Budget Expectations 2025: Nine Income Tax Reforms NRIs Want
NRIs expect policy changes that will meet their needs, as India prepares for the Union Budget 2025. They want clear tax rules, reforms and better benefits, that support their contribution to India’s economy.
1. Enhancing Tax Treaty Benefits at the Time of TDS
Double Taxation Avoidance Agreements, or tax treaties, are frequently availed of by NRIs while filing their income tax returns for tax refunds. In the event of such a procedure being provided for while deducting tax by employers, the whole process would become smoother. Provisions on specific relief granted would also be reflected in Form 16 to avoid a lot of paperwork and delays. This would make it easier for NRIs to avoid large adjustments during the income tax return filing process.
2. Change in Form 10F to claim tax relief
Tax treaty benefits can be claimed by submitting Form 10F online by NRIs. The form is an important self-declaration stating that the NRI has a Tax Residency Certificate (TRC) issued from his country of residence. But if TRC for future periods is not available while filing the ITR, then it creates a procedural problem. A change in Form 10F allowing NRIs to declare their intention to obtain and submit the TRC for the relevant future period, would simplify the process and help comply with Indian income tax regulations.
3. Simplifying income tax residency rules and income thresholds
The recent income tax laws have the provision of a non-resident status for the Indian citizen if he visits India and his stay is more than 60 days, provided that his income does not exceed Rs.15 lakh. In this respect, the term ‘visit’ has not been clearly defined in the rules, creating confusion among the people who go on short visits to India and work for their foreign employer in India. Providing clarity on what qualifies as a ‘visit’ will help NRIs better understand their tax residency status and know which income they should be taxed on.
4. Delaying the taxation of Employee Stock Option Plans (ESOPs) for NRIs
Recently, employees of ‘eligible startups,’ including NRIs, can delay paying taxes on their ESOPs (Employee Stock Option Plans). Employers can also postpone deducting TDS from NRIs’ salary. If this benefit is extended to all employees, including NRIs, and applies to all companies, not just eligible startups, it would make ESOPs more popular as a way to pay employees. This change would also simplify the income tax process for both employers and NRI employees.
5. Making TDS procedures more efficient for property transactions
The NRIs will face additional tax rules when they sell the property or rent it out. They need to obtain a Tax Deduction and Collection Account Number (TAN) and file e-TDS returns. The NRIs want the process to be simpler than it is for residents. For residents, buyers pay taxes on property sales or rental income using specific forms. Making these procedures easier for NRIs will improve tax compliance and reduce paperwork.
6. Overcome tax compliance challenges
The simplification of ITR forms has been a positive change for NRIs but, at this point, the e-verifying form at the end of the process is still a significant issue. This is especially difficult for NRIs who do not have an Aadhaar or an Indian bank account. These NRIs have to send a signed ITR-V form by international post for physical verification, which can take time. Also, with the deadline for e-verification reduced to 30 days, NRIs feel added pressure to complete the process on time. Another issue is the inability of NRIs to get access to other important tax documents such as Form 26AS, the AIS, and TIS because of the foreign IP address restriction. Thus, it will be hard for them to deal with their taxes. To address this, it should be easy for NRIs to verify information online and be able to gain access to tax details more conveniently.
7. Simplifying the process of ITR filing for NRIs
The simplified ITR-1 Form, which is still available for salaried individual taxpayers with the income source also including one house property, agricultural income up to Rs.5,000, and all other sources could be made applicable to Non-residents also to make it much easier for some NRIs whose income sources were limited.
8. Simplifying the income tax refund and payment systems for NRIs
Currently, NRIs cannot receive income tax refunds in their foreign bank accounts. Even though the income tax return (ITR) forms allow NRIs to provide details of their overseas bank accounts, the refunds are not credited there. Instead, NRIs get a notification asking them to validate their account, but this can only be done for Indian bank accounts. In addition, NRIs face difficulties in making income tax payments because they are allowed to pay taxes only through Indian bank accounts. This restriction causes cash flow problems and highlights the need for a more flexible and efficient tax payment system.
9. New deadline announced for belated and revised return filings
Currently, the deadline for submission of belated and revised returns is 31st December of the assessment year. This deadline becomes a challenge to NRIs categorized as Residents and Ordinary Residents as they often can not access their foreign income tax returns before the December deadline. It would really help many NRIs if the date for furnishing these returns were extended till 31st March of the relevant assessment year. This will provide adequate time for NRIs to claim credits or exemptions in India for taxes paid in foreign countries.
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