NRI Taxation

Changes in NRI Taxation: Few noteworthy amends via India's 2025 Budget

1. Alignment of Long-Term Capital Gains (LTCG) Tax Rates

The budget proposes increasing the tax rate on LTCG for non-residents, including Foreign Institutional Investors (FIIs), from 10% to 12.5%. The new rate will be effective from 1/4/ 2026, i.e. assessment year 2026-27 onward.

2. Enhanced Tax Collected at Source (TCS) Threshold under Liberalized Remittance Scheme (LRS)

The budget raises the TCS threshold under the LRS from ₹7 lakh to ₹10 lakh. This means remittances up to ₹10 lakh are now exempt from TCS, providing greater flexibility and reducing tax compliance for funds transferred abroad for personal, investment, or travel purposes. ​

3. Introduction of Presumptive Taxation for Non-Resident Service Providers

A new presumptive taxation regime has been introduced for non-residents providing services to Indian electronics manufacturing companies.

4. Stricter Monitoring of Foreign-Earned Income

To enhance transparency, the government plans to revise Double Tax Avoidance Agreements (DTAAs) and establish enhanced data-sharing agreements with multiple jurisdictions. This means NRIs may need to declare their foreign earnings in India, even if they do not have active income sources within the country. ​

5. Extension of Time Limit for Filing Updated Returns

The time limit to file updated returns has been extended from 2 years to 4 years. However, the penalties for delayed filing have increased, with additional tax and interest applicable based on the time elapsed since the end of the relevant financial year.

6. Removal of TCS on Education Loans for Overseas Studies

For NRIs planning to send funds for education abroad, the budget removes TCS on remittances funded through loans from specified financial institutions. This change reduces the tax burden on families supporting students pursuing education overseas. ​