Each Union Budget brings changes that ripple through the NRI community — sometimes obviously, sometimes quietly. Budget 2025, presented in February 2025, introduced a set of changes to the income tax framework that NRIs in UAE, US, UK, Canada, and Singapore need to know before filing their FY 2025-26 returns.
The Big Picture: What Changed for NRIs
Four categories of change matter most for NRIs in Budget 2025:
- New regime made default — you now have to actively opt out if you want the old slab structure
- New regime slabs revised downward — lower rates at more income levels
- TDS rationalisation — some NRO-related rates adjusted
- LTCG rate retained at 12.5% from Budget 2024 — no further change
New Tax Regime Slabs for FY 2025-26
The new regime is now the default. NRIs who do not opt for the old regime will be assessed under these slabs:
| Income Slab | New Regime Rate | Old Regime Rate |
|---|---|---|
| Up to ₹3,00,000 | Nil | Nil |
| ₹3,00,001 – ₹7,00,000 | 5% | 5% (up to ₹5L) / 20% |
| ₹7,00,001 – ₹10,00,000 | 10% | 20% |
| ₹10,00,001 – ₹12,00,000 | 15% | 30% |
| ₹12,00,001 – ₹15,00,000 | 20% | 30% |
| ₹15,00,001 – ₹20,00,000 | 25% | 30% |
| Above ₹20,00,000 | 30% | 30% |
NRI note: Unlike resident individuals, NRIs cannot claim the Section 87A rebate. The rebate — which makes income up to ₹7 lakh tax-free for residents — does not apply to NRIs. NRIs start paying tax from ₹3 lakh upward with no rebate offset.
Capital Gains: What Stayed the Same
The major capital gains changes were introduced in Budget 2024 (effective 23 July 2024). Budget 2025 retained these rates:
- Equity LTCG: 12.5% above ₹1.25 lakh exemption (unchanged)
- Equity STCG: 20% (up from 15% in Budget 2024)
- Property LTCG: 12.5% without indexation (unchanged)
- Debt mutual fund gains: Slab rate for units purchased after April 2023 (unchanged)
Surcharge rates on LTCG were slightly rationalised. The maximum surcharge on LTCG from listed equity is capped at 15%, preventing effective rates from going above approximately 14.4% inclusive of cess.
TDS Changes Affecting NRIs
Budget 2025 included a rationalisation exercise across TDS sections. Key NRI-relevant changes:
| TDS Section | Before Budget 2025 | After Budget 2025 | Impact |
|---|---|---|---|
| Section 194A (NRO interest) | 30% | 20% for specific categories | Reduced TDS on some NRO deposits |
| Section 195 (property sale by NRI) | 20% LTCG | Unchanged | No change |
| Section 196A (mutual fund dividends) | 20% | Rationalised to 10% | Less cash locked in TDS |
RNOR Status: Clarity for Returning NRIs
For NRIs planning to return to India, Budget 2025 brought procedural clarity on RNOR (Resident but Not Ordinarily Resident) status determination. RNOR status protects foreign income from Indian tax for up to 2–3 years after returning. The criteria — being a non-resident for 9 of the past 10 years, or spending less than 729 days in India in the past 7 years — remain unchanged, but the ITR filing process was streamlined to reduce disputes on status classification.
Old vs New Regime: Which Is Better for NRIs?
For most NRIs with straightforward Indian income, the new regime is likely better. Here's a quick guide:
- Choose new regime if: Your Indian income is mainly NRO interest, dividends, or capital gains; you have no significant Indian deductions; your income is between ₹7L-₹15L.
- Choose old regime if: You have Indian home loan interest deductions, significant 80C investments already made, or other large deductions that meaningfully reduce taxable income.
- Remember: once you choose the old regime for a year with business income, it remains binding in subsequent years unless you opt out.
- New tax regime is now the default — you must explicitly choose the old regime if you want deductions.
- NRIs do not get Section 87A rebate — income above ₹3 lakh is taxable from the first rupee.
- Equity LTCG stays at 12.5% above ₹1.25 lakh; equity STCG at 20% — both set in Budget 2024.
- TDS on some NRO interest categories reduced; mutual fund dividend TDS cut to 10%.
- RNOR status rules unchanged but easier to claim — useful if you're planning to return to India.
- Run both regime calculations before filing — for many NRIs the new regime results in lower overall tax.