a TDS amount.
In order to avoid such high TDS charges, NRIs should apply for PAN card no matter if their income in India is below or above the threshold limit.
Moreover, in order to avail income tax refund in India, PAN card is mandatory.
3. Carefully Maintaining Their NRI Status
In India, the income tax liability of an individual is computed based on their residential status and annual income.
Since the income earned outside India is not taxable in case of NRIs, they should plan their visits to India in such a way that they do not lose their NRI status whatsoever.
Otherwise, they will end up paying more taxes in India.
4. Benefiting From Provisions
NRIs must take advantage of the various provisions issued for long-term assets purchased in foreign currency. Under section 80, there is no deduction allowed for capital gains received against transfer or sale of foreign assets.
However, NRIs can leverage certain exemptions if they deposit profit back in shares or debentures of a company based out of India, bank accounts and investments like National Savings Certificates IV and VII.
5. Paying Home Loan Interest
NRIs are allowed to claim income tax deduction under section 24, which is subject to paying off interest on a home loan up to 2 Lakh on buying a house in India.
The property tax paid in this case is also exempted from their income tax liability as per their respective tax bracket. In fact, this is a pretty good tax-saving option for NRIs.
In case NRIs want to sell out a property in India, they have to pay the 20% tax on Capital Gains, whereas the tax on Short-term Gains is subject to their applicable income tax bracket as per their income from various resources in India.
What more investment options for NRIs do you have in mind? Share with us what tax saving investment options for NRIs do you suggest other than what we have explained above.