Budget 2024: How new reforms will impact NRIs and their investments

• The Budget 2024 measures underscore the government’s commitment to fostering a mutually beneficial relationship with the Indian diaspora

• By creating a conducive investment environment and fostering transparency, the government aims to leverage the vast potential of the NRI community to drive India’s economic growth

PRAVASISAMWAD.COM

In her first comprehensive Budget under the Modi 3.0 government, Finance Minister Nirmala Sitharaman announced several initiatives aimed at enhancing economic engagement with the Non-Resident Indian (NRI) community. These new measures are designed to attract NRI investments into Indian markets by easing Foreign Direct Investment (FDI) and Overseas Investment (OI) norms. One key initiative is the promotion of using the Indian Rupee for overseas investments, simplifying the process for NRIs to invest in India. Additionally, the holding period for long-term capital assets like bonds, debentures, and gold has been reduced from 36 months to 24 months, encouraging quicker returns for NRIs.

Taxation Reforms in Budget 2024 for NRIs

The budget proposes a simplified and rationalized structure for capital gains tax, effective from July 23. For short-term capital gains on listed equity shares and equity-oriented mutual funds, the tax rate will increase from 15% to 20%. Other short-term capital gains will continue to be taxed according to the individual taxpayer’s income tax slab rates.

For long-term capital gains on listed equity shares and equity-oriented mutual funds, the tax rate will rise modestly from 10% to 12.5%. Furthermore, the exemption limit for such gains will increase from Rs 1 million to Rs 1.25 million. However, a significant change is the reduction of the tax rate on long-term capital gains from assets other than equities and mutual funds from 20% to 12.5%, with the elimination of the indexation benefit, meaning actual gains will be fully taxable. For immovable properties acquired before April 1, 2001, the fair market value as of that date will be considered for calculating capital gains.

Capital gains on unlisted bonds and debentures will be taxed according to the taxpayer’s applicable tax slab rates, irrespective of the investment duration. The holding period will determine whether these gains are classified as short-term or long-term, affecting the set-off and carry-forward of capital losses. The budget also proposes equalizing capital gains tax rates for Resident Indians and NRIs, though NRIs can still benefit from special provisions under Chapter XII-A of the Income Tax Act, 1961. Assets sold between April 1, 2024, and July 22, 2024, will be subject to current income tax rates.

Real Estate Reforms in Budget 2024 for NRIs

The government is encouraging state governments to reduce stamp duty charges on property transactions, particularly for properties owned by women.

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