First women Finance Minister of India presented a decent budget with an aim to boost infrastructure and foreign investment in the country. The announced budget focused on bringing transparency in processes and procedures by proposing introduction of faceless assessment system, levy of TDS on cash payments above threshold limit and promoting digital payments.
Her themes of ease of living and the ease of being compliant in doing business, are well intended and needs effective implementation and follow up.
While the budget appeared to be maiden from NRI perspective, a few points to that a NRI should consider are increase in effective personal income tax rate due to increase in surcharge for the super rich, widening the definition of consideration for immovable property for purposes of TDS and obtaining Aadhar on arrival to India for Nri with Indian passport.
Major impact of Budget on NRIs
Increase in effective tax rate for income above Rs. 2 crores
Enhanced surcharge of 25% on taxable income exceeding INR 2 crores upto INR 5 crores and 37% on taxable income exceeding INR 5 crores. This means that the effective tax rate shall increase from 35.88% to 39% for income between INR 2 crores to INR 5 crores and from 35.88% to 42.744% for income above INR 5 crores.
Gift received by NRI from Resident Indian
The gift received by NRI on or after 5th July 2019 exceeding INR 50,000 received from any resident Indian apart from specified relatives would be taxed in hands of NRIs. Also, NRI will have to file a tax return to disclose the gift income and pay the tax according to the slab rates. Since the gift is accrued in India, it is considered as taxable. Presently, the gifts were not considered as taxable as it was explicitly mentioned in the law.
This amendment is bought to taxation to curtail the benami transactions and to prevent inappropriate transfer of money or property.
Possession of undeclared Foreign Assets
Under the new budget, the Indian government has expanded the coverage of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, to retrospectively include non-resident Indians under the Act. The aim of this move is to take action against those who were residents when they acquired the undisclosed asset and then subsequently turned into non-residents.
India is now receiving information on assets held overseas by Indians under various global treaties, making it easier for authorities to nab evaders.
The move comes amid reports of many high net worth individuals moving out of India and changing their residency status.
Aadhaar card for NRIs
NRIs returning back to India had to wait for 180 days for getting an Aadhaar Card. With the proposed change, NRIs with Indian Passport will get Aadhaar on arrival.
Interest on Rupee-denominated bonds
Interest earned on Rupee-denominated Bonds (RDB) taken between 17th September, 2018 and 31st March 2019 has been exempted from income tax.
Portfolio Investments by NRIs
Budget has proposed that NRI Portfolio Investment (PIS) will be merged with Foreign Portfolio Investment (FPI), there will be simplification of documentation processes and increase in statutory FPI investment limits.
Lower tax deduction Certificate
The procedure to claim lower or nil tax deduction at source from income tax assessing officers has been switched to online channel instead of manual application mode.
Exemption from long-term capital gains taxation on sale of residential property
Currently, long term capital gains arising on sale of a residential property, are exempt from tax, provided the capital gains are re-invested in one residential house property. The Budget has proposed to extend the said benefit of re-investment to two residential properties, provided that the capital gains on sale of residential property does not exceed INR2 crore.
The benefit of this provision can be availed, at the option of the person only once in his lifetime.
At present, tax is not chargeable on notional rent of one self-occupied house property. This Budget has proposed to extend this tax exemption to two self-occupied house properties. This means, one can now own upto two residential house properties without having to pay any Income Tax on notional rent.