3 Tips for NRIs to Reduce Tax Liability in India Legally
NRIs struggle with the intricacies of tax. Especially when dealing with their financial affairs in India. Knowing how to legally lower the tax burden is very important. These strategies ensure compliance and maximise tax efficiency in more than one jurisdiction abroad.
Three effective tips for NRIs to reduce tax liability in India legally are:
Strategic bank account selection significantly impacts your overall tax liability in India. NRE and FCNR accounts offer complete tax exemption on interest earnings. These accounts provide full repatriation benefits without any tax deductions at the source.
NRO accounts handle Indian-source income but attract taxation on interest earned. However, filing returns helps claim TDS refunds when annual income stays below ₹2.5 lakh. This approach works particularly well for NRIs in Singapore, the USA and Australia.
By using the accounts properly, the tax payments can be minimised without breaking the regulations. Select account types in line with the types of income you receive. This fundamental step forms the foundation of effective tax planning for international residents.
In India, there are currently Double Taxation Avoidance Agreements with more than 80 countries across the world. These arrangements reduce the chances of having double taxation of the same income in various jurisdictions. DTAA benefits significantly reduce tax rates on various income streams for global residents.
Form 10F and the Tax Residency Certificate enable DTAA claim processing effectively. Standard TDS rates of 30% often reduce to 10-15% under these agreements. This reduction applies to interest, dividends and capital gains from Indian investments internationally.
These provisions prove beneficial to the NRIs in the UK, Japan and other DTAA countries in a big way. Correct documentation makes the processing easy and saves maximum tax. The knowledge of bilateral agreements can be used to manage NRI related services professionally.
The old tax regime offers numerous deduction opportunities for reducing taxable income. Section 80C provides deduction of up to 1.5 lakh on investments and expenses. These are ELSS mutual funds, home loans principal, insurance premiums and tuition fees.
Additional deductions under Section 80CCD(1B) provide ₹50,000 relief for NPS contributions. Other sections such as 80D, 80E, 80G and 80TTA have additional tax benefits. Section 24(b) allows mortgage interest deductions exceeding ₹2 lakh for residential properties.
A strategic combination of several deductions is helpful in saving maximum amount of taxes and keeping the investments diversified. They are important tools in managing NRI tax matters while remaining compliant. Professional guidance ensures optimal utilisation of available deduction opportunities for international residents.
These strategies offer legal options to NRIs to maximise their tax liability in India. It is implemented with the necessity of knowing particular rules and staying compliant in various jurisdictions. Tax planning has to be in full compliance and professional advice will help achieve the greatest advantages.
For NRIs based in Singapore, the USA, Japan, Australia or the UK running businesses in India, these approaches help retain more profits legally.
Prakash K Prakash specialises in comprehensive NRI related services for Non-Resident Indians residing globally. We understand the complexities NRIs face while handling financial, legal and investment concerns in India. Starting from property transactions and tax filings to repatriation of funds and compliance with FEMA regulations, our professional team makes sure that you get smooth, transparent and legally sound support.
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