It's first important to understand what the tax savings under Sec 80C actually comprise off. These investments actually include insurance premium paid, permissible HRA exemptions, tuition fees of children paid, Public Provident Fund (PPF), Unit Linked Insurance Plans (ULIPs), National Savings Certificate, Employees Provident Fund contribution etc.
What this means is that if you have invested in any of the above during the year, you can deduct the same from your total income during the year.
Let's cite an example. Say for example your total income is Rs 5.5 lakhs during the year and you have invested in the above instruments to the tune of Rs 1.2 lakhs. Then you can deduct this Rs 1.2 lakhs from the income of Rs 5.5 lakhs, thus placing your total income after Sec 80C benefits at just Rs 4.3 lakhs. So, tax payable will be on a sum of Rs 4.3 lakhs and not on a sum of Rs 5.5 lakhs.
NRIs and Sec 80C
NRIs are not allowed to invest in all of the instruments where there is a Sec 80C benefit. For example, NRIs are not allowed to invest freshly into schemes like the National Savings Certificate and Public Provident Fund, while existing accounts can continue. There is no question of NRIs making contribution to the Employees provident Fund as well. However, they can invest in ULIPs and life insurance premium. NRIs are not allowed fresh investment in small savings schemes issued by the post office.
So, if you are an NRI, here is a quick list of instruments that you can invest in as a non Resident Indian for availing tax benefits under SEC80C of the Income Tax Act.
1) Life Insurance Premium paid.
2) School fees of children paid for studying in India. Only tuition fees qualify for tax rebate and not term fees and transportation charges.
4) Principal amount paid on a housing loan.
5) Equity Linked Saving Schemes
6) NRO Tax Saver Fixed Deposit offered by banks.
In this Union Budget Finance Minister Arun Jaitley announced a hike in the tax exemption limit under Sec 80C from Rs 1 lakh to Rs 1.5 lakh. So, NRIs should go ahead and make the most of it.