Budget 2025 and NRIs: What’s changing and what’s not

The Union Budget 2025 was presented on February 1, 2025, by the Finance Minister of India. As India remains a key destination for global investments and a financial hub for its diaspora, this budget carries significant implications for Non-Resident Indians (NRIs). So, what does this budget mean for you? Are there new tax regulations that could impact your earnings? Have there been changes in remittance policies that affect how you send money home? Are there new investment opportunities to help you grow your wealth in India?

Whether you are an NRI with investments in Indian real estate, stocks, or mutual funds, a business owner operating across borders, or someone with family and financial commitments in India, understanding these changes is crucial for your financial planning.

Let’s explore the key Budget 2025 announcements that every NRI should know. Follow along to discover practical steps and make informed decisions about your finances in India.

Budget 2025 highlights for NRIs
 

The Budget 2025 introduces several critical reforms, such as –

1. Updates on taxation
 

These changes impact your financial planning—how you can manage your income, investments, and tax liabilities in India. The updates are as follows –

a.  Increased tax exemption limit

The Budget 2025 raises the income tax exemption limit to ₹12 lakh under the new tax regime. However, this tax exemption is available through a rebate of up to ₹60,000 under Section 87A of the Income Tax Act of 1961. This section, which reduces the tax liability to zero, is available only to Indian residents. Therefore, an NRI cannot claim the rebate if their taxable income exceeds ₹4 lakh.

However, if you have Indian income sources—such as rent, capital gains, or interest—you can now benefit from the increased basic exemption limit of ₹4 lakh (up from ₹3 lakh).

b. Capital gains tax

The Budget 2025 proposes aligning long-term capital gains (LTCG) tax rates for NRIs, including Foreign Institutional Investors (FIIs). This alignment will match the rates applicable to resident taxpayers on the transfer of capital assets.

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

c. Incentives for electronics manufacturing units

The government has introduced a presumptive taxation regime for NRIs providing services to Indian electronics manufacturing companies. In addition, new safe harbour provisions have been established for NRIs storing components for supply to specified electronics manufacturing units. The objective is to boost foreign investment in India's electronics manufacturing sector.

2. Updates on remittance policies
 

The Union Budget 2025 has raised the Tax Collected at Source (TCS) threshold under the Liberalised Remittance Scheme (LRS) from ₹7 lakh to ₹10 lakh. This means remittances up to ₹10 lakh are now exempt from TCS. It provides significant relief when transferring funds abroad for personal, investment, or travel purposes.       

Additionally, TCS on remittances for education purposes has been removed, where such remittance is out of a loan taken from a specified financial institution.

3. Changes in compliance
 

Several shifts are proposed in the Budget 2025, which can impact NRI financial planning.

a. Increased scrutiny of foreign-earned income

According to Budget 2025, the government plans to revise Double Tax Avoidance Agreements (DTAAs) to prevent tax loopholes. Indian authorities will also have enhanced data-sharing agreements with multiple jurisdictions. You may be required to declare your foreign earnings in India.

b. Potential changes in residency definition

The threshold for maintaining NRI status may become stricter. The current limit of 180 days for NRIs and 120 days for high-net-worth individuals (HNI) NRIs may be revised soon.

Key Budget 2025 takeaways for NRIs

1. Income up to ₹4 lakh annually may be tax-exempt under the new regime
2. Exemptions under Section 10(4H) have been extended for ship-leasing activities in IFSC
3. LRS TCS threshold raised from ₹7 lakh to ₹10 lakh
4. Presumptive taxation introduced under new Section 44BBD for non-residents engaged in the business of setting up an electronics manufacturing facility and producing electronic goods, articles or things in India
5. Safe harbour provisions for component storage and supply
6. Enhanced data-sharing agreements under DTAA
7. Stricter rules for maintaining NRI status based on financial ties to India

How Budget 2025 affects NRI financial planning
 

The impact of the Union Budget 2025on NRI financial planning can be summarised as follows –

1. Enhanced investment opportunities
 

Increased tax exemption limits and reduced capital gains rates are boosting the appeal of real estate and equity investments in India.

Moreover, the new presumptive taxation regime for NRIs providing services to Indian electronics manufacturing companies further reduces your administrative burden. Instead of maintaining detailed expense records, you can pay a fixed percentage of your gross receipts as tax. This could also lower your tax liability.

In addition, safe harbour provisions will streamline logistics and supply chain management. This likely means fewer regulatory hurdles and lower warehousing and distribution costs.

2. Greater flexibility in long-term wealth-building
 

The higher TCS threshold under the LRS—raised from ₹7 lakh to ₹10 lakh—reduces tax deductions on your transfers. This makes remitting funds for real estate purchases, stock market investments, or supporting family members more cost-effective.

3.. New incentives for investment
 

The Budget 2025 extended tax exemptions under Section 10(4H) to include capital gains on equity shares of ship-leasing domestic companies and units in IFSCs. If you are an NRI investing in India’s financial markets, your investments in Gujarat International Finance Tec-City (GIFT) City could benefit from tax-free capital gains.

IFSC entities in GIFT City offer a low-tax environment and access to international financial instruments for NRIs interested in global investments. Investments in GIFT City are a compelling alternative to offshore banking hubs like Dubai or Singapore.

4. Stricter compliance
 

The budget introduces stricter tax regulations for NRIs, including enhanced scrutiny of foreign-earned income and expanded residency definitions for taxation. These changes will likely increase compliance burdens, requiring more detailed reporting and careful financial management.

Practical next steps for NRIs
 

To effectively navigate the changes introduced in the Union Budget 2025, NRIs should consider the following steps –

1. Review financial plans
 

Assess your current financial situation and determine how the new tax structure affects your income sources. Adjust your financial plans accordingly to maximise benefits under the new regime.

2. Explore investment opportunities
 

With favourable conditions for investing in Indian markets, you can consider diversifying your portfolio by investing in equities, mutual funds, or infrastructure bonds. Rebalance your portfolio to align with your risk tolerance and investment goals.

Consulting with financial advisors familiar with Indian markets can provide tailored strategies.

3. Maximise banking benefits
 

With the Budget 2025 introducing updates in taxation and remittances, leveraging banking solutions can optimise your financial planning. For instance, the IDFC FIRST Bank NRI Banking solutions allow you to –

• Earn up to 7.50% per annum on NRI Fixed Deposits, which provides substantial returns on your investments
• Benefit from interest rates up to 7.25% per annum on NRI Savings Accounts, with monthly credits to your account
• Enjoy all commonly used savings account services without any charges, enhancing your savings (Terms and conditions apply—charges may be levied in case of misuse, and certain fees like forex markup and monthly average balance charges may apply as per bank policy)
• Conduct swift transfers in major global currencies for seamless international transactions
• Manage your finances conveniently through the bank’s online platform at any time
• Access personalised assistance with a dedicated relationship manager

In conclusion
 

The Union Budget 2025 presents a transformative opportunity for NRIs looking to optimise their financial plans and investments in India. By understanding the key changes in taxation and remittance policies, you can make informed decisions that enhance your well-being.

Looking for support in navigating your investment journey after the budget? IDFC FIRST Bank NRI Banking offers various financial solutions to ease the process. Discover tailored solutions to suit your financial goals today, from high-interest fixed deposits and mutual funds to demat accounts, comprehensive wealth management solutions, and more.