The Union Budget 2025-26 introduces significant reforms in taxation, investment, real estate, remittances, and compliance that will directly impact Non-Resident Indians (NRIs). The government has focused on easing tax burdens, encouraging NRI investments, simplifying compliance processes, and enhancing financial transactions to make India a more attractive destination for global investors, including NRIs.
This analysis provides a comprehensive breakdown of the key provisions in the budget that affect NRIs, along with clear insights into their implications and actionable steps that NRIs should consider to optimize their financial planning.
1. Increase in Tax Exemption Limit and New Tax Slabs
Tax Exemption Limit Raised to INR 12 Lakh
The government has raised the income tax exemption limit from INR 5 lakh to INR 12 lakh under the new tax regime. This means that any NRI earning up to INR 12 lakh per annum from Indian sources, including rental income, dividends, capital gains, and business income, will not be required to pay any income tax in India.
Previously, under the new tax regime, the exemption limit was INR 5 lakh, beyond which individuals had to pay tax according to the applicable slabs. This increase in the exemption limit provides substantial relief to NRIs, particularly those with moderate income from India.
Impact of the Higher Exemption Limit
•NRIs earning up to INR 12 lakh per year in India will now pay zero tax, resulting in direct savings.
•NRIs receiving rental income from properties in India, dividends from Indian stocks, or capital gains from real estate and investments will have a larger portion of their earnings remain tax-free.
•The higher exemption limit reduces compliance requirements for NRIs with lower taxable incomes in India.
•NRIs who previously had to file tax returns solely due to earnings slightly above INR 5 lakh may no longer need to file returns if their income is below INR 12 lakh.
New Income Tax Slabs for NRIs in 2025
For NRIs earning above INR 12 lakh, the new tax slabs will apply as follows:

This restructuring benefits NRIs with high earnings from Indian sources by ensuring a more progressive tax rate and reducing the overall tax burden, especially for those in the middle-income range.
Reduction in Surcharge for High-Income NRIs
The surcharge on income above INR 5 crore has been reduced from 37 percent to 25 percent. This lowers the effective tax rate for ultra-high-net-worth NRIs from 42.7 percent to 39 percent, making India’s tax framework more competitive compared to other countries.
Actionable Insights for NRIs
•NRIs earning below INR 12 lakh annually should consider optimizing their investment portfolio in India to fully leverage the tax exemption.
•High-income NRIs should reassess their tax planning strategies to maximize savings under the new tax slabs and surcharge reductions.
•NRIs planning to expand their business or real estate investments in India may find it more financially viable due to the revised tax structure.
2. Changes in Tax Deduction at Source (TDS) on Rental Income
The government has increased the TDS threshold on rental income from INR 2.4 lakh to INR 6 lakh per year. Previously, if an NRI earned rental income exceeding INR 2.4 lakh, tenants were required to deduct TDS before making payments. With the new threshold, tenants will only deduct TDS if the annual rental payment exceeds INR 6 lakh.
Implications of the Increased TDS Threshold
•NRIs earning rental income below INR 6 lakh per year will receive the full rental amount without tax deduction, improving cash flow.
•Fewer NRIs will need to file for TDS refunds, reducing compliance burdens.
•NRIs with multiple rental properties may need to reassess their rental agreements to optimize tax benefits.
3. Real Estate Investment and Capital Gains Tax Changes
Reduction in Capital Gains Tax on Property Sales
•The long-term capital gains tax on the sale of property has been reduced from 20 percent to 15 percent.
•The required holding period for property to qualify as a long-term capital asset has been reduced from three years to two years.
Impact on NRIs Selling Property in India
•NRIs who sell their property after two years instead of three will now qualify for lower capital gains tax rates.
•The lower tax rate makes real estate investment in India more attractive, as liquidity concerns associated with long-term holdings are reduced.
•NRIs planning to repatriate funds from property sales will benefit from increased flexibility in structuring their sales transactions.
Increase in Repatriation Limit for Property Sales
•NRIs can now remit up to $2 million per year from property sales without requiring prior approval from the Reserve Bank of India (RBI).
•Previously, repatriation of funds from property sales was subject to strict approvals beyond certain limits, which created delays and administrative challenges.
Actionable Steps for NRIs
•NRIs considering selling property should plan their transactions to leverage the lower capital gains tax rates and repatriation limits.
•NRIs with multiple properties in India may find it more beneficial to restructure their real estate holdings to optimize tax savings.
•Those planning to invest in Indian real estate should take advantage of the reduced holding period requirement for long-term capital gains tax benefits.
4. Banking and Remittance Benefits
Lower Remittance Costs and Faster Transfers
•The government has mandated a reduction in remittance transaction fees for NRIs sending money to India.
The processing time for international remittances has been reduced to 24 hours, ensuring faster access to •funds.
Improved NRI Banking Regulations
•NRIs will have greater flexibility in managing NRE (Non-Resident External) and NRO (Non-Resident Ordinary) accounts, including improved repatriation facilities.
•A new digital banking platform exclusively for NRIs will be launched to simplify forex management, investment tracking, and compliance.
•The introduction of a Centralized KYC system will eliminate the need for repeated identity verification across different financial institutions.
Key Takeaways for NRIs
•NRIs making regular remittances to India will benefit from lower transfer costs and faster processing.
•Digital banking improvements will enhance financial management capabilities, making it easier to track investments and currency fluctuations.
•The increased flexibility in NRI accounts provides more opportunities for wealth management and repatriation planning.
5. Investment and Stock Market Reforms
Higher NRI Investment Limits in Indian Companies
•NRIs can now hold up to 10 percent stake in listed Indian companies, an increase from the previous limit of 5 percent.
•The investment cap for NRIs in venture capital and private equity funds has also been increased.
Expansion of Foreign Direct Investment (FDI) in Insurance and Infrastructure Bonds
•The insurance sector’s FDI cap has been raised to 100 percent, allowing NRIs to own and operate insurance businesses in India.
•Special tax-free infrastructure bonds are being introduced to encourage NRIs to invest in long-term government projects.
Investment Considerations for NRIs
•NRIs interested in equity markets can now take larger stakes in Indian companies, enhancing portfolio diversification.
•The relaxed FDI rules in insurance present new opportunities for business expansion and investment.
•Infrastructure bonds offer a secure investment option with tax advantages, making them an attractive choice for wealth preservation.
The India’s Union Budget 2025-26 introduces a range of tax cuts, compliance simplifications, and investment opportunities that significantly benefit NRIs. By raising the tax exemption limit, lowering capital gains taxes, increasing repatriation limits, and expanding investment avenues, the government has made India a more attractive destination for NRI capital and business activities. NRIs should reassess their financial strategies in light of these changes to maximize tax savings, optimize investment portfolios, and take advantage of the newly introduced banking and business incentives.