Indian budget 2024 a mixed bag for NRIs: Highlights

India’s 2024 budget, presented by Finance Minister Nirmala Sitharaman, has introduced several changes affecting foreign investments and Non-Resident Indians (NRIs).

Tax cuts for foreign companies

The Indian government has reduced corporate tax for foreign companies by 5 per cent, bringing the rate to 35 per cent. This move aims to attract more foreign investments.

“We are simplifying rules for Foreign Direct Investment (FDI) in India and overseas investment by Indians,” Sitharaman said.

The government has increased FDI limits in various sectors to promote business ease, raising caps from 26 per cent to 49 per cent, and in some cases, to 74 per cent.

Union Budget 2024-25 proposes:

👉 Financial sector vision and strategy document to set agenda for next 5 years

👉 Taxonomy for climate finance to increase availability of capital for climate action#Budget2024 #BudgetForViksitBharat pic.twitter.com/IeojmeanjT

— Ministry of Finance (@FinMinIndia) July 23, 2024

Customs duty reductions on gold

The budget also cuts customs duties on key precious metals.

Duties on gold and silver have been reduced from 15 per cent to 6 per cent, and the duty on platinum adjusted to 6.4 per cent. This is expected to lower the prices of these metals.

On Customs Duty, Union Budget 2024-25 proposes:

👉 BCD to be reduced to 5  per cent on certain broodstock, polychaete worms, shrimp & fish feed

👉 BCD to be reduced on real down filling material from duck or goose

👉 BCD on methylene diphenyl diisocyanate (MDI) for manufacture of… pic.twitter.com/woAXC2Krn5

— Ministry of Finance (@FinMinIndia) July 23, 2024

Reacting to the reduction in customs duties, jewellers and gold traders in the UAE said the new rates would not negatively impact them as the traders would continue to offer gold at 5 per cent to 6 per cent cheaper rates than what is available in Indian stores.

Changes in NRI tax rates

The budget has introduced changes for NRIs such as an increase in the rate of capital gains and remittances.

• Long-term capital gains under section 115E have been increased to 12.5 per cent.
• Long-term capital gains exceeding INR1,25,000 under section 112A will now be taxed at 12.5 per cent, up from 10 per cent, effective from July 23, 2024.
• Short-term capital gains under section 111A will be taxed at 20 per cent, up from 15 per cent.

There is also a move towards parity in taxation between residents and non-residents, aligning tax rates on long-term and short-term capital gains.

Liberalised remittance scheme

Under this scheme, individuals can remit up to $250,000 annually without prior approval from the Reserve Bank of India. However, the new TCS requirements will increase the financial burden on remittances, impacting individuals’ finances significantly.

Black Money Act

The finance minister proposed to depenalise non-reporting of small foreign assets.

She said, “Indian professionals working in multinationals get ESOPs and invest in social security schemes and other movable assets abroad. Non-reporting of such small foreign assets has penal consequences under the Black Money Act. Such non-reporting of movable assets up to INR20 lakh is proposed to be de-penalised.”

Tax Deduction at Source (TDS)

To simplify compliance, the budget proposes reducing TDS rates across various thresholds, though rates on salaries, digital assets, lottery winnings, and certain other payments remain unchanged.

Increased overseas spending costs

The budget has made overseas spending more taxing, particularly in education and travel.

Changes to Tax Collection at Source (TCS) will take effect from October 1, 2023.

For education financed by loans, TCS is nil up to INR7 lakh and 0.5 per cent above this amount. For self-financed education, TCS is nil up to INR7 lakh and 5 per cent above. For overseas tour packages, the TCS rate is 5 per cent up to INR7 lakh and 20 per cent thereafter.

Overall, while the budget includes incentives to attract foreign investments, it also introduces measures that will increase the cost of overseas spending for NRIs.

Scheme of presumptive taxation for cruise ship operations by non-residents

The budget proposed to put in place a presumptive taxation regime for cruise ship operations of non-residents. Further, it proposed to provide exemption for any income of a foreign company from lease rentals of cruise ships, received from a related company which operates such ship or ships in India.

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