Union Budget 2025: Expectations of Non-resident Indians (NRIs)

Non-Resident Indians (NRIs) play a vital role in boosting India’s economy, contributing significantly through remittances, investments, and property purchases. However, NRIs often face cumbersome processes and ambiguities when buying property in India, primarily due to unclear regulations, intricate taxation policies, and procedural delays. NRIs across the globe are hopeful that the Union Budget 2025 will address these hurdles and make property transactions seamless for them.

Challenges Faced by NRIs While Buying Property 

1. Complicated Taxation Norms 

NRIs purchasing property in India often struggle with dual taxation. They need to understand the interplay between India's tax laws and tax treaties with their resident countries. For instance, Tax Deduction at Source (TDS): 

When you buy a property of more than ₹ 50 Lakhs, you are required to withhold and deposit TDS of 1% of the purchase value. Due to digitisation, this process is rather convenient for resident Indians. However, that is not the case when it comes to NRIs. As explained by a partner at Deloitte, Divya Baweja, the TDS deducted for NRIs is at a much higher rate. To further complicate things, the buyer needs to get a Tax Deduction and Collection Account Number (TAN) as well as file e-TDS returns.

Then there is the matter of Capital Gains Tax. Long-term capital gains tax on property sales often involves complicated calculations, creating a barrier for NRI investments.

2. Ambiguity in FEMA Regulations 

The Foreign Exchange Management Act (FEMA) governs property purchases by NRIs, allowing only investments in residential and commercial properties. However, unclear guidelines, especially around agricultural land, farmhouses, and plantations, often confuse potential buyers.

3. Procedural Hurdles

From verifying property titles to obtaining necessary approvals and managing legal formalities, the process can be time-consuming and bureaucratic. NRIs also face challenges in obtaining financing due to limited clarity on loan eligibility criteria and high-interest rates on home loans for non-residents.

4. Absence of Digital Integration 

Despite India’s push towards digitisation, the real estate sector remains largely paper-based. NRIs often struggle to access property records and complete transactions remotely, adding to the inconvenience.

Budget 2025 Wishlist for NRIs

1. Rationalisation of Tax Rates 

• Reduction in TDS Rates: The government should consider lowering TDS rates for NRIs and simplifying processes to claim refunds, ensuring that the actual tax burden aligns with applicable tax slabs.
• Clarity on Capital Gains Tax: Introducing a standardised and straightforward process to calculate capital gains, along with adequate relief on reinvestments, could encourage more NRI property investments.

2. Simplified FEMA Regulations 

• Clearly defining permissible property types for NRIs under FEMA could help eliminate confusion.
• Allowing NRIs to invest in agricultural and rural land (with proper restrictions to prevent misuse) could open new avenues for investment.

3. Streamlined Procedures 

• Single-Window Clearance: Establishing a centralised system for property verification, registration, and loan approvals would make the process more efficient.
• Easier Loan Access: Introducing relaxed loan eligibility norms and reduced interest rates for NRIs would encourage property purchases.

4. Digital Integration of Real Estate Records 

• Digitisation of land and property records across all states, coupled with blockchain technology for transparency, could ensure smooth transactions for NRIs.
• Launching a dedicated NRI portal for property-related transactions, complete with tax calculators, document verification tools, and loan options, would be a game-changer.

5. Enhanced Dispute Resolution Mechanism 

• Setting up dedicated grievance redressal cells to resolve disputes related to property transactions involving NRIs could boost their confidence in the Indian real estate market.

6. Tax Incentives for Property Investments 

• Offering tax benefits for NRIs investing in affordable housing could align with the government’s vision of “Housing for All.”

NRIs contribute immensely to India’s economy, and the real estate sector is a critical area where their involvement can be further encouraged. Addressing taxation woes, simplifying FEMA regulations, and digitising real estate transactions would not only make the process more NRI-friendly but also boost foreign investments in India.

The Union Budget 2025 presents an opportunity to remove the barriers NRIs face in property purchases and foster a transparent, simplified, and efficient system.