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Budget 2025-26: Key Highlights for NRIs
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Revised tax structure and compliance relief
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Updates under Liberalised Remittance Scheme
The below content is purely for informational purposes and is not intended to constitute advisory of any kind. Please note, these are in-depth articles which are best viewed on large screen devices like laptops, desktops and tablets. The position reflected in this article has been updated as of February 15, 2024
The Union Budget 2025-26 announced several measures, including enhanced infrastructure, tax relief for the middle class and digital and financial sector reforms. It also introduced changes impacting Non-Resident Indians (NRIs), particularly concerning tax liabilities, financial transfers and return filing.
1. New income tax bill
The government has introduced a new income tax bill aiming to simplify existing tax laws, providing greater tax certainty and reducing litigation.
This change will help NRIs manage their taxation obligations in India with ease and clarity.
Revised tax slabs under the new regime
While the old tax regime remains unchanged, the new tax regime has been revised for both residents and NRIs.
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| Total income (₹) | Tax rate |
|---|---|
Up to 4,00,000 |
Nil |
4,00,001 to 8,00,000 |
5% |
8,00,001 to 12,00,000 |
10% |
12,00,001 to 16,00,000 |
15% |
16,00,001 to 20,00,000 |
20% |
20,00,001 to 24,00,000 |
25% |
Above 24,00,000 |
30% |
The revised tax slabs are expected to significantly reduce tax liabilities. NRIs paying taxes on Indian-sourced income can benefit from lower tax rates and enjoy higher take-home returns.
Did you know?
Resident Indians will not have to pay income tax on total annual income up to ₹12 lakh (excluding special rate income such as capital gains), this benefit does not apply to NRIs.
2. Relaxed taxation rules for homeowners
Most NRIs own properties in India that are either vacant or occupied by family. Previously, the government treated such properties (beyond a certain limit) as 'deemed to be let out', requiring owners to pay tax on notional rent. Notional rent on up to two self-occupied properties was exempt from taxes but subject to certain conditions. The Budget 2025-26 removed these conditions, allowing property owners, including NRIs, to enjoy tax-free ownership of up to two self-occupied properties in India.
3. Changes in Tax Collected at Source (TCS) regulations under the Liberalised Remittance Scheme (LRS)
Previously, if an NRI’s family in India made foreign remittances under LRS, TCS was applicable on remittances exceeding ₹7 lakh in a financial year (April-March), with the rate varying based on the purpose of remittance. Now, the threshold has been increased to ₹10 lakh, reducing the tax burden on remittances.
For remittances made from an education loan obtained from a specified financial institution, the TCS rate was 0.5% on amounts exceeding ₹7 lakh in a financial year. Post Budget 2025-26, no TCS will be levied in such cases.
These changes lower upfront tax costs and allow higher remittance amounts, making it easier and more convenient for NRI students to fund their foreign education.
To learn more about TCS rates under LRS, click here.
4. Relief in TCS and Tax Deducted at Source (TDS) regulations for non-filers
Prior to Budget 2025-26, NRIs having permanent establishment in India and who did not file taxes in India were subject to higher TCS or TDS rates. However, this rule has now been withdrawn, allowing NRIs more financial flexibility in transactions and eliminating the need to file returns solely to avoid higher upfront tax deductions.
Conclusion
The Budget 2025-26 introduced several noteworthy changes for NRIs, including revised tax slabs, opportunities to save tax through properties, relaxed TCS rules and a longer window for updated tax filings. While these measures enhance financial flexibility and simplify tax compliance, careful financial planning is essential to maximise tax savings and avoid penalties or legal complications.
Staying informed, using tax-efficient strategies and seeking professional advice will help ensure compliance and optimise financial growth as an NRI.
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