February 06, 2025

Can NRIs Claim the ₹12 Lakh Tax Exemption in Budget 2025? Find Out Now!

The Union Budget 2025-26 has introduced a game-changing reform—zero tax on annual incomes up to ₹12 lakh under the new tax regime. This is fantastic news for India’s middle-class residents, but a pressing question remains: Can NRIs claim this exemption too?

Who Qualifies for the ₹12 Lakh Tax Rebate Under Budget 2025?

Under Section 87A of the Income Tax Act, resident individuals with annual earnings up to ₹12 lakh are eligible for a rebate of up to ₹60,000, effectively making their tax liability zero.

Can NRIs Benefit from This Tax Rebate?

The answer is no. NRIs are excluded from this lucrative tax benefit, and here's why:

Residency Requirement: The rebate is strictly available to individuals classified as "residents" under the Income Tax Act.
Global Earnings Factor: NRIs often earn income abroad and pay taxes under the laws of their resident country.

What About NRIs Earning Income in India?

NRIs with income sources like rent, capital gains, or interest earned in India can benefit from the increased basic exemption limit of ₹4 lakh (up from ₹3 lakh) under the new tax regime. However, if their income exceeds ₹4 lakh, they will not be able to claim the Section 87A rebate.

Are Returning NRIs Eligible for the Rebate?

Yes. Returning NRIs who qualify as "Resident but Not Ordinarily Resident" (RNOR) for up to two years can claim the rebate under Section 87A.

Tax-Saving Tips for NRIs in Budget 2025

While the ₹12 lakh exemption may not be available, NRIs can still optimize their tax liabilities using the following strategies:

Double Taxation Avoidance Agreements (DTAA): Avoid paying tax twice on the same income by leveraging DTAA provisions.
Investment Deductions: Sections like 80C provide deductions for eligible investments, such as specified insurance products.
Expert Guidance: Professional tax advisors can help structure your investments and income for maximum tax efficiency.

Why Residency Status Matters for NRI Taxation

Understanding your residency status is crucial for accurate tax filing. Residency status determines the benefits you can claim and your tax obligations under Indian law.

Key Insights for NRIs on Budget 2025

The Section 87A rebate of up to ₹60,000 applies only to resident taxpayers.
NRIs need to focus on leveraging DTAA benefits through DTAA consultancy and deductions under Sections like 80C.
Strategic financial planning is essential for minimizing tax liabilities.

Next Steps for NRIs

Staying informed and proactive is essential to navigate India's evolving tax landscape. Evaluate your residency status, explore tax-saving options, and seek professional advice for optimal outcomes.

Visit DineshAarjav.com for expert insights on NRI taxation, financial strategies, and the latest updates tailored specifically for NRIs.