Budget 2025 impact on non-residents: What is new for NRIs?

Finance Minister Nirmala Sitharaman in Budget 2025 announced some key tax changes impacting non-resident Indians (NRIs) and foreign investors. To provide tax certainty for non-residents, the government proposed a presumptive taxation regime for foreign entities offering services to Indian companies establishing or operating electronics manufacturing facilities.

The government introduced a safe harbour provision non-residents storing components for supply to specified electronics manufacturing units.

The budget also proposed aligning the long-term capital gains (LTCG) tax rates for non-residents, including Foreign Institutional Investors (FIIs), with that of resident taxpayers on the transfer of capital assets.

"It is proposed to bring parity between the taxation of capital gains on transfer of capital assets between residents and non-residents being Foreign Institutional investors, on their income by way of long-term capital gains on transfer of securities," Sitharaman said in her Budget speech.

The government has extended tax exemptions under Section 10(4H) to include capital gains on the transfer of equity shares of a ship leasing domestic company for non-residents and units in International Financial Services Centres (IFSCs).

The income from the transfer of non-deliverable forward contracts by a Foreign Portfolio Investor (FPI) operating within an IFSC will now be exempt from taxation, subject to prescribed conditions.

Ahead of the Union Budget 2025, experts suggested tax relief and simplified compliance rules for NRIs, Persons of Indian Origin (PIOs) and Overseas Citizens of India (OCIs).

Experts also recommended rationalising long-term capital gains tax, taxation on property transactions and easing income tax filing norms for NRIs in Budget 2025.

In Budget 2024, FM Nirmala Sitharaman had announced several measures to enhance engagement with NRIs and attract funds. To boost NRI investment in the country, the Finance Minister announced easing FDI norms, reforms in taxation and investment in the Indian currency.

As part of easing FDI and overseas investment norms, the minister stressed the promotion of the rupee’s use for overseas investments, which would make it easier for the NRIs to invest in the country.

To attract NRI investment, the government reduced the holding period for long-term capital assets gold, bonds and debentures to 24 months from 36 months earlier.

The government also rationalised the capital gains structure to ease the taxation rules for NRIs. The revision, however, led to a higher tax rate of 20% from 15% earlier on short-term capital gains on listed equity shares and equity-oriented MFs.

The government further increased the tax rate to 12.5% from 10% on long-term capital gains for listed equity shares and equity-focussed mutual funds without the indexation benefits. However, the government hiked the exemption limit for long-term capital gains to ₹1.25 lakh from ₹10 lakh earlier.