Finance Minister Nirmala Sitharaman proposed to reduce TDS on Mutual Fund dividend payments to NRI investors u/s 196A of the IT Act.
The Union Budget 2023-24 primarily focuses on infrastructure and investment, green growth and financial sector. In her opening budget speech, the finance minister said that India’s current year’s growth is estimated to be at 7 per cent, which is the highest among all major economies. She also stressed that India has been recognized as a ‘bright star’ in the face of massive global slowdown caused by Covid-19 and the Ukraine war.
The budget also proposes a few benefits for NRI taxpayers and investors. Offering relief to NRI mutual fund investors, the Finance Minister proposed to allow the benefit of tax treaty at the time of TDS on payment of dividends to a non-resident Under Section 196A of the Act. In other words, NRIs investors will be required to pay lower TDS on mutual fund dividend payments. Currently, the TDS on such payments to an NRI is at the rate of 20 per cent.
How Union Budget 2023-24 will Impact NRI Taxpayers & Investors
- The budget proposes to reduce the rate of TDS on the payment of dividends to NRI by any person other than a company u/s 196A of the IT Act. The current rate of TDS is 20% at the time of the payment of such mutual fund income to non-residents.
- The rate of TCS for foreign remittance for education and medical treatment will continue to be 5 per cent for remittance exceeding Rs. 7 lakh. Likewise, TCS rate on foreign remittance for education purposes through a loan will also continue to be 0.5 per cent for an amount exceeding Rs. 7 lakh.
- However, the rate of TCS for foreign remittance for other purposes under LRS and purchase of overseas trips has been increased from 5 per cent to 20 per cent.
- The budget proposes the applicability of lower or nil tax deduction at source (TDS) on the interest income of non-resident Indians from wealth and pension funds. Currently business trusts deduct and deposit TDS on the interest income of an NRI @5 per cent.
- All gifts above Rs 50,000 received by a not-ordinarily resident from a resident Indian as a monetary gift would be deemed to arise in India and would be taxable w.e.f. 1st April 2024.
NRI Income Tax Slabs and Rates
The Finance Minister announced new tax slabs, which are different from the existing ones.
Here are new income tax slabs and rates for NRIs (Non-Resident Indians) for AY (Assessment Year) AY 23-24. However individuals have an option to continue with the old income tax regime.
| Income Tax Slab | New Regime Slab Rate |
|---|---|
| Rs. 3.00 lakh to Rs. 6.00 lakh | 5% |
| Rs. 6.00 lakh to Rs. 9.00 lakh | 10% |
| Rs. 9 lakh to Rs. 12.00 lakh | 15% |
| Rs. 12 lakh to Rs. 15.00 lakh | 20% |
| Above Rs. 15.00 lakh | 30% |
Income Tax Slab Rates for Old vs New Tax Slab 2023
Here is the analysis of the old vs new tax regime for NRIs. As per your annual income and investment in India, you can choose a tax slab that offers more benefits.
| Old Tax Slabs | Rates | New Tax Slabs | Income Tax Rates |
|---|---|---|---|
| Up to Rs 2.5 lakh | Nil | Up to Rs. 3 lakh | Nil |
| Rs. 2.5 lakh to Rs. 5 lakh | 5% | Rs. 3 lakh to Rs. 6 lakh | 5% |
| Rs. 5 lakh to Rs. 10 lakh | 20% | Rs. 6 lakh to Rs. 9 lakh | 10% |
| Above Rs. 10 lakh | 30% | Rs. 9 lakh to Rs. 12 lakh | 15% |
| – | – | Rs. 12 lakh to Rs. 15 lakh | 20% |
| – | – | Above Rs. 15 lakh | 30% |
Note:
- The new income tax regime will be the default tax regime, which means if you don’t choose any of the regimes, the new regime will be selected automatically
- Standard deduction has been increased to Rs 52,500 in new tax regime
How Indian Stock Market Reacted to the Union Budget 2023-24
The Indian stock market reacted positively to Finance Minister Nirmala Sitharaman’s presentation of the Union Budget 2023-24, with benchmark indices rising over 1,000 points to breach the 60,000 mark. Other than the Nifty oil and gas index, all other indices were in green with Nifty bank, financial services, and private banks rising the most.
Union Budget 2023 for NRIs – Investment
In a nutshell, this budget offers many benefits for NRIs who earn income in India. NRIs who earn income in India can enjoy a big incentive or need to pay lower tax under the new tax laws. Since NRIs will be paying lower TDS on mutual fund dividend payments, they can invest more in mutual funds in India. While India has already emerged as a bright spot for investors from around the world, simplified tax regime and reduction in TDS on income from mutual funds by NRIs make it a more attractive investment destination and the right opportunity for investors.
Today, there are several traditional and new-age investment options for NRIs to grow their income in India, including mutual funds, commercial real estate (CRE), Portfolio Management Services (PMS), Micro VC funds, and a lot more.
These are the key highlights of Union Budget 2023 for NRIs. NRIs living around the world can ask any questions related to the budget, such as NRI taxation, TDS, investment, etc. You can download SBNRI App to connect with our NRI Tax / investment experts and get end-to-end assistance related to NRI tax filing. SBNRI will also help you get a lower TDS Certificate.
You can also click on the button below to ask any questions. Visit our blog and YouTube Channel for more details.
