My son is 21 years old and financially dependent on me. He has been studying in Australia since 2019 and as such is an NRI (Non-Resident Indian). He has a savings bank account in India. He also has a PNA. I understand that NRIs cannot avail benefits under section 80C for tax savings. I want to transfer a part of my income to his bank account to invest in his name and reduce my taxable income and tax expense. What are the avenues available for him to have zero tax liability and at the same time I will be able to reduce my tax expenditure to the maximum through him?
No. Your understanding about the eligibility of NRIs to claim deduction under section 80C is not entirely correct. One NRI Eligible to claim full deduction under section 80C up to Rs. 1.50 lakhs every year but there are restrictions on the products in which an NRI can invest to claim this deduction. Hence an NRI is not entitled to open a PPF account and also cannot invest in NSC, Senior Citizen Scheme and Post Office Monthly Schemes. So barring these restrictions, your son can invest in many other tax saving avenues available under section 80C like ELSS, ULIP, payment of life insurance premium, tax saving FD, repayment of home loan etc.
You can gift any amount to your son which will neither attract any tax liability to either of you as to make the relationship of father and son a gift out of the purview of taxation under the category for specified relatives has been covered. It will also not attract any clubbing provisions. He can save tax by availing the basic exemption of Rs. 2.50 lakhs by investing in any product like ELSS. 1.50 lakh in a year. Please note that by simply transferring the income from your account to your son’s bank account, you will not be able to reduce the tax that you are otherwise liable to pay on such income. However, any income from the money so transferred shall be included in his income and taxed in his hands.
Balwant Jain is a tax and investment specialist and can be contacted on Twitter.com at jainbalwant@gmail and @jainbalwant.
Don’t miss a story! Stay connected and informed with Mint.
download
Our App Now!!
.