Understanding Section 80C: Income tax benefits for NRIs and their dependents

My daughter is 21 years old, dependent and has no income of her own. She has been studying in the USA since 2022 and is thus an NRI. She has a savings bank account in India, a PAN and an Aadhaar. I understand NRIs cannot avail of any items under section 80C, including PPF, for tax savings. I would like to transfer some of my incometo her savings bank account and invest in her name and through that account to save on my taxable income and tax outgo. What avenues are available so she has zero tax liability and I reduce my tax outgo to the maximum through her?

No. Your understanding is not entirely correct about the eligibility of non-residents to claim deductions under Section 80 C. Residents, and non-residents are equally entitled to avail of the tax benefits under Section 80 C, provided the old tax regime opts. However, a non-resident is not entitled to open a PPF account or invest in NSC, Senior Citizen scheme and post office monthly scheme except this restriction, your daughter can invest in other tax saving avenues available under Section 80 C like ELSS, ULIPs of mutual funds, payment of life insurance premium if she has a life insurance policy or invest in tax saving FD, repayment of home loan etc. As far as saving tax by transferring money to her is concerned,

How can I maximise tax savings by investing in my NRI daughter’s name?

Yes, you can gift any sum to your daughter, which will not attract any tax liability or clubbing provisions. You can save tax by availing the basic exemption of Rs. 2.50 lakhs and investing in ELSS, etc., of ₹1.50 lakh in a year. Please note that just by transferring income from your account to her savings bank account, you cannot avoid the tax you are otherwise liable to pay on such income as any income arising on money so transferred shall be included in her income and taxed in her hand.

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Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail.com and @jainbalwant his X handle.

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