The Union Budget 2025 has introduced a significant tax reform: zero tax on annual incomes up to ₹12 lakh under the new tax regime. This move has been widely welcomed by India’s middle-class taxpayers, but the question remains—Can Non-Resident Indians (NRIs) claim this exemption too? Understanding NRI tax exemptions under Budget 2025 is crucial for NRIs looking to optimize their tax liabilities and make informed financial decisions.
If you are an NRI earning income in India, understanding NRI property ownership in India and how the latest tax updates impact your financial planning is crucial. This blog breaks down the new tax rebate, eligibility, and key tax-saving strategies for NRIs under Budget 2025.
Who Qualifies for the ₹12 Lakh Tax Exemption Under Budget 2025?
Under Section 87A of the Income Tax Act, individuals classified as residents with an annual income up to ₹12 lakh can now enjoy a tax rebate of up to ₹60,000. This effectively makes their income tax-free under the new regime.
However, there’s a catch—NRIs do not qualify for this rebate.
Why NRIs Cannot Avail of the ₹12 Lakh Tax Rebate?
Unfortunately, NRIs are not eligible for this tax relief due to the following reasons:
- Residency Requirement – The tax rebate is exclusively available to individuals who qualify as resident taxpayers under the Indian Income Tax Act.
- Global Income Consideration – Most NRIs earn income abroad and pay taxes in their country of residence, limiting their eligibility for resident tax benefits in India.
- Section 87A Restriction – The rebate applies only to residents, excluding NRIs, even if they earn below ₹12 lakh in India.
What About NRIs Earning Income in India?
While NRIs do not qualify for the ₹12 lakh exemption, they still benefit from the increased basic exemption limit, which has now risen from ₹3 lakh to ₹4 lakh under the new tax regime.
Tax Slabs for NRIs Under Budget 2025 (New Regime)
| Annual Income in India | Tax Rate |
| Up to ₹4 lakh | 0% |
| ₹4 lakh – ₹7 lakh | 5% |
| ₹7 lakh – ₹10 lakh | 10% |
| ₹10 lakh – ₹15 lakh | 15% |
| ₹15 lakh+ | 30% |
Returning NRIs – Can They Claim the ₹12 Lakh Exemption?
Yes, Returning NRIs may be eligible for this exemption, but only if they qualify as Resident but Not Ordinarily Resident (RNOR) under Indian tax laws. This status is available for up to two years after returning to India, allowing them to enjoy certain tax benefits, including potential eligibility for the rebate.
Tax-Saving Strategies for NRIs in Budget 2025
Even though NRIs cannot claim the ₹12 lakh exemption, they can still optimize their tax liabilities through smart financial planning:
1. Utilize Double Taxation Avoidance Agreements (DTAA)
NRIs can avoid paying tax twice on the same income by leveraging DTAA treaties between India and their country of residence.
2. Claim Investment Deductions
NRIs can lower their taxable income by investing in tax-saving instruments under Section 80C, which allows deductions of up to ₹1.5 lakh for investments in:
- Life insurance premiums
- Public Provident Fund (PPF)
- ELSS mutual funds
- National Pension System (NPS)
For more details on tax deductions and exemptions under the new and old tax regimes, refer to this guide: Business Today – Budget 2025 Tax Deductions & Exemptions.
3. Strategic Repatriation of Funds
With stricter DTAA compliance and increased scrutiny on foreign remittances, NRIs must ensure they follow the right process for repatriating funds from property sales or rental income. Proper documentation and tax compliance are essential to avoid penalties.
4. Tax Planning for Rental Income in India
NRIs earning rental income from Indian properties are subject to TDS at 30%. However, they can claim tax deductions on municipal taxes, home loan interest, and maintenance costs to reduce their taxable income.
5. Capital Gains Tax Planning
NRIs selling property in India must account for capital gains tax, which depends on the holding period:
- Short-Term Capital Gains (STCG) (Property sold within 24 months): Taxed as per the income tax slab.
- Long-Term Capital Gains (LTCG) (Property held for over 24 months): Taxed at 20% with indexation.
Why Residency Status Matters for NRIs
Understanding your tax residency status is key to determining your tax liabilities in India. The Union Budget 2025 has tightened tax regulations for NRIs, increasing scrutiny on foreign earnings, repatriation, and DTAA compliance.
Key updates include:
- Stricter DTAA documentation – NRIs earning abroad must report foreign income in India.
- Expanded residency rules – High-income NRIs may face reduced NRI status tenure for tax purposes.
- Enhanced reporting requirements – Failure to disclose foreign assets and bank accounts may result in penalties.
Final Thoughts – What Should NRIs Do Next?
While the ₹12 lakh tax exemption does not apply to NRIs, they still have numerous avenues to reduce their tax burden through DTAA benefits, strategic investments, and smart tax planning. NRI tax exemptions under Budget 2025 offer various ways to minimize tax liabilities through deductions, exemptions, and investment strategies.
At Brivan Consultants, we specialize in NRI property ownership in India, taxation, property transactions, and financial compliance. Whether you need help navigating DTAA complexities, repatriation rules, or tax-saving investments, our expert team is here to guide you.
Need Expert NRI Tax Advice? Contact Brivan Consultants today to ensure your financial planning aligns with the latest tax regulations and maximizes your savings!
