Dubai: Will India’s next budget, to be announced tomorrow (February 1), finally offer up some incentives for Indian expats?
In recent years, specific budget proposals targeted at NRIs have been limited or even absent, according to tax consultants and other business sources. But there is hope that this time the Finance Minister Nirmala Sitharaman will come up with something.
At least when it comes to how property sales done by NRIs in India are treated. “Currently, NRIs are not given the advantage of the ‘inflation index’ unlike Indian citizens,” said Jeet Gianchandani, Managing Partner at the audit firm JCG. “If this is allowed, NRIs too will get a tax benefit on inflation for older properties bought when adjusted to the current inflation rate.”
This is how a unified inflation indexation would work. Say, an expat Indian in the UAE bought a property in India for Rs10 million in 2015. And then decides to sell it for Rs20 million now.
Under current rules, the tax is applied on the full property value gain – of Rs10 million – between 2015 and now.
But resident Indians selling the same property would get a massive benefit when inflation indexation kicks in. If the property’s current inflation-adjusted price is Rs1.5 million currently, the actual impact will be only on Rs5 million, which is the value gain that the property made between the time it was bought in 2015 and now.
“It would be a big break if the inflation indexation was the same for all, NRIs and domestic Indian investors,” said Gianchandani. “Simplified tax compliance measures and lower taxes in the 2025-26 India budget will be welcomed by all.”
Given how high India’s inflation has been, the tax cost on NRIs on any such transaction is steep. And a hindrance when it comes to further investments in Indian property by NRIs, real estate industry sources add.
Ease the tax rules for NRIs
Rupen Rajguru is Head of Equity Investments and Strategy at Julius Baer India. He says, emphatically, “Many NRIs struggle with complex taxation rules, especially around double taxation. Clarity on tax residency rules, elimination of ambiguities in capital gains taxation, and better provisions for tax credits would be welcomed.
“Policies encouraging NRI investments in real estate, startups, and infrastructure, coupled with more liberalized RBI regulations, could enhance foreign inflows.
“Many NRIs returning to India seek clarity on pension benefits, taxation of foreign income, and retirement savings plans. Policies ensuring a smooth financial transition could be highly beneficial.”
These are the sentiments within the wider NRI community in the UAE and Gulf. Many still remember with disappointment the missed opportunities from not having any proposals in recent budget announcements.
India needs its higher growth back
Recent data on the Indian economy have not been exactly bullish. Foreign portfolio investments into Indian stock markets are seeing significant pull-outs, while the dramatic decline in the rupee since November 5’s US Presidential election will be a concern for India’s policymakers and businesses.
“India’s GDP growth has decelerated recently – In 2024-25, the economy is projected to grow by around 6.4%, down from 8.2%,” said Krishnan Ramachandran, CEO of Barjeel Geojit Financial Services.
“This is attributed to factors such as weakened private consumption, high inflation and reduced manufacturing output. Despite these challenges, India’s growth remains relatively strong compared to global standards.”
How has the inflation been?
In 2024, inflation was at a troublesome 4.8%, but expected to reduce to 4.6% in Q1-2025 and then to 4%. But sticky inflation has been hurting consumer sentiments, and translating into lower spending. This is something that key consumer-facing sectors can scarcely afford.
Will there be some tax relief?
“With inflationary pressures affecting household budgets, (India’s) salaried professionals and the middle-class expect relief in income tax slabs and higher exemptions,” said Rajguru. “A revision in the standard deduction and an increase in the Section 80C limit for tax-saving investments are among the top demands.”
Sometime tomorrow, resident Indians and NRIs will know whether those hopes will be met.