Indian budget simplifies taxes for NRIs and boosts taxpayer benefits

These proposed changes aim to simplify tax compliance and provide fairer benefits for taxpayers, particularly NRIs, aligning the tax system with contemporary needs and challenges

PRAVASISAMWAD.COM

The upcoming budget marks the first full-year financial plan for the newly elected government. Historically, the government has emphasized structural reforms over tax breaks, a trend expected to continue, Business Standard reported.

The report quoted to Deloitte, which found the budget’s focus on refining the new tax regime, expediting tax refunds, enhancing the tax collection system, and swiftly resolving appeals and grievances.

Business Standard quoted Divya Baweja, GES National Leader at Deloitte, who outlined key expectations for the 2024-2025 Budget:

1. Simplifying TDS Compliance for Home Buyers with NRI Sellers Buying property in India is already a complex process, and it becomes more complicated when the seller is a non-resident Indian (NRI). Currently, for properties exceeding Rs 50 lakh, buyers must deposit 1% of the purchase value as Tax Deducted at Source (TDS). While this is straightforward for transactions with resident sellers, involving a simple challan form, the process for NRIs requires a higher tax rate, a temporary account number (TAN), and a separate tax return filing. Baweja proposes simplifying this process by using the same challan forms for NRIs as for resident sellers, easing the burden on home buyers.
2. Enabling Tax Payments from Overseas Bank Accounts Presently, tax payments in India are confined to modes such as net banking, debit cards, NEFT/RTGS, and UPI, all requiring an Indian bank account. This restriction poses a challenge for non-resident taxpayers. Baweja suggests allowing tax payments from overseas bank accounts, facilitating easier compliance for NRIs.
3. E-Verification Using OTPs for Foreign Mobile Numbers E-filing of tax returns has streamlined the process significantly, but the final step of e-verification remains cumbersome for NRIs. The current system requires net banking/demat accounts with specified banks, Aadhaar OTP to Indian mobile numbers, or digital signature certificates. Extending e-verification to include OTPs for foreign mobile numbers or two-factor authentication would greatly benefit NRIs, reducing paperwork and administrative hurdles. Additionally, extending the 30-day time limit for physical verification would provide more flexibility.
4. Issuing Tax Refunds to Overseas Bank Accounts Foreign nationals and NRIs often face difficulties receiving tax refunds if they have closed their Indian bank accounts. The current system mandates refunds to pre-validated Indian accounts, which may become dormant over time. Allowing refunds to be credited to foreign bank accounts for PAN holders registered as non-residents would alleviate this issue.

• Currently, for properties exceeding Rs 50 lakh, buyers must deposit 1% of the purchase value as Tax Deducted at Source (TDS)

• While this is straightforward for transactions with resident sellers, involving a simple challan form, the process for NRIs requires a higher tax rate, a temporary account number (TAN), and a separate tax return filing

5. Faster Tax Relief for Foreign Tax Credits Taxpayers paying taxes abroad can claim credits against their Indian tax obligations, but often face delays in receiving refunds due to initial employer withholding practices. Baweja recommends that employers account for foreign tax benefits upfront, minimizing the need for large refunds later.
6. Easier Access to Retirement Benefits Recent legislation allows for deferral of taxes on foreign retirement funds until withdrawal, but does not apply retroactively. Baweja suggests making this law retroactive, benefiting those with existing foreign retirement funds.
7. Extending Deadlines for Tax Return Filing The current deadline for filing revised or late tax returns is December 31st, which can be problematic for those claiming foreign tax credits, as overseas returns might not be finalized by then. Baweja proposes extending this deadline to March 31st, aligning better with international tax schedules.
8. Fairer Tax Treatment for Bengaluru Residents Despite Bengaluru’s high living costs, it is not classified as a metro city for tax purposes, resulting in lower house rent allowance (HRA) deductions compared to official metro cities. Baweja advocates for recognizing Bengaluru as a metro city, allowing residents to claim higher HRA deductions.
9. Streamlining Tax on Stock Options Employees with foreign stock option plans face double taxation: tax withheld at source (TCS) on remittances and income tax on stock options as a perquisite. Baweja suggests adjusting TCS to reflect the income tax already paid, reducing the immediate financial burden on employees.
10. Clearer Tax Rules for Electric Vehicles Current tax rules for company-provided cars are based on engine capacity, which does not account for the unique maintenance costs of electric vehicles (EVs). Baweja proposes revising these rules to include battery capacity and charging costs, providing clarity for both employers and employees using EVs.

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