The 2025 Budget presents an opportunity for the government to address key concerns of the global Indian diaspora.
Budget 2025: The upcoming Union Budget is seen with high hopes from Non-Resident Indians (NRIs), with a focus on simplifying the 182-day residency rule and easing Tax Deducted at Source (TDS) compliance for NRIs selling properties in India. These measures could address long-standing challenges faced by NRIs in navigating India’s complex tax framework while boosting economic engagement.
Budget 2025 Expectations
Residency Rule Revisions: Balancing Complexity and Economic Participation
India’s overseas community, comprising 35.42 million individuals, has faced increasing challenges in determining their tax residency status since the Finance Act, 2020 introduced stricter anti-avoidance measures. The existing framework revised the 182-day rule, establishing a tiered classification system based on the duration of stay and Indian income:
- Individuals staying for less than 120 days are considered non-residents.
- Those staying between 120 and 182 days with Indian income below Rs 15 lakhs remain non-residents.
- Individuals staying between 120 and 182 days and earning more than Rs 15 lakhs in Indian income are classified as “not ordinarily resident,” making their India-sourced income taxable at resident rates.
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Rahul Charkha, Partner at Economic Laws Practice, highlights the challenges this framework poses, especially for blue-collar workers and other NRIs with seasonal stays in India. “The stricter rules discourage long-term engagement and investment by NRIs, as they fear additional tax liabilities. A return to the 182-day rule could restore balance, encouraging greater participation in India’s economy while simplifying compliance,” Charkha said.
The proposed Direct Tax Code (DTC) aims to streamline these provisions, reducing complexities in tracking stay durations and income thresholds over multiple years. Restoring the 182-day threshold would likely make tax compliance easier for NRIs while maintaining a robust tax base, Charkha says.
Simplifying TDS Compliance for NRIs Selling Properties
Another key area of focus in the upcoming budget is the cumbersome TDS compliance process for NRIs involved in property transactions. Current rules under Section 194-IA of the Income Tax Act require buyers of properties worth Rs 50 lakh or more to deduct 1% of the purchase value as TDS. However, if the seller is an NRI, taxes are withheld at higher rates, and buyers must obtain a Tax Deduction Account Number (TAN), file e-TDS returns, and navigate a more complex process.
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Akhil Chandna, Partner at Grant Thornton Bharat, advocates for simplification. “The current process is cumbersome, especially since property transactions are typically one-off for buyers. Introducing a single challan-cum-statement, similar to Form 26QB for resident sellers, would significantly ease compliance for buyers and encourage smoother property transactions involving NRIs,” he explained.
This proposed reform could reduce the administrative burden on buyers while ensuring better compliance from both parties involved in property sales.
Tax Relief for NRI Investors
In addition to residency and property-related tax reforms, NRIs are hoping for relief in taxation on trading income. Sujit Bangar, Founder of Taxbuddy, pointed out that regular tax provisions apply to NRIs engaged in trading Indian equities or futures and options (F&O). “Many NRIs feel this tax burden is excessive. A reduced tax rate on NRI income from trading could encourage greater participation in Indian financial markets and attract long-term investment,” Bangar said.
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A Balanced Approach for the Future
The 2025 Budget presents an opportunity for the government to address key concerns of the global Indian diaspora. Simplifying TDS compliance, revising the residency rule, and reducing trading-related tax burdens could collectively enhance economic participation and strengthen India’s ties with its overseas community. As the country prepares to unveil its Direct Tax Code, these measures could serve as a cornerstone for a fairer, more inclusive tax regime for NRIs.