India has introduced a series of tax reforms that tighten NRI taxation, enhance compliance, and align with global tax norms. These changes impact everything from tax residency to foreign asset reporting, making it essential for NRIs and global investors to revisit their financial strategies.
With increasing scrutiny on overseas income and remittances, NRIs must now plan their tax obligations carefully to avoid penalties and optimize their wealth management strategies. Here is an easy to read reckoner on how NRIs must plan their finances and investments going forward.
1. Tax Residency Rules Have Tightened
Earlier, NRIs could maintain their status if they stayed in India for less than 182 days in a financial year. Now, if an NRI earns over ₹15 lakh in India, they will be considered a resident if they stay for 120 days or more.
This change follows global best practices, preventing tax avoidance through prolonged foreign stays. Those planning to retain NRI status must carefully track their days spent in India and adjust travel plans accordingly.
2. Foreign Income Taxation for RNORs
NRIs classified as Resident but Not Ordinarily Resident (RNOR) will now be taxed on their foreign passive income. This is similar to how the US taxes its citizens under FATCA.
For NRIs with rental income, dividends, or interest earnings abroad, this means a higher tax liability in India. Transparency is the goal here, ensuring global income is disclosed and taxed appropriately.
3. Mandatory Reporting of Foreign Assets & Bank Accounts
NRIs and residents must now disclose their overseas assets and bank accounts to Indian tax authorities. This aligns with global information-sharing agreements, ensuring tax compliance across jurisdictions.
Those with investments in foreign stocks, bank accounts, or properties must maintain detailed records and ensure compliance to avoid penalties.
4. Higher Taxes on Foreign Remittances
Remitting money abroad under the Liberalized Remittance Scheme (LRS) will now attract a higher Tax Collected at Source (TCS).
Large outbound remittances will be under greater scrutiny, similar to how the EU tracks cross-border transactions. NRIs sending funds abroad should consider tax-efficient alternatives to minimize deductions.
5. Digital Businesses & SEP Rules
Foreign digital companies earning from Indian clients now fall under the Significant Economic Presence (SEP) framework.
This means NRIs running offshore digital businesses must comply with new tax regulations in India, similar to digital tax laws in France and the UK.
6. Stricter Double Tax Avoidance (DTAA) Compliance
Tax treaty benefits now come with stricter documentation requirements, preventing misuse of DTAA provisions.
NRIs relying on tax treaties to reduce their liabilities must ensure they meet these new documentation requirements to continue availing treaty benefits.
7. Taxation on Foreign Crypto & Digital Investments
Foreign crypto assets and offshore investments now fall under India’s tax net. This follows global trends where digital assets are being taxed more aggressively.
NRIs holding cryptocurrencies abroad should assess their tax exposure and consider restructuring investments for better tax efficiency.
8. Taxation of Foreign Pension & Retirement Accounts
NRIs returning to India could face taxes on their foreign pension and retirement accounts. Similar to Canada’s approach, India is strengthening its oversight on offshore income sources.
Those planning a return should evaluate how their overseas retirement funds will be taxed and explore exemption options if available.
9. Two-Year Tax Relief for Returning NRIs
To encourage NRIs to return, India now offers a two-year tax relief period. This is similar to policies in China, where tax breaks are used to attract skilled professionals back to the country.
NRIs considering long-term financial planning in India should factor in this benefit to optimize their investment strategies.
10. Stricter Penalties for Non-Compliance
Failure to comply with these tax laws will now result in higher penalties. This follows Australia’s approach of imposing strict fines on tax evasion.
To avoid financial and legal risks, NRIs and global investors must stay updated on tax regulations and plan accordingly.
What NRIs & Global Investors Should Do Now
India’s tax laws are evolving rapidly, and these changes impact:
- NRI residency status
- Taxation of foreign passive income
- Reporting of overseas assets
- Crypto and digital economy taxation
With increasing global scrutiny, NRIs and investors must reassess their tax strategies, ensure full compliance, and explore ways to optimize their wealth management.
At Maxiom Wealth, our experts specialize in navigating India’s evolving tax landscape. We offer customized investment solutions and tax planning strategies to help you safeguard your wealth.
For personalized tax and investment advice, consult Maxiom Wealth today!
