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Best Tax Saving Options for NRIs in A.Y. 2018-19

As an NRI, you are qualified for tax exemptions on specific investments in India

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  • NRIs are supposed to pay taxes to India as well
  • There are tips for this tax saving
  • NRIs can use many methods to save taxes

Non- Resident Indians (NRIs) are supposed to pay taxes on income earned in India during a particular financial year. So, any income that has been either accrued or received in India shall form part of the taxable income of NRI. If you have recently moved abroad, you may be worried about ensuring your tax compliance in India for the assessment year 2018-19. Moreover, you need to do tax saving in India with twofold goals- decrease tax liability and increase return on investments. While tax saving is essential, you should strive to invest prudently to reap the maximum benefit of the savings.

These simple tips will help NRIs in tax saving.

If you are an NRI and searching for investment options with tax saving benefits, you should realise that there are various options for the same. Take a look at these tax saving options for NRIs in A.Y. 2018-19:

Bank Deposits

For money to be parked for short-term or long-term investments, NRI can have any one of three following types of banks accounts:

  1. Non-Resident External Rupee Account (NRE): In this type of account, your funds in foreign currency are converted into Indian rupees and the rate prevailing at the time of conversion is applicable. The benefit here is-Interest earned on NRE account is exempt from tax for an individual who qualifies as a ‘person resident outside India’ under the exchange control law.
  2. Non-Resident Ordinary Rupee Account (NRO): Interest earned on NRO account (savings or fixed) is fully taxable. A deduction up to Rs 10,000 may be claimed for interest earned on savings account while filing the tax return.
  3. Foreign Currency Non-Resident Bank Deposit (FCNR): It is a term deposit or fixed deposit account, where NRIs can deposit their money in foreign currency. The deposits canbe made for a minimum maturity period of one year and maximum maturity period of 5 years. The interest earned under this account is tax-free, whereas the principal amount is taxed under wealth tax.

    Opening bank deposits can help save taxes. ecointersect.com

Other popular means of claiming a deduction from gross total income is via Section 80C.

Deductions Under Section 80C

Term Insurance

NRIs can invest in term insurance, a type of life cover, which provides financial coverage to the insured. If the insured expires during the tenure of the policy, then death benefit is payable to the nominee. A deduction of Rs 1.5 lakh is allowed for the premium paid towards term insurance plans as per Section 80C. This deduction can be claimed where the plan has been purchased in the NRI’s name or the name of his/her spouse. Moreover, purchasing online insurance plans like term plans has turned out to be simple, hence you can easily go for these online insurance plans and avail tax benefits on the premium payable.

Unit Linked Insurance Plans (ULIPs)

Unit Linked Insurance Plans offer duals benefits of life insurance and investment. Some part of the premium is utilised as insurance coverage to the policyholder, while the remaining amount is invested in various debt and equity schemes. As with all life insurance plans, the amount invested in a ULIP is available for tax deductions for NRIs.

Subject to certain conditions, the premium paid for ULIPs is allowed as a deduction under Section 80C of the Income Tax Act. ULIP premium can be deducted from your taxable income up to Rs 1.5 lakh, which is currently the permissible limit.

Loan to Buy a Home

Buying a house property is beneficial for you (NRI) as the interest income and principal income will allow for a tax rebate. The total deduction for interest payment on home advances is Rs 1.5 lakh, whereas the principal amount repayment on home loan already qualifies for a tax rebate of Rs 1 lakh.

Equity Linked Mutual Fund schemes (ELSS)

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Loaning a house can help save taxes for NRIs. Pixabay

For NRIs, ELSS also offers similar benefits under Section 80C of the Income Tax Act. ELSS are equity-linked mutual fund schemes investing in a diversified portfolio of Indian stocks. ELSS schemes can be purchased online, yet remember, there is an element of risk in ELSS as money is put into equity markets. Be that as it may, they are tax efficient instruments for NRIs.

National Pension Scheme (NPS)

You can subscribe to NPS if you have retained your Indian citizenship and planned to retire in India. You can contribute to NPS from NRE and NRO accounts. However, the pension needs to be received in India only and cannot be repatriated. Your investment up to 1.5 lakh can be used to avail tax deductions.

NPS comes under EET tax structure (Exempt-Exempt-Tax) and is a cost-effective, government-backed retirement savings plan. All the contributions and accrued capital gains are exempt from tax; however, withdrawal is subject to tax.

Also Read: Rich NRI Keralites Seek State-of-the-Art Old Age Homes to Ensure Stress-Free Life for their Aged Parents

Other Allowable Deductions:

Health Insurance- Deduction under Section 80D

NRIs can take health insurance from Indian companies for themselves or their family members and claim a deduction for the premium paid under Section 80D. Additionally, health plans like cancer insurance plans serve as monthly income plan with different payout options made available upon diagnosis of the disease. The availability monthly income plan feature offers a comprehensive financial coverage for the life assured as well as his family.

The deduction for health insurance is up to Rs25,000 for insurance of self. You can claim a deduction for insurance of parents up to Rs30,000 if their parents are a senior citizen (above 60 years) and Rs25,000 if the parents are below 60 years.

Education Loan- Deduction under Section 80E

Like resident Indians, NRIs can also take educational loans and claim tax deductions on the interest paid under section 80E. This loan might be either taken for higher education for self, spouse or children.

Quit smoking
Saving money by saving taxes now becomes easy for NRIS with these tips. Pixabay.

Besides, there is no limit on the amount which can be claimed as a deduction, and deduction is offered for a maximum of eight years or till the interest is paid, whichever is earlier.Additionally, no deduction is allowed on the principal repayment of the loan.

Conclusion:

As an NRI, you are qualified for tax exemptions on specific investments in India. Before investing, you should make an informed choice by understanding tax laws in India, in addition to the nation of your residence. Moreover, you must select tax saving instruments which would enable repatriation of income at maturity. Your investment decisions should consider your life objectives and also repatriation restrictions on investments in India.

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More US States Lift Taxes From Female Hygiene Products

In Asia, India and Malaysia ended their tax on feminine hygiene products this year, as well.

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feminine hygiene products
Tammy Compton restocks tampons at Compton's Market, in Sacramento, Calif., June 22, 2016. Bills to exempt feminine hygiene products and diapers from sales taxes were vetoed by Gov. Jerry Brown in 2016, but the measure's author's are reintroducing the proposals. VOA

A growing number of states are moving to end a tax on feminine hygiene products seen as discriminating against women.

The issue will be on a state ballot this November for the first time, with voters in Nevada decided the matter in a referendum.

While there is no specific tax on menstrual products in any U.S. state, many states exempt people from having to pay a tax on “medically necessary” products. These products can include medicines, as well as personal care items such as ChapStick and dandruff shampoo. Women’s feminine products, including tampons and pads, have historically not been included in these exemptions.

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Sanitary napkins being made from banana fibre.
Measures

With state taxes typically running between 4 and 9 percent, activists have increasingly been advocating for eliminating the so-called “tampon tax,” saying it unfairly hurts women.

“I think the issue itself has come out of the shadows. It’s really quite a no-brainer,” said Jennifer Weiss-Wolf, who has written a book on the issue, “Periods Gone Public.”

Weiss-Wolf, who also founded the organization Period Equity to eliminate sales tax on menstrual products, notes that women typically spend $70-$100 per year on such products. Many women typically menstruate between the ages of 12 to 50.

Nadya Okamoto, who named her nonprofit organization PERIOD, said the tampon tax can greatly affect low-income women.

“For some people, the few extra cents or dollars really do make a difference,” said Okamoto, whose organization provides menstrual products for those in need.

Okamoto said she became interested in accessible menstrual products when she was younger, and her family did not have a home for a time. During that time, she met homeless women who had to make their own menstrual pads.

“When you don’t have a roof over your head, the tampon tax can mean the difference between buying tampons and having to resort to using socks or cardboard, instead,” she said.

State legislation

Nine states have specifically exempted feminine hygiene products from sales tax: Connecticut, Florida, Illinois, Maryland, Massachusetts, Minnesota, New Jersey, New York, and Pennsylvania. Five other states have no sales tax at all.

feminine
Plastic sanitary pads do not decompose easily.

“We still have 36 states to go,” said Weiss-Wolf, who expressed optimism the measure would be adopted by other states. “Nationally, this is a policy issue that has extraordinary support,” she said, noting that Democrats and Republicans have backed state legislation.

Last year, lawmakers in Nevada passed a bill repealing the tampon tax, with large majorities in both parties supporting the legislation. Republican Gov. Brian Sandoval signed the bill, but the issue must still be decided by voters. Nevada law requires all amendments to sales tax decisions be put to a voter referendum.

“What happens there could be inspiring,” said Weiss-Wolf, who explained that the successful passage of a referendum could create another model for activists to use in their campaign to eliminate the tampon tax.

The latest region to adopt the policy change was the District of Columbia. Mayor Muriel Bowser announced in October that the city would no longer charge sales tax on tampons, sanitary napkins, menstrual cups or comparable products.

She explained her decision in a tweet: “Because feminine hygiene is a necessity, not a luxury.” Sales tax in the District is 6 percent.

feminine
California Gov. Jerry Brown speaks at a forum in Sacramento, Calif. VOA

In some states, bills have been circulated but not passed. California Gov. Jerry Brown vetoed legislation in 2016 on the grounds that it would cost the state too much money. California’s state Board of Equalization estimated the tampon tax repeal would have cost $20 million in 2016.

Okamoto said the main argument she hears against repeal is from people who “don’t see periods as a necessity,” and who “don’t think their tax dollars should be used on periods.”

She said one model that can work for states is to introduce a tax on “something that isn’t a necessity, like alcohol, in place of menstrual hygiene products.”

International issue

The fight against the tampon tax is relatively new in the United States, with most state legislation introduced in the last few years. Activists say they were influenced by similar campaigns in other countries, including in Britain and Australia.

Also Read: Alternative Sanitary Pads Are Here, But Accessibility Still An Issue

Years of campaigning in Australia culminated in October, when federal and state governments announced they were removing a 10 percent tax on feminine hygiene products.

A campaign in Spain also scored a victory in October when the government announced that the value-added tax (VAT) on feminine hygiene products will be cut from 10 percent to 4 percent.

In Asia, India and Malaysia ended their tax on feminine hygiene products this year, as well. (VOA)