Will Budget 2025 Simplify Tax Compliance for Property Transactions with NRIs?

As property transactions involving Non-Resident Indians (NRIs) continue to rise, homebuyers face significant challenges with tax compliance. Purchasing real estate from an NRI seller requires buyers to navigate complex rules, from tax withholding to administrative filings. Could Budget 2025 address these issues and make the process easier for all parties involved?

Current Challenges for Homebuyers

For resident sellers, the process is straightforward: buyers deduct 1% of the property value as Tax Deducted at Source (TDS) for properties worth over INR 50 lakh. However, when the seller is an NRI, the situation becomes more complicated. Buyers must:

• Obtain a TAN: A Tax Deduction and Collection Account Number is mandatory for deducting and depositing TDS, adding administrative work for one-time property buyers.
• File e-TDS Returns: This requires familiarity with tax filing systems, often necessitating professional help.
• Handle Limited Payment Options: Current rules restrict TDS payments to Indian bank accounts, which can be challenging for NRIs who primarily use overseas accounts.
• Ensure Compliance with High TDS Rates: Buyers must calculate and deduct taxes at rates higher than the standard 1% for residents, adding to the complexity.

What Budget 2025 Could Change

Tax experts believe that Budget 2025 has the potential to bring reforms to simplify these processes. Here are some proposed solutions:

1. Challan-Cum-Statements

• Proposed Reform: Introduce a challan-cum-statement system for NRI property transactions, similar to those used for resident sellers.
• Benefit: Eliminates the need for buyers to obtain a TAN, significantly reducing administrative work for one-time property transactions.

2. Overseas Tax Payments

• Proposed Reform: Allow NRIs to make tax payments through overseas bank accounts.
• Benefit: Removes the reliance on Indian bank accounts, making the payment process smoother and more accessible for NRIs.

3. Expanded e-Verification

• Proposed Reform: Broaden the e-verification system for NRIs to include:
  • OTPs sent to international mobile numbers.
  • Two-factor authentication for enhanced security and ease of use.
• Benefit: Speeds up the tax filing process and reduces delays caused by restrictive verification methods tied to India-based systems.

Expert Insights

According to Divya Baweja, Partner at Deloitte India, these reforms could streamline the tax compliance process significantly. She highlights that introducing a challan-cum-statement system alone could remove a significant administrative hurdle for buyers, encouraging smoother transactions. Expanding digital and payment systems would further align tax processes with the needs of NRIs and modern financial practices.

A Step Toward Simplicity

If implemented, these reforms in Budget 2025 could transform property transactions involving NRIs. Simplifying compliance, expanding payment options, and improving verification systems would reduce the burden on buyers and sellers alike. As the real estate market grows increasingly global, these updates are not just desirable—they’re necessary.

Homebuyers and NRIs alike will be watching closely as Budget 2025 unfolds, hoping for a more streamlined, accessible system that eliminates unnecessary roadblocks and fosters easier property transactions.