Tax Deductions & Exemptions for NRIs 

1. Section 80C Deductions for NRIs

NRIs can claim tax deductions up to ₹1.5 lakh every year under Section 80C, just like resident Indians. This applies only to income earned in India since NRIs aren’t taxed on foreign income. Below are the key tax-saving options available to NRIs under Section 80C: 

• Life Insurance Premiums: 
  Premiums paid on life insurance policies taken for self, spouse, kids (dependent or independent, minor or major). Maximum 10% of the sum assured. 

• Tuition Fees: 
  Pay school or college fees in India for up to two children’s full-time education and claim a deduction. 

• Principal Repayment of Home Loan: 
  Repay the principal amount of a home loan for a house in India. You can also include stamp duty and registration fees 

• Equity-Linked Savings Scheme (ELSS): 
  Investments in ELSS mutual funds are eligible for deductions. 3-year lock-in period. 

• Unit-Linked Insurance Plans (ULIPs): 
  Premiums paid towards ULIPs, which combine insurance and investment, qualify for deductions. The lock-in period is typically 5 years, and the premium must meet the 10% sum assured condition. 

• Tax-Saving Fixed Deposits (FDs): 
  Put money in 5-year FDs with banks or post offices in India—up to ₹1.5 lakh qualifies 

Restrictions for NRIs:

• Public Provident Fund (PPF): NRIs can’t open new PPF accounts. If you had one as a resident, you can keep investing till it matures (15 years) and claim deductions. 

• National Savings Certificates (NSC): Cannot make new investments in NSC. But existing investment can continue. 

• Senior Citizen Savings Scheme (SCSS): This is not available to NRIs, as it is only to resident senior citizens.  

Notes: 

• The ₹1.5 lakh limit includes deductions under Sections 80C, 80CCC, and 80CCD(1) 

• These benefits work only in the old tax regime. The new tax regime skips Section 80C deductions. 

• File an ITR if your taxable income in India exceeds ₹2.5 lakh or to claim a refund for extra TDS. 

2. House Property Loan Benefits for NRIs:

Owning a house in India? NRIs can enjoy tax breaks on home loans: 

• Principal Repayment (Section 80C): Claim up to ₹1.5 lakh yearly on the principal repayment, including stamp duty and registration fees. 

• Interest on Home Loan (Section 24(b):  

1. Self-occupied property: Deduct up to ₹2 lakh per year on interest paid. 

2. Rented or other property: No limit on interest deduction. 

3. Pre-construction interest: Claim it in 5 equal parts starting from the completion year. 

3. Foreign Income Exemptions for NRIs 

NRIs get tax relief on income earned outside India: 

• Exempt:  

1. Salary, Profits on businesses, capital gains, or other income earned abroad and not linked to India. 

2. Interest on NRE/FCNR accounts (tax-free in India). 

• DTAA Relief:  

1. Double Taxation Avoidance Agreements (e.g., India-US) provide tax credits or exemptions on foreign income taxed across globally. 

• NRIs Only:  

1. Tax applies only to income from India if you’re an NRI (stay in India <182 days). 

4. Capital Gains Exemptions for NRIs

Selling property or assets? NRIs can save on long-term capital gains (LTCG) taxes with these options: 

• Section 54 – Residential Property  

• Sell a house and reinvest the gains in another residential property in India. 

• Conditions: Buy within 1 year before or 2 years after the sale, or construct within 3 years. Max reinvestment: ₹50 lakh (for sales after July 23, 2024). 

Example: Sell a house for ₹80 lakh (₹30 lakh gain), reinvest ₹30 lakh in a new house—₹30 lakh gain is tax-free. 

• Section 54F – Other Assets  

• Sell any asset (not a house, like shares) and invest the proceeds in a residential property in India. 

• Conditions: Same timelines as Section 54. You shouldn’t own more than one house (besides the new one) on the sale date. Reinvest the full proceeds for complete exemption. 

Example: Sell shares for ₹60 lakh (₹20 lakh gain), invest ₹60 lakh in a house—₹20 lakh gain is exempt. 

• Section 54EC – Bonds  

• Sell land or a building and invest LTCG in bonds like NHAI or REC. 

• Conditions: Invest within 6 months, max ₹50 lakh, 3-year lock-in. 

Example: Sell land for ₹70 lakh (₹40 lakh gain), invest ₹40 lakh in bonds—₹40 lakh is exempt. 

Why This Matters for NRIs?

Understanding these tax deductions and exemptions can help you to save a lot of money. Whether it’s investing in a home, saving through ELSS, or managing capital gains, these rules make financial planning easier.  

Always check your resident status and file an ITR when needed to maximize benefits!