Simplifying Tax Responsibilities for NRIs in Budget 2025

Tax responsibilities for NRIs : The Union Budget 2025 is sparking interest with its proposals to ease tax compliance for non-residents. Whether you're an NRI (Non-Resident Indian) earning income in India or someone managing investments back home, this budget could bring good news for you! In this blog, we'll unpack the complexities of non-resident taxation and explore potential changes that could simplify your financial responsibilities.

Tax responsibilities for NRIs

What Makes You a Non-Resident?

Before we dive into the proposed changes, let's clear up a common misconception: being an NRI isn’t about where you're born or where you live—it’s about how many days you spend in India during the financial year.

Here’s the basic breakdown:

• Residents are taxed on their worldwide income, no matter where it’s earned.

• Non-residents, however, are only taxed on income generated in India—like rental income from a property in Delhi or interest from an Indian savings account.
  

What Isn’t Taxable for Non-Residents?

If you're a non-resident earning a salary abroad, don’t worry—your income deposited in a foreign bank account for services rendered outside India isn’t taxable here. This clarity is a relief for many NRIs balancing earnings across multiple countries.

If you’re managing business tax filings, such as for a Partnership Firm, LLP, or Private Limited Company, we can guide you through ensuring compliance for your Indian operations. Learn more about our Business Tax Filing Services here.

Simplifying Residency Certificates for NRIs

Non-residents often benefit from tax treaties between India and other countries. These treaties can reduce your tax rates for income such as dividends from shares in India. Sounds great, right? But here’s the catch: to claim these benefits, you must provide a Tax Residency Certificate (TRC) issued by your home country.

The Current Challenge

Obtaining a TRC can be time-consuming, especially for small amounts of income. Many non-residents feel the hassle isn’t worth it. The Bombay Chamber of Commerce and Industry has suggested setting a minimum income threshold for requiring TRCs to make life easier for taxpayers and businesses.

Need help managing compliance for your business? From GST Registration to ROC Filings, our services ensure you’re covered. Explore our GST and ROC Services here.

What Could Change?

Budget 2025 might introduce measures to simplify this process. Setting a threshold could make compliance less burdensome for small amounts of income, saving you time and effort.

Filing Form 10F – A Hassle Worth Addressing

To claim tax treaty benefits, non-residents must currently file Form 10F online, along with a TRC from the foreign tax authorities. However, TRCs are not issued for future periods, leading to confusion and delays.

What’s the Proposed Solution?

Experts suggest allowing flexibility in submitting TRCs. For example, NRIs could use TRCs from the past 1-2 years and provide the current year’s certificate during tax return filing.

To avoid unnecessary stress, consider outsourcing your Income tax filings or TDS Return Filings to professionals who can handle it seamlessly. Check out our TDS Filing Services here.

Modernizing the Tax Payment Process

Non-residents face another hurdle: tax payments in India can only be made through Indian banks. This limitation can make compliance challenging, especially for NRIs who don’t have an Indian bank account.

Proposed Easing of Payment Methods

Budget 2025 might allow NRIs to make tax payments from foreign bank accounts. This change would reduce reliance on Indian banking systems, especially for non-residents who have closed their Indian accounts.

Additionally, the e-verification process for tax filings could be expanded to include foreign mobile numbers or email-based authentication. This move would make tax filing smoother and more accessible for NRIs.

If you’re considering starting a business in India, whether as a One Person Company (OPC) or a Private Limited Company, we can assist with company registration and compliance. Learn more about Company Registration here.

Tax Refunds for NRIs – What Needs to Change?

Finally, let’s talk about tax refunds. Currently, refunds are only credited to pre-validated Indian bank accounts. But what happens if your account becomes dormant or you’ve closed it? You’re stuck waiting.

A New Proposal for Refunds

Experts recommend allowing tax refunds to be credited directly to foreign bank accounts for PAN holders registered as non-residents. This simple change could eliminate delays and make life easier for non-residents.

If you’re navigating the refund process or need help managing advance tax filings, we’ve got you covered. Check out our Tax Filing Services here.

Closing Thoughts

The Union Budget 2025 holds promise for simplifying tax responsibilities for non-residents. From easing compliance with residency certificates to modernizing the tax payment process, these changes could make life significantly easier for NRIs managing income in India.

Whether you’re filing taxes, managing a business, or dealing with compliance requirements, our team of experts is here to help. From Income Tax Matters to GST Services, we provide comprehensive support to ensure your peace of mind. Contact us today to learn more!