B. TAX-FREE INCOME
FOR NRIs AND THOSE EARNING OVERSEAS
1. Non-residents
Indians are granted certain tax exemptions if they are defined as, or fulfill
the criteria of, Non-Resident Indian under the Income Tax Act, 1961.
2. These tax free incomes available to Non-Resident
Indians are:
o
Interest earned on Savings Certificate,
o
Interest earned on Non Resident (Non Repatriable)
[NRNR] Deposit,
o
Interest earned on Foreign Currency Non Resident
(Bank) [FCNR(B)] Deposit,
o
Overseas income of NRIs,
o
Dividend income from Indian Public/Private Company,
Indian Mutual Fund and from Unit Trust of India,
o
Long-term capital gains arising on transfer of equity
shares traded on recognized Stock Exchange and units of equity schemes of
Mutual Fund is exempt from tax at par with residents,
o
Remuneration or fee received by non-resident /
non-citizen / citizen but not ordinarily resident 'consultants', for rending
technical consultancy in India under approved programme including remuneration
of their employees, and
o
Income of their family members which accrue or arise
outside India, Interest on notified bonds.
C. TAX DEDUCTIONS FOR
NRIs AND THOSE EARNING OVERSEAS
1. Non-Resident
Indians are allowed the following deductions under Income Tax Act, 1961:
o
Home Loan Interest Deduction: Non-residents Indians
are eligible to avail deductions on home loan interest for the interest portion
of the EMI paid towards the repayment of home loans.
o
Savings Deduction: From the various tax saving avenues
available to the general public – Equity instruments like ELSS, Debt
instruments like PPF, National Savings Certificate, Bank FDs etc and Life
Insurance and Pension Plans.
o
Health Insurance Premium Deduction: On
mediclaim/health insurance policy of self and family, and also for senior
citizen parents.
o
Other Deductions: For interest paid on education loan,
and for certain specified donations.
2. Non-residents Indians are not allowed the following
investments:
o
Not allowed to open a PPF account, although an
existing PPF account can be continued till maturity.
o
Not allowed from investing in National Saving
Certificates (NSC), Senior Citizens Savings Scheme (SCSS) and Post Office Time
Deposits (POTD), although existing investments (i.e., those that were purchased
before becoming an NRI) can be continued till maturity.
D. TDS FOR NRIs AND
THOSE EARNING OVERSEAS
1. When a NRI sells a property, he has to deduct 20% TDS and deposit
it with the government.
2.
NRIs are not permitted to submit Form 15G for interest on their NRO deposits in
banks, and TDS is mandatory, which is 30.9% without any threshold limit on
interest income.
3. The interest earned on all other investments, such as
corporate deposits and bonds, is subject to a 20.6% TDS.
4. 15% TDS is applicable on short-term or long-term capital gains
earned by NRIs when they sell mutual funds or stocks if the securities
transaction tax (STT) has been paid, and 30.9% TDS if no STT has been paid.
5. NRIs are liable to pay 30% TDS on rental income obtained from
land and buildings, and all other taxable incomes, along with a cess of 3%.