The top 10 Tax Tips for 2019 for NRI investors
While it is no secret that resident Indians have to pay taxes for a fiscal year. However, all NRI investors must also pay taxes for a fiscal year if applicable. Irrespective of whether they earned the money directly or indirectly, if they are liable, they must pay taxes on the same. As long as the income is generated in India.
Any income that is generated as a part of their investments or assets or business interests, is liable to taxes. The presence of tax laws means that there are different avenues to save money from tax liabilities as well. If you are an NRI and are looking for tax-related tips, here are some that you might find to be quite useful.
Just like resident Indians, NRIs also can benefit from investing in Section 80C. You can invest as much as INR 1.5 Lacs for a fiscal year in Section 80C as per the Income Tax Act of 1961 and enjoy a reduced tax liability.
Apart from the most common and obvious investment mode of Section 80C, there are a few additional ways to save money and taxes as well. You can invest in NPS instrument (Section 80CCD) and save additional money on the top of Section 80C. however, NRIs cannot invest in PPF, National Savings Certificate or any other senior citizen schemes.
Annual income exceeding a certain limit is subject to TDS. Section 206AA governs the taxes that an NRI is liable to pay. An NRI must furnish their Pan card details when they are investing in India. Failing to do so would result in you paying higher TDS amount.
The income tax liability of an individual depends on their annual income and residential status. Thus, it is essential to maintain your residential status as NRI. If you have any trips for India, ensure that they do not hamper your NRI status.
NRIs having any home loans in India can use it to claim deductions for their income tax. Under Section 24, NRIs can claim up to INR 2 Lac per year which they pay in interest towards their home loan.
If an NRI is paying any property tax for properties that they own, they can claim the amount as well. Depending on their tax liability they can save taxes.
As an NRI if you wish to sell any properties in India, you would have to pay applicable capital gains tax. It is usually split into short-term and long term capital gains. If you sell your property within 24 months of buying, it is short-term capital gain. And if you sell it after 24 months of buying, it qualifies as long term capital gain.
Most NRIs wish to come back to India to post their retirement. It would be a good idea to buy a health insurance plan. Buying it while being out of the country will help you overcome the waiting period of pre-existing diseases and offer tax cuts.
There are several mutual funds which can offer you tax deductions under Section 80C. The lock-in period of mutual funds is lower than other investment instruments as well.
Holding your savings in an NRE account can be beneficial as well. Since the interest earned is tax-free and the benefits would be available for two years after you shift back to India.
The above would help you better plan and manage your taxes.