Can an NRI claim Tax benefit under section 80C?
Strictly speaking, the term non-residentÂ refers only to theÂ tax statusÂ of a person who, as per section 6 of the Income-tax Act of 1961, has not resided in India for a specified period for the purposes of the Income Tax Act.Â The rates of income tax are different for persons who are “resident in India” and for NRIs. For the purposes of the Income Tax Act, “residence in India” requires stay in India of at least 182 days in a calendar year or 365 days spread out over four consecutive years. According to the act, any Indian citizen who does not meet the criteria as a “resident of India” is a non-resident of India and is treated as NRI for paying income tax. TAX benefit given to NRIs by Govt. of India:- Income Tax Act of India offers many options to derive Tax benefits. These benefits are captured in various sections in the Act. The most popular section among these is Section 80C which involves guidelines for Tax benefits regarding some specific investments and these investment benefits are applicable for NRIs too. An NRI can derive its benefit to reduce his/her taxable income in India.A brief description of section 80C is as follows- Section 80C (various investments):- This section has been introduced by the Finance Act 2005. Broadly speaking, this section provides deduction from total income in respect of various investments/ expenditures/payments in respect of which tax rebate u/s 88 was earlier available. The total deduction under this section (alongwith section 80CCC and 80CCD) is limited to Rs. 1 lakh only.
- Life Insurance Premium For individual, policy must be in self or spouse’s or any child’s name. For HUF, it may be on life of any member of HUF.
- Sum paid under contract for deferred annuity For individual, on life of self, spouse or any child .
- Sum deducted from salary payable to Govt. Servant for securing deferred annuity for self-spouse or child Payment limited to 20% of salary.
- Contribution made under Employee’s Provident Fund Scheme.
- Contribution to PPF For individual can be in the name of self/spouse, any child & for HUF, it can be in the name of any member of the family.
- Contribution by employee to a Recognized Provident Fund.
- Sum deposited in 10 year/15 year account of Post Office Saving Bank
- Subscription to any notified securities/notified deposits scheme. e.g. NSS
- Subscription to any notified savings certificate, Unit Linked Savings certificates. e.g. NSC VIII issue.
- Contribution to Unit Linked Insurance Plan of LIC Mutual Fund e.g. Dhanrakhsa 1989
- Contribution to notified deposit scheme/Pension fund set up by the National Housing Scheme.
- Certain payment made by way of instalment or part payment of loan taken for purchase/construction of residential house property. Condition has been laid that in case the property is transferred before the expiry of 5 years from the end of the financial year in which possession of such property is obtained by him, the aggregate amount of deduction of income so allowed for various years shall be liable to tax in that year.
- Contribution to notified annuity Plan of LIC (e.g. Jeevan Dhara) or Units of UTI/notified Mutual Fund. If in respect of such contribution, deduction u/s 80CCC has been availed of rebate u/s 88 would not be allowable.
- Subscription to units of a Mutual Fund notified u/s 10(23D).
- Subscription to deposit scheme of a public sector, company engaged in providing housing finance.
- Subscription to equity shares/ debentures forming part of any approved eligible issue of capital made by a public company or public financial institutions.
- Tuition fees paid at the time of admission or otherwise to any school, college, university or other educational institution situated within India for the purpose of full time education of any two children. Available in respect of any two children.