There has been a lot of noise and misinformation around the Income Tax Bill 2025, creating unnecessary panic among Non-Resident Indians (NRIs). However, there are no drastic changes in tax bill that negatively impact NRIs. While some updates have been introduced, the overall tax structure remains familiar, ensuring better compliance and ease of taxation.
To clear any confusion, let’s break down what has changed in 2025 and what remains the same for NRIs.
What Has Changed in the Income Tax Bill 2025?
New Income Tax Slabs Introduced
One of the most significant updates in 2025 is the introduction of new income tax slabs, replacing the earlier structure. The revised tax brackets aim to simplify taxation while keeping rates largely consistent.
For NRIs, the new tax slabs are:
| Annual Income (INR) | Tax Rate (%) |
| Up to ₹4,00,000 | 0% |
| ₹4,00,001 – ₹8,50,000 | 5% |
| ₹8,50,001 – ₹12,50,000 | 10% |
| ₹12,50,001 – ₹16,50,000 | 15% |
| ₹16,50,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹25,00,000 | 25% |
| Above ₹25,00,000 | 30% |
These changes in tax bill provide a clearer tax structure without increasing the tax burden on NRIs.
Higher TCS Threshold for Foreign Remittances
For NRIs who regularly send money abroad, there’s good news. The threshold for Tax Collected at Source (TCS) under the Liberalized Remittance Scheme (LRS) has been increased from ₹7 lakh to ₹10 lakh. This means:
- No TCS for remittances up to ₹10 lakh.
- TCS at 5% for education and medical expenses beyond ₹10 lakh.
- TCS at 20% for other remittances exceeding ₹10 lakh.
This change benefits NRIs by allowing higher remittances without additional tax deductions.
Simplification of TDS and TCS Rules
A key change in tax bill 2025 is the consolidation of TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) provisions into a single section. Previously, these rules were scattered across different sections of tax law, making compliance cumbersome. Now:
- TDS and TCS rules are grouped together for better clarity.
- No changes to existing TDS rates for NRIs on property sales, rent, or interest income.
- NRIs can still apply for a lower TDS certificate (Form 13) to reduce tax deductions at the source.
Introduction of a Standardized Tax Year
The Income Tax Bill 2025 replaces the previous system of separate financial and assessment years with a unified tax year from April to March. This aligns India’s tax system with global standards and simplifies tax filing for NRIs.
Stronger Tax Recovery and Digital Tracking
The government has expanded its powers to track financial transactions, ensuring better tax compliance. Now, tax authorities can access electronic records such as emails, online banking transactions, social media activity, and digital payments. Additionally:
- Tax officers can freeze Indian assets of NRIs who have unpaid tax dues.
- Digital monitoring tools are being used to detect tax evasion.
For NRIs, this means ensuring accurate and timely tax filings to avoid scrutiny.
What Has Not Changed in the Income Tax Bill 2025?
Capital Gains Taxation Remains the Same
If you’re investing in Indian markets, there are no changes in the tax bill regarding capital gains taxation rules. It remains same from the reforms introduced in July 2024:
1. Indexation Benefit Removed
- The indexation benefit, which allowed taxpayers to adjust the purchase cost of assets for inflation, was removed on July 22, 2024 for certain long-term assets.
- To offset this, the long-term capital gains (LTCG) tax rate was lowered to 12.5%.
2. Long-Term Capital Gains (LTCG) Tax for NRIs
- LTCG applies to assets held for more than 12 months for listed securities (stocks, mutual funds, bonds). The tax rate is 12.5%.
- For real estate and unlisted shares, the LTCG tax remains at 20%, without indexation benefits.
- Special provisions exist for assets purchased before July 22, 2024, where part of the gain may still qualify for indexation.
3. Short-Term Capital Gains (STCG) Tax for NRIs
- STCG applies to assets held for less than 12 months.
- Listed securities are taxed at 15%, while other short-term capital assets (real estate, unlisted shares, mutual funds) are taxed at applicable slab rates.
- Debt mutual funds and certain other financial instruments are now automatically considered short-term, increasing their tax liability.
4. Exceptions to LTCG & STCG Holding Periods
- Real estate & unlisted shares are considered long-term only if held for more than 24 months. If sold before this, they are taxed as short-term gains.
- Debt-oriented mutual funds, regardless of tenure, are always taxed as short-term under the new rules.
- Zero-coupon bonds follow standard rules but may have specific exceptions under certain government schemes.
- Listed shares and equity mutual funds are taxed at 15% if sold within 12 months, but this applies only if the transaction is subject to Securities Transaction Tax (STT).
5. Addressing Tax Complexity
- If an NRI purchased assets before July 22, 2024, and sells them after this date, the capital gains calculation may be split into two different tax regimes—one under the old rules with indexation, and the other under the new rules with lower tax rates.
- This can create tax complications, so expert consultation is advised.
Taxation on Dividends, Interest, and Investments Unchanged
For NRIs earning income from Indian investments, no changes in tax bill have been introduced. The existing tax rates remain:
- Dividends and interest from Indian companies continue to be taxed at the same rate.
- Mutual Fund Investments: Income from mutual funds purchased in foreign currency remains taxed at 20%.
- Infrastructure Debt Fund Interest: The tax rate remains 5% on interest income from these funds.
NRI Residency Rules Stay the Same
The rules for determining NRI status remain unchanged:
- NRIs must spend fewer than 182 days in India in a financial year.
- For high-income earners (above ₹15 lakh in Indian income), the additional 120-day rule still applies.
NRIs should ensure they track their days spent in India to avoid unexpected tax liabilities.
Exemptions for NRI Income Continue
Certain tax benefits remain intact for NRIs:
- NRE account interest remains tax-free.
- FCNR deposits continue to be exempt from taxation.
- NRO account interest remains taxable at applicable slab rates.
- Income from foreign assets remains untaxed in India unless repatriated.
- There is no inheritance tax, and gifts from relatives remain tax-free within certain limits.
Double Taxation Avoidance Agreements (DTAA) Still Protect NRIs
India continues to honor its DTAA agreements, preventing NRIs from being taxed twice on the same income. If tax has already been paid in another country:
- NRIs can claim tax relief when filing in India.
- These agreements also help with information exchange and tax recovery between countries.
Also read: How to Check Income Tax Refund Status Online for NRIs/OCIs
Stay Informed, Stay Compliant
The Income Tax Bill 2025 introduces structured reforms but does not impose additional burdens on NRIs. Instead, it streamlines compliance and provides more clarity in taxation.
To navigate these changes effectively:
- File ITR Even Below Taxable Limit – Helps with refunds, financial planning, and maintaining compliance.
- Plan Capital Gains Tax Smartly – Consult an expert to minimize liabilities based on investment timelines.
- Ensure TDS Compliance – Avoid higher deductions by applying for a lower TDS certificate when required.
- Consult an NRI Tax Specialist – If unsure, reach out to CA Mohit for personalized tax guidance.
No need to worry—just stay informed, plan ahead, and manage taxes smartly!
Frequently Asked Questions (FAQs)
1. Do NRIs need to file an ITR in India if they have no taxable income? Yes, it is advisable to file an ITR even if your income is below the taxable limit to maintain compliance and claim refunds if applicable.
2. Has the tax rate on NRI investments changed? No, tax rates on mutual funds, infrastructure debt funds, and dividend income remain unchanged.
3. What happens if an NRI remits more than ₹10 lakh abroad? TCS at 5% applies for education/medical expenses, and 20% for other remittances beyond ₹10 lakh.
4. How will the new tax slabs impact NRIs? The changes in tax slabs simplify taxation without increasing the tax burden on NRIs.
5. Can NRIs still benefit from DTAA agreements? Yes, DTAA agreements continue to provide relief against double taxation.
6. What are the new tax recovery measures that impact NRIs? Authorities can now track digital transactions and freeze Indian assets in case of unpaid tax dues.
7. Will TDS rates on NRI property sales change? No, TDS on long-term capital gains remains at 20%, and 30% for short-term gains.
