The Union Budget 2025 has introduced several key changes to India’s income tax rules that directly impact both resident taxpayers and Non-Resident Indians (NRIs). With a focus on simplification, transparency, and widening the tax base, the government has revised tax slabs, raised rebate limits, and introduced changes to rental income treatment, property sale TDS rules, and the Liberalised Remittance Scheme (LRS). One of the major highlights includes the new 120-day NRI residency rule and updated global income taxation norms. These measures are designed to make compliance easier while ensuring fair contribution from all taxpayers. Whether you live in India or abroad, understanding these changes is crucial for better financial planning. This article breaks down each update in simple language to help you navigate the 2025 tax landscape with clarity and confidence.
New Tax Slabs & Rebates
The Union Budget 2025 introduced significant changes to the income tax structure, aiming to provide relief to taxpayers and stimulate economic growth. Under the new tax regime for FY 2025-26 (AY 2026-27), the tax rebate under Section 87A has been increased, making taxable incomes up to Rs. 12 lakh eligible for zero tax liability. This adjustment is designed to enhance disposable income for the middle class, thereby boosting consumption and savings. The highest surcharge rate for individuals earning above Rs. 2 crore remains at 25%. These reforms are part of the government's broader strategy to simplify the tax system and encourage compliance.
Check STT tax rates in India.
No TDS on Education Loans
In a move to support students pursuing higher education abroad, the government has announced that there will be no Tax Collected at Source (TCS) on education loans taken under the Liberalised Remittance Scheme (LRS). This exemption aims to reduce the financial burden on families funding overseas education, making it more accessible for Indian students to study abroad. Previously, remittances for education loans were subject to TCS, adding to the cost of foreign education. The removal of TCS on these loans is expected to encourage more students to seek international educational opportunities without the added tax implications.
Higher Limit on Family Transfers
The Budget 2025 has increased the threshold for tax-free family remittances under the LRS. Now, individuals can transfer up to Rs. 10 lakh to family members abroad without attracting TCS. This enhancement facilitates greater financial support for families with members residing overseas, covering expenses such as living costs, education, and healthcare. Transfers exceeding this limit will be subject to a 20% TCS on the amount exceeding Rs. 10 lakh. This change aims to provide more flexibility and ease for individuals supporting their families internationally.
Relaxed Rental Income Rules
The government has simplified the tax rules concerning rental income. Previously, if an individual owned more than one house, only one could be declared as self-occupied, and the others were considered as deemed to be let out, attracting tax on notional rent. Under the new provisions, taxpayers can now claim up to two properties as self-occupied, thereby exempting them from tax on notional rent for the second property. This change provides relief to homeowners with multiple properties, reducing their tax liability and encouraging investment in real estate.
TDS Rules on Property Sales
The TDS provisions on property sales have been updated to streamline the process and ensure better compliance. For resident Indians, a TDS of 1% is applicable if the property value exceeds Rs. 50 lakh. In the case of Non-Resident Indians (NRIs), the TDS rate is determined based on the capital gains and can be higher. Buyers are required to deduct the applicable TDS and deposit it with the government within the stipulated time frame. These measures aim to bring transparency and accountability to property transactions.
Easier Tax for Homeowners
The Budget 2025 has introduced measures to make tax compliance easier for homeowners. One significant change is the ability to claim two self-occupied properties as tax-free, which was previously limited to one. This provision reduces the tax burden on individuals owning multiple homes and eliminates the need to pay tax on notional rent for the second property. Additionally, the standard deduction for salaried individuals has been increased, providing further relief. These initiatives are part of the government's efforts to simplify the tax system and encourage home ownership.
120-Day NRI Residency Rule
The residency criteria for Non-Resident Indians (NRIs) have been revised in the latest tax provisions. Previously, an individual was considered a resident if they spent 182 days or more in India during the financial year. Under the new rules, NRIs earning more than Rs. 15 lakh from Indian sources will be deemed residents if they stay in India for 120 days or more in a financial year. This change aims to bring more high-income NRIs into the Indian tax net, ensuring they contribute their fair share to the country's revenue.
New Global Income Tax Rules
The government has introduced new rules concerning the global income of NRIs. Under these provisions, Indian citizens who are not liable to tax in any other country will be deemed residents of India for tax purposes. This means their global income will be taxable in India. The move is aimed at preventing tax avoidance by individuals who exploit residency rules to avoid paying taxes in any jurisdiction. These changes underscore the government's commitment to ensuring tax compliance and broadening the tax base.
How NRIs Can Prepare for These Changes
NRIs should proactively assess the impact of these tax changes on their financial planning. It's advisable to consult with tax professionals to understand the implications of the new residency rules and global income taxation. Maintaining accurate records of income earned both in India and abroad is crucial. NRIs should also evaluate their stay duration in India to ensure compliance with the revised residency criteria. By staying informed and seeking professional guidance, NRIs can navigate these changes effectively and ensure their financial affairs remain in order.
Conclusion
The Budget 2025 introduces several significant changes aimed at simplifying the tax system, providing relief to taxpayers, and ensuring better compliance. From revised tax slabs and increased rebates to changes in residency rules and global income taxation, these measures reflect the government's commitment to a more transparent and efficient tax regime. Taxpayers, including NRIs, should stay informed about these developments and seek professional advice to navigate the evolving tax landscape effectively.
