On Feb 1, 2025, India’s Honorable Finance Minister Smt Nirmala Sitharaman presented India’s Annual Budget. In this budget, she proposed various new tax related and other proposals. Hereunder, we have summarised some of the proposed provisions, specifically those which have an impact on Non Residents i.e. NRIs (Indian Citizen living/working abroad), Foreign Citizens (PIOs, OCIs, Others), Seafarers, and Expatriates.
Changes In Tax Slabs, Tax Rates – Applicability Wrt FY 2025-26 (Year Ending March 31, 2026), AY 2026-27
Changes In Old Regime: In this budget, there is no change made in Old Regime tax slabs/rates. Old regime is the regime, where tax payer can claim various deductions, however, the tax rates are more as comparative to the New Regime. Tax rates applicable under the old Regime for FY 2024-25 and FY 2025-26 are given in the table below next para.
Changes In New Regime: In this budget, good amount of beneficial changes made in tax slab rates for the New Tax Regime taxpayers. Under the New Tax Regime, a taxpayer cannot claim various deductions, however, rates under the New Tax Regime are much beneficial for tax payers.
Hereunder, is a comparative chart of tax rates for two years i.e. FY 2024-25 (AY 2025-26) and FY 2025-26 (AY 2026-27) is given below. From this chart, the impact of proposed tax rates can be clearly seen as compared to existing tax rates.
Comparative Chart of Existing Vs Proposed Tax Rates under Old & New Tax Regime
| Old Regime | New Regime | ||||
| Tax Slabs
(Applicable For FY 2024-25 and FY 2025-26) | Tax Slabs (FY 2024-25) | Budget 2025 Proposed Tax Rates (FY 2025-26) | |||
| Tax Slabs | Tax Rates | Tax Slabs | Tax Rates | Tax Slabs | Tax Rates |
| <= 2.50 Lakh | Nil | <= 3 Lakh | Nil | <= 4 Lakh | Nil |
| 2.50 Lakh to 5 Lakh | 5% | 3 Lakh to 7 Lakh | 5% | 4 Lakh to 8 Lakh | 5% |
| 5 Lakh to 10 Lakh | 20% | 7 Lakh to 10 Lakh | 10% | 8 Lakh to 12 Lakh | 10% |
| >10 Lakh | 30% | 10 Lakh to 12 Lakh | 15% | 12 Lakh to 16 Lakh | 15% |
| 12 Lakh to 15 Lakh | 20% | 16 Lakh to 20 Lakh | 20% | ||
| >15 Lakh | 30% | 20 Lakh to 24 Lakh | 25% | ||
| >24 Lakh | 30% | ||||
Analysis of Budget Proposals For Tax Rates Changes – For NRIs
- There are no changes in tax rates in the Old Tax Regime. Hence, no impact under the Old Regime. The purpose behind this is that Govt want to shift taxpayers from the Old Regime to the New Regime to reduce the scrutiny work, making ITR filing more convenient and simpler. This is a very beneficial proposal for Non-residents as they generally do not claim deductions in their ITR. Hence, they prefer to file their ITR under the New Tax Regime only.
- As per the proposed changes under the New Tax Regime, Non-Residents may be benefitted upto Rs 1,10,000 (plus applicable surcharge and cess). It means that as per Budget proposal 2025, now for FY 2025-26, taxpayer will have to pay less tax i.e. by Rs 110,000 (plus surcharge and cess) as compared to FY 2024-25.
- Benefit of amendments in tax proposal will have across the Non-Resident category either full Rs 1.10 Lakh or less depending on their Total Taxable Income in India.
- As discussed above, Non-Residents generally choose New Tax Regime only. Hence, positive amendments in the New Tax Regime is a welcome proposal for NRIs, OCIs, Seafarers, Expatriates.
New Tax Regime – Benefit Analysis of Budget 2025 Proposal – FY 2024-25 Vs 2025-26
| Income Rs | Tax (FY 2024-2025) | Tax (FY 2025-2026) | Tax Benefit (A-B) | ||||
| Tax @ Slab rate | Surcharge & Cess | Total Tax | Tax @ Slab rate | Cess & Surcharge | Total Tax | ||
| 4 Lakhs | 5,000 | 200 | 5,200 | 0 | 0 | 0 | 5,200 |
| 8 Lakhs | 30,000 | 1,200 | 31,200 | 20,000 | 800 | 20,800 | 10,400 |
| 12 Lakhs | 80,000 | 3,200 | 83,200 | 60,000 | 2,400 | 62,400 | 20,800 |
| 15 Lakhs | 1,40,000 | 5,600 | 1,45,600 | 1,05,000 | 4,200 | 1,09,200 | 36,400 |
| 16 Lakhs | 1,70,000 | 6,800 | 1,76,800 | 1,20,000 | 4,800 | 1,24,800 | 52,000 |
| 20 Lakhs | 2,90,000 | 11,600 | 3,01,600 | 2,00,000 | 8,000 | 2,08,000 | 93,600 |
| 24 Lakhs | 4,10,000 | 16,400 | 4,26,400 | 3,00,000 | 12,000 | 3,12,000 | 1,14,400 |
| 40 lakhs | 8,90,000 | 35,600 | 9,25,600 | 7,80,000 | 31,200 | 8,11,200 | 1,14,400 |
| 50 Lakhs | 11,90,000 | 47,600 | 12,37,600 | 10,80,000 | 43,200 | 11,23,200 | 1,14,400 |
| 60 Lakhs | 14,90,000 | 2,14,560 | 17,04,560 | 13,80,000 | 1,98,720 | 15,78,720 | 1,25,840 |
| 120Lakhs | 32,90,000 | 6,44,840 | 39,34,840 | 31,80,000 | 6,23,280 | 38,03,280 | 1,31,560 |
- Hence, from the above table it can be seen that taken into account surcharge and cess benefit, total saving can reach upto Rs 131,560 in case of taxable income of NRIs/OCIs/Seafarer exceeds Rs 1 Crore in India.
TCS On Liberalised Remittance Scheme Remittances
In an effort to ease the compliance & tax burden, and to rationalize the tax provisions, this budget 2025 has proposed some needed changes in the TCS provisions. Some key changes are as under
- TCS has been removed on Remittances being sent for Education purposes if the remittance is financed by a loan from approved financial institution. Earlier it was .50%. This is a very important change, which will benefit to those NRIs who are planning to go abroad for their studies etc. With this proposal, now there will be more liquidity and funds for education remittances.
- Threshhold limit of Rs 7 lakh has been raised to Rs 10 Lakh. Hence, the status of TCS which was applicable on remittances exceeding Rs 7 Lakh remittance, now the same will be applicable for Rs 10 Lakh or above.
- With the increase of limit from Rs 7 Lakh to 10 Lakh, now there will be saving of Rs 45,000/- for Indian residents touring abroad for travel or visiting their NRI/OCI relatives.
- There will be saving of Rs 15,000 for LRS remittances being made for medical and other purposes.
Hereunder is a chart showing the rationalization of TCS provisions in relation to foreign remittance/expenditures.
Rationalization Tax Collected At Source (TCS) Rates
| Nature of Payment | Earlier rate before finance act, 2023 | Rate wef from 1/10/2023 -to- 31/3/25 | Proposed rate in finance act 2025 (wef |
| LRS for education, financed by loan from financial institution | Nil, Up-to Rs. 7 Lakhs | Nil, Up-to Rs. 7 Lakhs | Nil, without any maximum limit |
| 0.5% Above Rs. 7 Lakhs | 0.5% Above Rs. 7 Lakhs | ||
| LRS for Medical treatment/education (other than financed by loan) | Nil, Up-to Rs. 7 Lakhs | Nil, Up-to Rs. 7 Lakhs | Nil, Up-to Rs. 10 Lakhs |
| 5% Above Rs. 7 Lakhs | 5% Above Rs. 7 Lakhs | 5%, Above Rs. 10 Lakhs | |
| LRS for other purposes | Nil, Up-to Rs. 7 Lakhs | Nil, Up-to Rs. 7 Lakhs | Nil, Up-to Rs. 10 Lakhs |
| 20%, Above Rs. 7 Lakhs | 20%, Above Rs. 7 Lakhs | 20%, Above Rs. 10 Lakhs | |
| Purchase of Overseas tour program package | 5% (Without Threshold) | 5%, Up-to Rs. 7 Lakhs | 5%, Up-to Rs. 10 Lakhs |
| 20%, Above Rs. 7 Lakhs | 20%, Above Rs. 10 Lakhs |
Updated ITR (i.e. Belated ITR) – Extension By 2 Years
Budget 2025 has extended the filing of Updated ITR by 2 more years. Now late return can be filed up to 4 years from the end of the relevant assessment year i.e. effectively up to 5 years from the end of the relevant financial year.
Section 139(8A) of the Act relates to the furnishing of updated return. As per the present provisions, an updated return can be filed up to 24 months from the end of the relevant assessment year.
Existing Provision for Updated Return
- Filed within 12 months from the end of relevant A.Y.: 25%
- Filed within 24 months from the end of relevant A.Y: 50%
New (Proposed) Provision for Updated Return
- Filed within 12 months from the end of relevant A.Y.: 25%
- Filed within 24 months from the end of relevant A.Y: 50%
- Filed within 36 months from the end of relevant A.Y: 60%
- Filed within 48 months from the end of relevant A.Y: 70%
How this Budget 2025 Updated ITR Proposal is benefit for NRIs – Many NRIs are maintaining Bank Accounts in India. Time to time the remit funds to these bank accounts and then they also do some small or big investments in India from this money. However, since there is no source of income or income is very low in India ie from interest, rent, etc., these NRIs do not file ITR in India. IT Deptt captures their financial transactions i.e. investments, property purchase, bank deposits etc and in the absence of ITR, they raises enquiries under section 148A, 147, 142(1), 133(6), 131, etc. Now, NRIs are being aware of these inquiries. Hence, NRIs, OCIs, Seafarers, and other Non-Residents explore the provisions of filing a belated ITR. However, they were restricted to file this ITR (under Updated ITR provisions) for 2 years only from the end of the relevant financial year. However, now with the extended window, NRIs can file ITR effectively up to 5 year from the end of the respective financial year (ie. 4 years from the end of relevant assessment year). Hence, it is a welcome proposal for NRIs.
Presumptive Taxation Extended For Non-Resident Providing Services For Electronics Manufacturing Facility [A.Y. 2026-27 i.e. FY 2025-26 onwards]
It is proposed, to insert a new section 44BBD, which deems 25% of the aggregate amount received/ receivable by, or paid/ payable to, the non-resident, on account of providing services or technology, as profits and gains of such non-resident from this business. This will result in an effective tax payable of less than 10% on gross receipts, by a non-resident company. (wef 1/4/2026). Hence, those Non Residents (including NRIs, OCIs, Other foreign residents) whoc does provide services in India in this sector, this proposed change will help in pay tax at low rate and without hassle of claiming & calculating expenses for deductions.
Annual Letting Value of Two Self-occupied houses to be taken at Rs. Nil, unconditionally – Welcome Amendment:
In the previous budgets, Govt has provided the benefit of claiming Net Annual Value as Nil for of two houses if those were self-occupied houses. However, there was a condition there that tax payer could not occupy the houses due to his/her employment or business being carried out at any other place. Now, in this Budget i.e. Budget 2025, a welcome change is made to remove the condition of employment/business being carried on at other place.
Hence, now onwards there is no condition to claim NAV of 2 Self occupied houses at Rs. Nil.
Now, the Net Annual Value for two self-occupied houses will be calculated as Nil straightway, and there is no need to check any condition for claiming it. Hence, it will remove the harassment at the time of assessment by tax officer.
Many NRIs, OCIs, occupy 2 or more properties in India. Many times these properties are no let out. In such cases, to those NRIs, this change is a very beneficial change as they can claim NAV as Nil for two such vacant properties. And they need not to pay tax on Notional Rent Income.
Budget 2025 Impact and Importance For NRIs, Seafarers
Budget 2025 has brought many proposals which will be directly benefitting the Non Residents i.e. NRIs, OCIs, Seafarers, Other Non-Residents. This article prepared by S Lohia & Associates NRI Team will be helpful in clarifying their various questions as under:
- What are the budget proposals on tax rates for NRIs, OCIs for FY 2025-26? Is there any additional tax saving in terms of tax payable provided in Budget 2025 to Non-Residents?
- Is there any extended time limit provided for NRIs in Budget 2025 for filing their ITR for previous years?
- What are the TCS relaxations for foreign going students and travellers in Budget 2025?
- Need a Tax Consultant for NRIs, Non-Resident matters in Delhi, Mumbai, Bangalore, Chennai, Other parts of India who can advise in relation to Budget 2025 provisions?
NRI Tax, RBI Laws Services – Various Topics – By NRI Tax Service Team Team
- S Lohia Team Services for Lower TDS Certificate For NRIs, OCIs In Delhi, Mumbai, Bangalore, Other Cities
- Non Resident NRO A/c Outward Remittance 15CA 15CB Repatriation Services In Delhi NCR, Bangalore, Kolkata, Chennai, Hyderabad, Pune, Mumbai
- Income Tax Return (ITR) services of S Lohia Team – PAN India
- Non Resident Income Tax Litigation Services by S Lohia & Associates – PAN India