The Indian Union Budget 2024, presented by Finance Minister Nirmala Sitharaman on July 23, 2024, has been one of this year's most anticipated financial events.

With keen eyes from across the globe fixed on this budget, it promised to unveil crucial changes impacting the economic interests and obligations of those living in India and NRIs.

Among the critical disclosures were significant capital gains tax revisions, which directly impact NRI tax payments. Furthermore, new property tax regulations aim to ease compliance for NRIs who own property in India, providing a more efficient way to manage their assets.

As the dust settles, it's time to analyze these changes and determine how they may affect the financial landscape for NRIs in the coming year. 

Let’s examine how these changes will impact NRIs in the coming year.

Higher TDS on Capital Gains

One of the most significant changes in the Union Budget 2024 is the substantial increase in Tax Deducted at Source (TDS) on capital gains from assets such as listed equities. This move, while aiming to streamline tax collection, directly impacts NRI tax payments, increasing their immediate tax liabilities.

According to the Reserve Bank of India (RBI), the TDS rates have been significantly hiked:

• Long-Term Capital Gains (LTCG) Tax: Increased from 10% to 12.5% for gains from listed equities held for more than one year.
• Short-Term Capital Gains (STCG) Tax: Increased from 15% to 20% for gains from listed equities held for less than one year.

This change aims to balance resident and non-resident taxation structures. While this endeavor to maintain fairness is commendable, it undoubtedly increases the financial burden on NRIs. The greater immediate tax liabilities may force NRIs to reconsider their investing methods and diversify their assets.

New Tax Slabs for NRIs & Revamp of the Income Tax Act

In a significant announcement, the government plans to revamp the Income Tax Act within the next six months. This overhaul, which will simplify the tax code, has the potential to significantly alter how NRIs report and pay taxes.

It's crucial for NRIs to stay informed about these developments to adjust their financial planning accordingly. 

The RBI reports that this revamp aims to reduce the complexity of tax filings by 20%. The Union Budget 2024 also introduced significant changes in the income tax slabs and direct tax proposals, impacting residents and NRIs.

These changes are designed to offer relief to taxpayers by increasing the income thresholds for lower tax rates and introducing new deductions.

Changes in Income Tax Slabs and Rates:

Here's a comparative overview of the old and new tax slabs:

Additionally, the standard deduction under the new tax regime has been increased from INR 50,000 to INR 75,000. These changes present both challenges and opportunities for NRIs. 

The higher standard deduction is a welcome relief, potentially easing financial strain. However, the revised tax slabs complicate tax planning for many. This mixed bag will likely prompt NRIs to rethink their financial strategies to navigate the new landscape effectively.

Enhanced Pension Savings for a Better Future

The Union Budget 2024 has introduced a significant enhancement to the National Pension System (NPS) that will benefit NRIs. The key update is the increase in the employer contribution limit under Section 80CCD(2) from 10% to 14% of the salary (basic + dearness allowance) for all employees, including those in the private sector.

This change makes the NPS more attractive by offering greater tax savings and enhanced retirement benefits for NRIs looking to optimise their retirement savings while receiving tax advantages

New Property Tax Regulations 

The budget also introduced stricter property tax regulations, significantly impacting NRIs. A significant change is the revised Tax Deducted at Source (TDS) rule for property sales. Previously, splitting the sale value of house properties could help sellers avoid TDS. 

Any property sale valued above INR 50 lakh will incur TDS, regardless of how the sale value is split. This adjustment aims to streamline the tax process and ensure compliance.

However, while intended to curb tax evasion, we believe this move could complicate the property transaction process further and potentially deter investment in the Indian real estate market.

Real Estate Investment Prospects for NRIs

The Union Budget 2024 highlights promising real estate investment opportunities for NRIs. With a significant boost in capital expenditure and the launch of new infrastructure projects, the Indian property market is teeming with potential.

Increased funding for innovative city projects presents lucrative investment avenues. 

What’s the Sentiment Among NRIs?

The Union Budget 2024 has elicited a range of reactions from the NRI community. Presented by Finance Minister Nirmala Sitharaman, the budget was highly anticipated by the Indian expat community, who hoped for substantial reforms and specific measures tailored to their unique needs.

Indian diaspora remittances reached over INR one lakh crores (US$125 billion) last year, the highest in the world, so expectations were understandably high. Key demands included comprehensive social security measures and the rationalization of exorbitant airfares. 

While some provisions related to employment, consumption boosts, and support for rural and MSME sectors have been welcomed, many NRIs feel that their long-standing concerns must be adequately addressed.

Despite these hopes, the Union Budget left many NRIs feeling somewhat disappointed, failing to address these significant concerns. 

Conclusion

The Union Budget 2024 introduces new pension plans and smart city investments, promising growth and development. However, tightened property tax regulations and increased TDS on capital gains add layers of complexity for NRIs.

This ambitious budget could complicate financial planning for the NRI community. Staying vigilant and adaptable will be crucial as these changes unfold.

NRIs must carefully navigate the new economic landscape and stay informed to manage these adjustments effectively. Remaining proactive and prepared will be essential to thriving in this evolving scenario.