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New Income Tax Rules for NRIs

New Income Tax Rules for NRIs: What’s Changing in 2025?

India’s tax rules are changing, and if you’re an NRI, it’s important to stay updated.
The Income Tax Bill 2025 brings new rules that may affect how you manage your income, investments, and financial plans in India. From changes in tax residency status to new rules on global income and asset declarations, there’s a lot to unpack.

This simple guide highlights the key updates so you can stay compliant and make smart decisions with your money in 2025 and beyond.

  1. Updated Rules for High-earning NRI

Before you know how much tax you need to pay in India, you must first check if you are a “resident” or not. As per the new rule (which is mostly the same as before), if you stay in India for 182 days or more in one year, you will be called a resident for tax purposes.

However, there’s now a special update for high-earning NRIs. If your income from Indian sources is more than ₹15 lakh, and you stay in India for 120 days or more, you’ll also be counted as a resident.

This change has been introduced to ensure that wealthy NRIs who spend much time in India also contribute to Indian taxes.

  1. Stricter Rules for Proving Foreign Employment

Earlier, if an Indian citizen left the country “for work,” they were given relaxed rules to be treated as a non-resident, which often meant less tax to pay. But now, the rule is more specific. Only people who leave India for a confirmed job abroad will be given this benefit.

So, to be treated as a non-resident under the new law, you must have clear documents like a job offer letter, work visa, or employment contract that shows you’re working in another country. Without this proof, the Indian government may treat you as a resident, and you could end up paying more tax.

  1. Tax Rates and Exemptions

The Income Tax Bill 2025 introduces several changes to tax rates and exemptions:

  • Basic Exemption Limit: Increased from ₹3 lakh to ₹4 lakh for NRIs under the new tax regime.
  • Tax-Free Income: Salaried individuals, including NRIs, with income up to ₹12 lakh per annum may be eligible for complete tax exemption, subject to specific conditions.
  • Dividend Income: Taxed at 20%, while dividends from International Financial Services Centre (IFSC) units are taxed at 10%.
  • Interest Income: Interest on government or Indian company debt (foreign currency loans) is taxed at 20%, and interest from infrastructure debt funds is taxed at 5%.
  1. Simplified Tax Filing Process

The new bill aims to make tax compliance more straightforward:

  • Consolidated Tax Year: Introduces a standardized ‘Tax Year’ concept to align reporting timelines.
  • Simplified Documentation: Eliminates redundant laws and complex legal jargon, making it easier to understand and comply with tax obligations.
  1. Two-Year Tax Relief for Returning NRIs

For NRIs planning to return to India, the bill offers a two-year tax relief period:

  • RNOR Status: Returning NRIs can claim ‘Resident but Not Ordinarily Resident’ status, ensuring that foreign income earned before returning isn’t taxed in India for two years.
  • Transition Planning: This period allows returning NRIs to restructure their finances before full taxation applies.
  1. Emphasis on Documentation

With the new tax rules, having the right papers is more important than ever:

  • Job Proof: If you’re working in another country, keep things like your job offer letter, work visa, or employment contract. These papers help prove that you’re a non-resident and don’t have to pay full tax in India.
  • Income Details: Write down and save all details of your earnings — both from India and other countries. This will help you figure out exactly how much tax you need to pay (or not pay).

In short, keeping all your documents organized can help you avoid tax problems later.

Conclusion

The Income Tax Bill 2025 brings about significant changes that NRIs must be aware of to ensure compliance and optimize tax planning. By understanding the revised residency criteria, tax rates, and filing processes, you can make informed financial decisions. It’s advisable to consult with a tax professional to navigate these changes effectively.

References

  1. Understanding the New Tax Residency Rules for NRIs – India Briefing
  2. Income Tax Bill 2025: Key NRI Tax Updates, Residency Rules – Dinesh Aarjav & Co.
  3. Key Tax Changes Every NRI Should Know in 2025 – IndiaFilings

 

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