NRI Taxation: What changes in Income-tax Act 2025 from April 1 and what stays the same?
NRI Taxation: What changes in Income-tax Act 2025 from April 1 and what stays the same? – Income Tax News | The Financial Express
India’s Income-tax Act, 1961, will be replaced by the new Income-tax Act, 2025, on April 1, 2026, signifying a significant reform in the tax system.
For the non-resident Indians (NRIs), not much has changed except for a few modifications. The basic test for determining residence for individuals under the Income Tax Act, 2025, has not been updated, and therefore, the fundamental conditions for determining individual residency remain unchanged.
Under section 6 of the Income-tax Act, 2025, an individual continues to be treated as a tax resident if he stays in India for 182 days or more in the relevant tax year, or for 60 days or more in that year, coupled with 365 days or more in the preceding four years.
The rule for Indian citizens or Persons of Indian Origin visiting India has also not been modified. The rule remains the same under the Income-tax Act, 2025. A visiting Indian citizen or person of Indian origin shall be treated as ‘resident’ in a tax year if he is in India for a total period of more than 182 days in that tax year.
However, for persons earning more than Rs. 15 lakh (other than the income from foreign sources) during the tax year, alternate condition u/s 6(2)(b) of the new Act also applies with modification that ‘60 days’ in the said section is to be read as ‘120 days’ along with 365 days or more in the four years preceding such tax year. This new 120-day rule will apply to high-income NRIs earning more than Rs. 15 lakh in India.
Also, NRIs who put their properties on rent in India need to be aware of certain new HRA exemption rules.
Preeti Gupta, Director, Deloitte India, says there are certain enhanced reporting requirements, one of them is on HRA exemption. “As per the recently notified rules, while HRA exemption continues, the framework now combines enhanced benefits with other disclosure requirements i.e. taxpayers claiming HRA will now be required to explicitly disclose the relationship with the landlord.
Under the new rules, the taxpayer will now need to declare the landlord-tenant relationship as part of prescribed reporting (e.g., Form 124),” says Gupta.
Foreign Income
Also, there are many direct or indirect changes specified for the foreign income of an NRI. One of which is ‘Expanded Taxability Through Income Attribution (Rule 9).
Section 9 of the Income-tax Act deems certain incomes to accrue or arise in India, even if earned outside India. These incomes are taxable in India, particularly for non-residents, unless a Double Taxation Avoidance Agreement (DTAA) provides relief.
Gupta says, “Rule 9 provides that when the India-linked income cannot be determined directly or indirectly through the parameters provided, the Assessing Officer may now compute NRI income using a reasonable percentage of receipts arising in India, or global profit ratios, or any method deemed fit.”
Another change is in the Significant Economic Presence (SEP) Thresholds (Rule 13). SEP thresholds relate to the aggregate amount of payments from transactions carried out by a non-resident with any person in India, in respect of any goods, services, or property, including provision for download of data or software in India during the tax year.
“Rule 13 operationalizes the concept of Significant Economic Presence, which can trigger tax liability without physical presence in India. A non‑resident is considered to have SEP if, in a financial year:
Payments arising from transactions with Indian users exceed Rs 2 crore, or if the number of Indian users engaged by the non‑resident reaches 300,000,” informs Gupta.
Disclaimer: This article is for informational purposes only and does not constitute professional tax advice. Tax laws and regimes are subject to frequent changes by the government. Readers should verify details with official Income Tax Department notifications or consult a Chartered Accountant before making any financial decisions.
aniltikotekar4sme.com 