Budget 2025 Impact on NRIs: 8 Tax Changes You Can't Afford to Miss
Comprehensive analysis of revised tax slabs, TCS threshold increase to ₹10 lakh, education loan TCS removal, capital gains rationalization, two-property benefit, and how these changes affect different NRI income profiles with examples
Written by
CA Ashama Rajawat
1. Capital Gains Tax Rationalization (July 2024)
The Biggest Change for NRI Property Owners
Old Regime (Before July 23, 2024)
- • LTCG Rate: 20%
- • Indexation: Available
- • TDS on Property: 20%
New Regime (After July 23, 2024)
- • LTCG Rate: 12.5%
- • Indexation: Removed
- • TDS on Property: 12.5%
Impact on NRIs:
Properties purchased before 2015 will face HIGHER tax despite lower rate. Properties purchased after 2020 will benefit from lower rate. See our dedicated blog on this topic for detailed examples.
2. Two Self-Occupied Properties Tax-Free (Effective FY 2019-20 onwards)
Major Relief for NRI Property Holders
Change: NRIs can now treat up to 2 residential properties as "self-occupied" without paying tax on notional rent.
Before This Change:
- • 1st property: Self-occupied (no tax)
- • 2nd property: Deemed let out (taxed on notional rent even if vacant)
Now:
- • Up to 2 properties: Self-occupied (no notional rent tax)
- • Only 3rd+ property: Deemed let out
Perfect for NRIs: Keep one property for parents, one for own use during India visits—zero tax on notional rent!
3. TCS Threshold Increased to ₹10 Lakh (Budget 2024)
| Purpose | Old Threshold | New Threshold | TCS Rate |
|---|---|---|---|
| Overseas Tour Package | ₹7 lakh | ₹10 lakh | 5% |
| Medical Treatment | ₹7 lakh | ₹10 lakh | 5% |
| Education (loan) | Any amount | Fully Exempt | 0% |
| Other LRS purposes | ₹7 lakh | ₹10 lakh | 5% |
Impact on NRIs:
If you're remitting money FROM India (e.g., moving NRO funds abroad), you can now send up to ₹10 lakh per FY without TCS. Beyond that, 5% TCS applies (which you can claim back when filing ITR).
4. Education Loan TCS Exemption (Budget 2024)
Complete TCS Waiver for Education Loans
Change: Remittances for education funded through loans from financial institutions are now completely exempt from TCS.
Before:
- • Even education loans attracted 5% TCS on amounts above ₹7 lakh
- • Created liquidity issues for families sending kids abroad for studies
Now:
- • No TCS on any amount if funded through education loan
- • Applies to loans from banks, NBFCs, specified institutions
- • Must provide loan sanction letter/disbursement proof to bank
Benefit: If you're sending your child abroad with education loan, zero TCS hassle regardless of amount!
5. Revised Income Tax Slabs (New Regime - FY 2024-25)
| Income Slab | Old New Regime Rate | Revised New Regime Rate |
|---|---|---|
| Up to ₹3 lakh | Nil | Nil |
| ₹3 - ₹7 lakh | 5% | 5% |
| ₹7 - ₹10 lakh | 10% | 10% |
| ₹10 - ₹12 lakh | 15% | 15% |
| ₹12 - ₹15 lakh | 20% | 20% |
| Above ₹15 lakh | 30% | 30% |
Impact on NRIs:
New regime now default (unless you opt for old). For NRIs with only Indian rental/investment income (no salary deductions needed), new regime often better due to lower rates.
6. 120-Day Residential Rule for High-Income NRIs (FA 2020)
Stricter Residency Test
New Rule: If you earn ₹15 lakh+ from Indian sources AND stay 120+ days in India, you become tax resident.
Impact Example:
- • Rajesh works in UAE, visits India frequently
- • FY 2024-25 stay: 140 days (less than 182 days)
- • Rental income from Mumbai properties: ₹20 lakh
- • Result: Becomes resident due to 120-day rule!
Strategy: If you have ₹15L+ Indian income, stay under 120 days. OR reduce Indian income below ₹15L threshold.
7. Deemed Residency for Stateless Indians (FA 2021)
POEM (Place of Effective Management) Rule
Rule: Indian citizens who are NOT tax residents anywhere in the world become "deemed residents" if Indian income exceeds ₹15 lakh.
Who This Impacts:
- • Indians working in UAE, Saudi, Qatar (tax-free countries)
- • Digital nomads not establishing tax residency anywhere
- • Those with substantial Indian rental/business income (₹15L+)
Tax Treatment:
Deemed residents taxed only on Indian-sourced income (not worldwide), but must file as resident and lose NRI banking benefits.
Solution: Obtain Tax Residency Certificate (TRC) from your country of work, even if it's tax-free.
8. Standard Deduction for Pensioners (Budget 2023)
₹50,000 Deduction for Pension Income
Change: Standard deduction of ₹50,000 now available on pension income (previously only for salary).
Impact on NRI Pensioners:
- • Pension from Indian employer → NRO account
- • Gross pension: ₹8,00,000
- • Less: Standard deduction: ₹50,000
- • Taxable: ₹7,50,000 (saves tax on ₹50K)
Applicable: Both old and new tax regimes. Automatic deduction, no documentation needed.
How Different NRI Profiles Are Affected
Profile 1: NRI with Only Property Rental Income
Situation: ₹12 lakh rental income, visits India for 60 days/year
Key Changes Impact:
- ✓ New tax regime slabs beneficial
- ✓ Can keep 2 properties self-occupied
- ✓ Stay under 120-day rule (safe)
Action: File ITR as NRI, opt for new regime, claim NRO TDS credit
Profile 2: NRI Selling Old Property
Situation: Property bought in 2012 for ₹50L, selling for ₹2Cr in 2025
Key Changes Impact:
- ✗ Loss of indexation hurts significantly
- ✓ Lower 12.5% rate vs 20% (but doesn't compensate)
- ✓ Apply for lower TDS certificate
Action: Calculate exact tax, consider Section 54 exemption, get Form 15CB
Profile 3: UAE-Based NRI with High Indian Income
Situation: ₹25 lakh rental + business income, visits 130 days/year
Key Changes Impact:
- ✗ 120-day rule triggered (becomes resident!)
- ✗ POEM rule risk if no UAE TRC
- ✓ Can claim RNOR status (limited taxation)
Action: Obtain UAE TRC immediately, reduce India stay to <120 days, file resident ITR if crossed
Action Items for NRIs in 2025
1. Review Your Residential Status
Count exact days in India for FY 2024-25. If close to 120/182 days with high Indian income, take corrective action NOW.
2. Evaluate Property Sale Timing
If selling old property (purchased before 2018), calculate tax under new regime vs old. Consider deferring if future rule changes expected.
3. Optimize Two-Property Benefit
If you own 3+ properties, strategically choose which 2 to declare self-occupied to minimize deemed rent taxation.
4. Get TRC If in Tax-Free Country
If working in UAE/Middle East with ₹15L+ Indian income, obtain Tax Residency Certificate to avoid deemed residency.
5. Plan Remittances Under LRS
With ₹10L threshold and education loan exemption, optimize timing of overseas remittances to minimize TCS.
Conclusion
Budget 2024-25 and recent amendments have brought mixed changes for NRIs. While lower capital gains rates, higher TCS thresholds, and two-property benefits offer relief, the loss of indexation and stricter residential status rules create new challenges. Proactive planning—tracking India stays, optimizing property declarations, maintaining tax residency certificates, and strategic transaction timing—is essential to navigate these changes successfully.