The simplification of ITR forms has been a welcome change for NRIs

NRIs' expectations from Budget 2025: 9 changes that NRIs want in income tax rules However, e-verification of ITR form to successfully complete the filing process continues to pose certain challenges. Read our story to know more about the expectations among NRIs of changes in government policies

Sreenivasulu Reddy

Sreenivasulu Reddy, Tax Partner, EY India

As India gears up for Union Budget 2025, there are high expectations among NRIs of changes in government policies that not only address their concerns but also provide clear frameworks, incentives, and reforms to strengthen the NRIs' invaluable role in India's economic growth.

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Streamlining Treaty Benefits at time of TDS
NRIs usually claim relief under the applicable Double Taxation Avoidance Agreements (DTAA) or tax treaties, resulting in claim of significant income tax refunds at the income tax return filing stage. Clear guidelines for employers on claiming treaty benefits by employees at the tax deduction stage including providing necessary provisions in Form 16 to capture the tax reliefs, would help in reducing administrative complexities. This will help NRIs to minimize tax refund-related adjustments at the time of ITR filing.

Also read | Union Budget 2025 Income Tax Expectations Live

Amendment to Form 10F to claim tax relief

Currently, NRIs are required to submit Form 10F electronically to claim tax treaty reliefs. It is a necessary self-declaration confirming that the NRI holds a Tax Residency Certificate (TRC) from his/her country of residence. However, the unavailability of TRCs for the future periods at the time of ITR filing results in a procedural challenge.

An amendment to Form 10F allowing NRIs to declare their intent to obtain and furnish the TRC for the relevant future period will ease the procedural complexities, thereby, adhering to Indian income tax regulations.

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Also read | Will Budget 2025 announce closure date of old tax regime under Income Tax Act?

Streamlining income tax residency rules and income thresholds

Current income-tax laws permit Indian citizens visiting India to retain their Non-resident status even if the threshold period of 60 days is exceeded, provided, the income does not exceed threshold of Rs 15 lakh. However, the term 'visit' is not explicitly defined in the income tax rules, creating uncertainty in situations where individuals undertake short trips to India and provide services to their foreign employer from India. Clarity with respect to what constitutes 'visit' will help NRIs determine their (income tax) residential status and offer appropriate income to tax.

Deferring the taxation of Employee Stock Option Plan (ESOPs) for NRIs

Currently, employees of 'eligible startups', including NRIs, are allowed to defer paying taxes on ESOPs. At the same time, employers are allowed to postpone the TDS from NRIs salary. Expanding this benefit to encompass all employees, including NRIs and across all organizations, not just eligible startups, would encourage the broader adoption of ESOPs as an employee compensation. Such a measure would streamline income tax compliance processes for employers and NRI employees.

Simplifying TDS procedures on sale/rent of immovable property

Currently, transactions involving NRI sellers or landlords entail additional income tax compliance requirements, including the necessity for NRIs to obtain a Tax Deduction and Collection Account Number (TAN) and file e-TDS returns. NRIs seek simplified procedures similar to those for resident sellers or landlords, where buyers are required to deposit taxes on property sale or rental income through forms-cum-challans. Streamlining these procedures would relieve the compliance burden for NRIs and enhance tax compliance efficiency.

Addressing the tax compliance challenges

The simplification of ITR forms has been a welcome change for NRIs. However, e-verification of ITR form to successfully complete the filing process continues to pose certain challenges. The problem is more for those NRIs who do not possess Aadhaar or an Indian bank account. The current system requires these NRIs to opt for physical verification which involves sending the signed ITR-V through international post, which is prone to delays. Further, the reduction in the e-verification deadline to 30 days imposes additional pressure on NRIs to complete the process.

Moreover, NRIs often struggle to access critical income tax documents such as Form 26AS, the Annual Information Statement (AIS), and the Taxpayer Information Summary (TIS) due to restrictions on overseas IP addresses. These challenges highlight the need for a more streamlined e-verification procedure and improved access to tax-related information for NRIs.

Ease of ITR filing for NRIs

The streamlined ITR-1 form, which is currently available to resident individuals with income from specified sources like salary, one house property, agricultural activities (up to Rs. 5,000), and other sources, could be made applicable to Non-residents as well, thereby simplifying the tax filing experience for NRIs having limited sources of income.

Making income tax refund and payment systems easier for NRIs

The current procedures do not allow NRIs to receive income tax refunds in their overseas bank accounts. While the ITR forms allow the inclusion of overseas bank account details, refunds are not credited to these accounts. Instead, they receive an intimation requiring account validation, which is restricted to Indian bank accounts.

Additionally, NRIs face difficulties in making income tax payments due to the requirement to remit taxes exclusively through Indian bank accounts. This limitation creates cash flow challenges, necessitating for a more streamlined and flexible tax payment process.

Extension of belated and revised return deadlines

At present, the deadline for submitting belated or revised returns is December 31 of the assessment year. This timeline poses difficulties for NRIs who are categorized as Resident and ordinarily residents, as often they cannot access their foreign income tax returns before the December deadline. To facilitate a smoother tax filing process, it would be helpful for NRIs if the due dates for filing these returns were extended to 31 March of the assessment year. Such an extension would give them the necessary time to accurately claim tax credits or exemptions for taxes paid in other jurisdictions.

* The article is written by Sreenivasulu Reddy, Tax Partner, EY India. Dilish Davis, Senior Tax Professional, EY India, also contributed to this.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

This story originally appeared on: India Times - Author:Faqs of Insurances