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Tax Benefits and Exemptions for Non-Resident Indians (NRIs)

NRIs are required to pay tax only on income originated or generated in India and can avail themselves of certain tax-saving options similar to Resident Indians and some opportunities specific to NRIs. Here are the tax exemptions and deductions available to NRIs:

Exempt Incomes for NRIs

1. Interest Earned on FCNR(B) Deposits and NRNR:

   • Interest on Foreign Currency Non-Resident (Bank) [FCNR(B)] Deposits and Non-Resident Non-Repatriable [NRNR] accounts.

2. Interest on Notified Bonds and Savings Certificates:

   • Interest on bonds and savings certificates issued by the Government of India.

3. Interest Earned on NRE Accounts:

   • The interest earned on Non-Resident External [NRE] accounts.

4. Interest Earned on NRO Savings Accounts:

   • Interest earned on Non-Resident Ordinary [NRO] savings accounts up to a certain limit.

5. Long-Term Capital Gains:

   • Long-term capital gains up to Rs. 1 lakh from the sale or redemption of shares or equity mutual funds.

   • Long-term capital gains on the sale of house property to the extent reinvested in a new house property (u/s 54), invested in notified bonds of NHAI or REC (u/s 54EC), or on the sale of property other than a house if reinvested in a house property (u/s 54F).

Deductions from Rental Income

NRIs can claim certain deductions from rental income, similar to Resident Indians, including:

• Interest on primary home loans up to Rs. 2 lakhs.

• Property tax paid.

• Standard deduction of 30%.

General Tax Deductions for NRIs

1. Section 80C Deductions:

   • Available to all individual taxpayers with a total cap of Rs. 1.5 lakhs.

   • Includes investments such as life insurance premium payments and Public Provident Fund (PPF).

2. National Pension Scheme (NPS) for NRIs:

   • The NPS allows NRIs to build their retirement corpus with an additional Rs. 50,000 deduction u/s 80CCD 1(B) for investments in NPS.

3. Bank Fixed Deposits (FDs):

   • 5-year tax-saver bank fixed deposits are a popular and safe investment option.

   • NRIs can open FDs using their FCNR, NRO, or NRE bank accounts.

   • FDs have a lock-in period of 5 years, and the interest rate depends on the bank and prevailing rates.

4. Health-Related Deductions (Section 80D):

   • Medical insurance and preventive health check-ups for self and family up to Rs. 25,000 annually.

   • Medical insurance and preventive health check-up costs for parents or parents-in-law also qualify.

For more details and current information on NRI taxation you can refer to the Indian Income Tax website.