The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, introduces significant policy changes that impact Non-Resident Indians (NRIs). These changes cover taxation, remittances, investment opportunities, real estate transactions, and financial compliance. This article explores the major highlights of Budget 2025 and their implications for NRIs.
1. Revised Tax Residency Rules for NRIs
The government has introduced new tax residency criteria to curb tax avoidance and improve compliance:
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Revised Residency Criteria: NRIs staying in India for more than 120 days in a financial year, with Indian income exceeding ₹15 lakh, will now be treated as tax residents.
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Automated Tax Compliance: NRIs earning rental income, capital gains, or dividends from Indian sources will be subject to enhanced digital tax scrutiny.
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Pre-Filled Tax Returns: The union budget 2025 for NRI includes a provision for pre-filled Income Tax Return (ITR) forms for NRIs to simplify tax compliance.
2. Changes in Tax Collected at Source (TCS) on Remittances
Modifications under the Liberalized Remittance Scheme (LRS) provide relief for NRIs sending money abroad:
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Higher TCS Exemption Limit: The TCS-free threshold has been increased from ₹7 lakh to ₹10 lakh per financial year.
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Lower TCS on Education & Medical Transfers: TCS rates on remittances for education and healthcare expenses have been reduced to ease financial burdens.
3. Investment and Market Reforms Benefiting NRIs
The budget introduces incentives to attract NRI investments:
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Equal Long-Term Capital Gains (LTCG) Tax Rates: NRIs now enjoy the same LTCG tax treatment as resident investors.
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Extended Startup Tax Exemptions: NRIs investing in startups will benefit from extended tax exemptions until April 1, 2030.
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Relaxed FDI Norms: Foreign Direct Investment (FDI) policies have been liberalized for real estate, technology, and renewable energy sectors.
4. Real Estate Taxation and Property Sale Reforms
Significant reforms have been introduced in NRI property transactions:
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Faster TDS Refunds on Property Sales: NRIs selling property in India will experience quicker TDS refund processing.
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Standardized TDS Rates: Property transactions exceeding ₹50 lakh will have a uniform TDS rate of 20%, eliminating discrepancies.
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Online TDS Certificate Application: NRIs can now apply for lower TDS certificates through a streamlined digital process.
5. Digital Banking and Financial Inclusion for NRIs
The budget proposes several measures to improve financial access for NRIs:
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Fully Digital KYC for NRE & NRO Accounts: NRIs can now complete KYC verification online, eliminating the need for physical presence.
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PAN-Aadhaar Integration for Compliance: The government has simplified tax compliance by integrating PAN and Aadhaar for financial transactions.
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Enhanced Repatriation Mechanism: A new digital repatriation system will enable faster and more transparent fund transfers.
6. Strengthening DTAA Benefits and Foreign Income Reporting
To ensure compliance with international tax laws, the government has enhanced Double Taxation Avoidance Agreement (DTAA) provisions:
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Global Income Transparency: NRIs must now disclose foreign income and assets more comprehensively to claim DTAA benefits.
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Lower Tax on Retirement Fund Transfers: Special tax relaxations apply for NRIs transferring 401(k) and UK pension funds to India.
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Automated Global Tax Data Exchange: India has expanded its participation in international tax information sharing networks.
7. Social Security and Retirement Fund Benefits
New policies protect NRI social security and retirement benefits:
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Recognition of Foreign Social Security Contributions: NRIs working in foreign countries with mandatory social security deductions can avoid double taxation.
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Retirement Fund Transfers at Lower Tax Rates: NRIs can repatriate foreign retirement savings to India with reduced tax liabilities.
Conclusion
The Union Budget 2025 introduces a combination of tax compliance measures and investment incentives for NRIs. While stricter residency norms and global income reporting may require better financial planning, benefits like higher TCS exemptions, tax-friendly investment policies, and enhanced banking facilities offer significant advantages.
To make informed financial decisions, NRIs should seek expert tax and investment guidance. Dinesh Aarjav & Associates provides comprehensive financial advisory services tailored to the needs of NRIs.
