As the Union Budget for 2025-26 approaches, the spotlight shines on NRIs’ role in India’s economic growth. With their significant contributions through remittances, investments, and entrepreneurial ventures, Non-Resident Indians (NRIs) are integral to India’s financial ecosystem. The upcoming union budget presents a vital opportunity for the government to address key pain points, ensuring a seamless, inclusive environment for the NRI community.
Experts from EY India have outlined union budget reforms that could reshape how NRIs engage with India’s economy. From tax relief mechanisms to streamlined compliance, these changes could unleash the full potential of NRI contributions.
1. Treaty Relief at Source
Currently, claiming tax relief under Double Taxation Avoidance Agreements (DTAA) is a tedious process, involving lengthy refund cycles. Simplifying this by introducing treaty relief at the tax withholding stage—supported by changes in Form 16—can eliminate administrative burdens. This reform would ensure NRIs’ role in India’s economic growth is supported by hassle-free compliance.
2. Expanding ESOP Tax Benefits
Employee Stock Ownership Plans (ESOPs) are powerful compensation tools. While India’s tax laws allow employees of eligible startups to defer taxes on ESOPs, extending this benefit to all employees, including NRIs, can enhance compensation structures. This step would boost cash flow management, encouraging greater participation from NRIs in India’s growing corporate landscape.
3. Simplifying Property and Rent TDS
Tax Deducted at Source (TDS) on property sales and rent payments is often complex for NRIs. Streamlining these processes, backed by advanced digital infrastructure, would ensure user-friendly compliance. Simplified TDS systems can bolster confidence in India’s regulatory framework, encouraging more NRI investments in real estate.
4. Addressing E-Verification Challenges
E-verifying tax returns is a persistent challenge for NRIs, primarily due to the lack of Aadhaar or Indian bank accounts. Streamlining this process and enabling access to tax forms from overseas IP addresses can make filing returns seamless, fostering greater NRI engagement.
5. Extending Simplified ITR-1 to NRIs
Many NRIs have limited income sources, such as rental income or bank interest. Including them in the simplified ITR-1 filing category would make compliance easier and encourage timely submissions, further enhancing NRIs’ role in India’s economic growth.
6. Enabling Refunds and Payments via Overseas Accounts
Delays in refund credits to overseas bank accounts and restrictions on tax payments through Indian accounts disrupt financial planning for NRIs. Allowing seamless transactions through overseas accounts would resolve these issues, ensuring financial flexibility.
7. Revising Deadlines for Belated Returns
Granting NRIs additional time to file belated or revised returns until 31 March of the assessment year would ensure accurate tax filings. This adjustment would also facilitate the timely claiming of foreign tax credits.
Union Budget 2025: A Seamless Tax Ecosystem
The proposed union budget reforms outlined by EY India present an opportunity for the government to simplify compliance, enhance financial flexibility, and foster deeper engagement from the NRI community. As key contributors to remittances, investments, and entrepreneurship, NRIs’ role in India’s economic growth cannot be overstated.
The Union Budget 2025-26 is more than a fiscal announcement; it is a chance to fortify India’s economic foundation through inclusive, forward-thinking policies. By addressing the concerns of NRIs, the government can ensure their contributions continue to propel India toward becoming a global economic powerhouse.
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