Govt of India presented its Budget 2022 proposals on February 1, 2022. Seems a new India budget as it is proposing for Drones, 5G, Digital University, Digital Currency, E-Passport, More Infrastructure, Indigenous Defence Manufacturing and many other future India proposals. There are various tax & other proposals made through this budget. Here is a brief summary of those, which will impact Non-Resident Indians ‘NRI’ (Indian Citizen living/working abroad), Foreign Citizen (PIOs, OCIs, Others), Seafarers, Expatriates.

Income Tax Slabs (FY 2022-23)

There is no change or new provision on Tax Slabs. Hence, Tax Slabs will be the same as it was for FY 2020-21, which is as under:

Non Residents (NRIs, OCIs, Expatriates) Tax Slabs (Applicable For FY 2021-22, FY 2022-23)

Tax Rates

(without tax deductions benefits)

Tax Rates

(without tax deductions)

Up to to Rs 2.5 Lakh Nil Nil
Rs 2.5 Lakh to Rs 5 Lakh 5% 5%
Rs 5 Lakh to Rs 7.5 Lakh 10% 20%
Rs 7.5 Lakh to Rs 10 Lakh 15% 20%
Rs 10 Lakh to Rs 12.5 Lakh 20% 30%
Rs 12.5 lakh to Rs 15 Lakh 25% 30%
Rs 15 Lakh and above 30% 30%

Above slabs are applicable for all individuals including Non-residents, NRIs, Seafarers, Expatriates etc.

Also Read:

NRI New Income Tax Slabs Effective FY 2020-21 To FY 2022-23

NRI ITR Filing Benefits, Non-ITR Filing Consequences 

Capping Of Capital Gain Surcharge at 15%

Though, there is a buzz that there is nothing in this Budget regarding tax rates reduction. However, it is not so. Budget 2022 has proposed a welcome tax saving clause for restricting the Surcharge on Capital Gains to 15%. This is a very relaxing proposal for all including NRIs, Non-residents doing high value capital gain transactions in India specifically Immovable Property Sale Transactions. Here is brief explanation on this proposal and its impact:

  • Presently, tax is calculated as per the applicable tax rates on the Total Income (TI) of Taxpayer.
  • Once basic tax is calculated (as per respective tax rates), a surcharge is levied, if applicable, as per the applicable surcharge rate.
  • Surcharge is applicable if Total Income (TI) exceeds Rs 50 Lakh.
  • Rate of surcharge varies from 10% to 37% i.e. 10% (TI Rs 50 Lakh to 1 Crore), 15% (TI Rs 1 Crore to 2 Crore), 25% (TI 2 Crore to 5 Crore), 37% (TI exceeding Rs 5 Crore).
  • A cap of 15% on surcharge was provided in Budget 2019  in relation to capital gains on STT paid Equity shares and Mutual Funds.
  • Now, the cap of 15% window is also extended on all types of Long Term Capital Gains.
  • Hence, to understand this, if a person is selling an immovable property in India where long term capital gain is arising for more than Rs 2 Crore. So, as per earlier provisions, higher surcharge rate as per applicable rate (i.e. 25% or 37% of tax) was applicable. However, now, as per the amended provisions, surcharge will be restricted to 15%.

Impact On NRIs, Non-residents: Many NRIs and Other Non-residents do own/inherit immovable property and other assets in India. In many cases the sale consideration on sale of these property or assets is significant, and capital gains on same exceed Rs 2 Crores or 5 Crores. Now, with the reduced rate of surcharge, the effective tax liability will get reduced. Also, for the purposes of TDS applicability the effective TDS rate will be reduced.

Tax Planning For Immovable Property Sales Being Made Before March 31, 2022: NRIs can do tax planning, who are in process of selling immovable property in India before March 31, 2022. If capital gain is arising more than Rs 2 Crores or 5 Crores, they can plan to do the registration of property after March 31, 2022. If they do so, surcharge will be restricted to 15%, and they will save huge amount of tax in the form of lower surcharge rate.

Also Read:

Income Tax And RBI Regulations Wrt Non Resident, NRI Property Buying In India 

Tax Rules and Planning For Property Sale In India By Non-Residents. How To Apply Lower TDS Certificate For Property Sale In India.

30% Tax On Digital or Crypto Currency

Budget 2022 has proposed tax provisions on Digital Currency or Crypto Currency. With this India has become the first country in the world to provide provisions for taxation on Digital Currency or Crypto Currency. Here are the salient features of the new Digital Currency Tax Provisions:

  • Tax Provisions have been provided in relation to Virtual Digital Asset (VDA), which includes Digital Currency and/or Crypto Currency.
  • A new section 115BBH has been inserted to tax the Crypto Currencies at special rates, to be effective from FY 2022-23 ie April 1, 2022.
  • Taxation will be straight @30% on income arising from VDA i.e. Sale price minus cost price.
  • Except cost of acquisition, no other expenses e.g. borrowing cost etc will be allowed as expense.
  • If there is any loss on sale of VDA (Crypto, Digital Currency) the same is neither allowed to be set off against any other income of same year nor it is allowed to be carried forward to next years.
  • Also, loss of any other head is not allowed to be set off against VDA income.
  • No indexation of cost of VDA (Crypto, Digital Currency) is allowed.
  • TDS @ 1% has been introduced on VDA (Crypto) Transactions. Hence, all these transactions shall get reported to Income Tax Authorities by the Crypto Exchanges.
  • Gifts of these assets (Crypto, Digital currencies), to other than close relatives, will be taxable in the recipient hands.

Impact On NRIs, Non-residents: Many NRIs and Other Non-residents do trade in Crypto Currencies. Till now, many were treating Crypto Income under Business Head by claiming various expenses to reduce the net income. In many cases, it was being shown as Capital Gain income and lower rate & indexation benefit were claimed. Many NRIs, Non-residents were also trading internationally where buying was made outside India and selling was made in India. Now, with the TDS introduction, these transactions will be difficult.

Tax Planning Before March 31, 2022: The new tax provisions on Crypto Currency will be applicable wef April 1, 2022. Hence, till March 31, 2022, one can (including NRIs) book profits on Crypto Currency by selling it before March 31, 2022 and enjoy the present provisions of law. E.g. if there is a loss then the same can be set off against income from other heads; if it is a business income then expenses can be booked agains crypto currency income etc.

2 More Years For Filing Income Tax Return

There is a welcome provision in the Budget 2022 for NRIs, Non-residents, Seafarers. Presently, an ITR can be filed by due date i.e. July 31 of the assessment year. A Revised or Belated ITR is allowed to be filed upto Dec 31 of the relevant assessment year. However, after December 31, there is no window to file the ITR. Now, a new provision {i.e. Sec 139 (8A)} has been inserted. Here are salient features of new provision i.e. Updated Income Tax Return:

  • Budget 2022 has allowed filing of ITR beyond the present max time limit (i.e. Dec 31 of relevant AY). As per the new provision, an ITR can be filed upto 2 years from the end of relevant AY. In other words, an ITR can be filed upto 3 years from the end of relevant Financial Year. E.g. ITR of FY 2021-22 can be filed upto March 31, 2025.
  • This extended window for filing the ITR will attract an additional tax payment.
  • If an updated ITR is filed within 12 months from the end of relevant assessment year then assessee will have to pay an additional tax @25% of outstanding tax & interest payable on filing of Update ITR.
  • If an updated ITR is filed after 12 months and within 24 months from the end of relevant assessment year then assessee needs to pay 50% of outstanding tax & interest payment as additional tax.
  • The intent of law by providing this new provision is to allow the genuine tax payers a window to file correct information about income and expense and pay taxes thereon. Hence, to reduce down their penalty cost and also to reduce down the litigation.
  • The new window of updated ITR is not allowed to claim a refund or loss. Hence, a Refund or Loss ITR cannot be filed under this extended time limit.
  • Yes, an ITR can be filed under this mechanism if there is no outstanding tax or interest payable.

Also Read:

What If NRI Missed Filing Of ITR For Earlier Years

NRI, Non Resident, Seafarer, Expatriates ITR Filing Rules And Provisions In India

Miscellaneous Proposals Having Impact On NRIs, Other Non-Residents

There are several other proposals in Budget 2022, which will impact NRIs, Other Non-Residents (OCIs, PIOs, Expatriates). Some of those are hereunder:

  • Digital Rupee: Govt of India will introduce its own Digital Currency. It will benefit NRIs, OCIs, Expatriates in reducing the cost of cross-border remittances.
  • E-Passports: Govt has planned to launch E-passport with embedded chip. This will help and ease arrival and departures. The chip will also facilitate in linking of data with various authorities of India. It will also help in updating tax authorities regarding residential status of NRIs, Other Non-residents. Now, tax authorities will be able to capture date directly into their records, which will benefit honest tax payers but will catch those who are not fulfilling their tax obligations based on their correct residential status.
  • GDP Growth 9.2%: FM Sitharaman estimated India GDP growth @9.2% for FY 2022. This will boost NRIs, Other Foreign Citizens confidence to invest in India. Will boost continuity of NRIs remittance to India.

Usefulness Of Above Information – Budget 2022 For NRIs, Seafarers

The above information can be helpful to NRIs, PIOs, OCIs Expatriates, and Other Non-Residents in relation to their various doubts about Indian Budget 2022 Impact on NRIs PIOs such as:

  • What are Budget 2022 provisions in relation to NRIs, PIOs, Expatriates?
  • How does Budget 2022 benefit NRIs, other Non Residents?
  • As an NRI, what do I need to know about Budget 2022?
  • Chartered Accountant (CA) Services for NRIs in connection with Budget 2022 provisions?
  • Whether Budget 2022 is good or bad for NRIs PIOs Non Residents?

NRI Services/Topics By S Lohia & Associates NRI Team