Budget 2025: The NRI’s wish list

Non-resident Indians play a vital role in India’s economic and social progress, significantly contributing to the country’s growth through remittances, investments, entrepreneurship, and international trade. As the Union Budget for 2025-26 approaches, NRIs will be looking for clarity on certain rules as well as incentives and reforms that could strengthen their contribution to India’s economic landscape.

Clarity in residency rules

Under the Income-tax Act 1961, an Indian citizen visiting India can retain their non-resident status even if they stay longer than the threshold period of 60 days, provided the income threshold is also met. But the term ‘visit’ is not defined under the law, leading to ambiguity in cases where individuals make short trips to India and render services from the country. Clarity on what constitutes a ‘visit’ will help NRIs determine their residential status—which in turn has tax implications—and offer appropriate income to tax.

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Treaty relief at withholding stage

NRIs often claim tax relief (tax credit/exemption) under applicable Double Taxation Avoidance Agreements or treaties in the tax return, leading to significant refunds. Clear guidelines/rules on claiming treaty relief at the tax withholding stage by employers will reduce the administrative burden and minimise refunds in the tax return. An amendment to Form 16 on claiming treaty reliefs will allow employers to account for that while deducting tax from salaries.

ESOPs tax deferral

India’s tax laws allow employees of ‘eligible startups’, including NRIs, to defer paying taxes on employee stock options, or ESOPs. Employers can also defer withholding tax. This benefit should be extended to all employees, including NRIs, working in any organization, not just those in eligible startups. Such a move will further promote the inclusion of ESOPs as part of employee compensation, better cash flow management for employees (especially NRIs), and simplify tax compliance for all employers.

Streamlining TDS procedures on sale/rent of immovable property

Currently, individuals buying property worth ₹50 lakh or more from a resident seller must deduct 1% tax while paying for the purchase. Similarly, tenants paying a monthly rent of over ₹50,000 to a resident landlord must deduct 2% annually.

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Enhanced tax-filing mechanism

The introduction of simplified ITR (income tax return) forms has significantly streamlined the tax filing process. However, e-verification remains a challenge for NRIs who do not possess Aadhaar or Indian bank accounts. They often rely on physical verification by mailing the ITR-V form from overseas, leading to delays. The reduced e-verification deadline of 30 days further makes the process difficult. Additionally, they face challenges in accessing Form 26AS, AIS (annual information statement), and TIS (taxpayer information summary) from overseas IP addresses. A streamlined e-verification and access procedures would improve the efficiency and user-friendliness for NRIs.

Extension of ITR-1 applicability to NRIs

The simplified ITR-1 tax return form is available exclusively to resident individuals, with income limited to salary, one-house property, agricultural income (up to ₹5,000), and other sources. Given that many non-residents may have only limited income sources, covering NRIs in form ITR-1 will simplify the compliance process.

Filing of Form 10F

Currently, NRIs seeking to avail treaty reliefs are required to file a self-declaration electronically in Form 10F, confirming possession of a tax residency certificate (TRC) from their overseas jurisdictions. There is a challenge in submitting TRCs for future periods as these are typically unavailable at the time of filing the tax return. Amendment to Form 10F allowing the taxpayer to declare that the TRC for the relevant future period will be obtained and provided subsequently will ensure compliance without procedural challenges.

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Crediting income tax refunds to overseas banks

NRIs frequently encounter difficulties receiving tax refunds into their overseas bank accounts. Although the ITR utility permits the inclusion of overseas bank account details, refunds are not credited to these accounts. Instead, an intimation requiring account validation is initiated, which is restricted to Indian bank accounts.

NRIs also encounter challenges in making tax payments, as they are required to remit taxes exclusively through Indian bank accounts. This limitation poses cash flow challenges for NRIs, highlighting the need for a streamlined tax payment process.

Restore previous tax return deadlines

Currently, the due date for filing belated or revised tax returns is 31 December of the assessment year. However, NRIs who qualify as residents and ordinarily residents face challenges in claiming credit for taxes paid in their overseas jurisdictions due to the unavailability of foreign tax returns by the 31 December deadline.

It would be beneficial for NRIs if the filing date for belated or revised returns is extended to 31 March of the assessment year, which will provide them sufficient time to claim the appropriate tax credit or exemption.

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Sameer Gupta is national tax leader and Amarpal S. Chadha is tax partner at EY India. Shanmuga Prasad, director-tax, EY India, also contributed to the article.