Budget 2023 expectations: Instead of an Income Tax rate cut, Non-Resident Indians (NRIs) would prefer a reduction or removal of excessive TDS across asset classes through Budget 2023. In a survey conducted by Mudra Portfolio, over 92% of the 430 NRI respondents said that the reduction or removal of excessive TDS across asset classes is their key expectation from the Union Budget 2023-24.
TDS reduction is important for NRIs as mostly their tax liability is less than the tax deducted at source and they have to wait till Income Tax Return (ITR) filing to claim the same.
Current TDS rate for NRIs
At present, the TDS rate (excluding surcharges) for interest on NRO accounts and deposits is 30%, while that of Long-Term Capital Gains (LTCG) and Short-Term Capital Gains (STCG) on equities are 10% and 15% respectively. The TDS rate on STCG from debt (non-equity) Mutual Funds is 30% and the same on property sale (on the sale value), and rental income are 20% and 30% respectively. The TDS rate for dividend income is 20%.
Top expectations of NRIs across asset classes
Mutual Funds, Stocks
Around 85% of NRI respondents who have invested in Mutual Funds and stocks in India believe that LTCG on MF/stocks should not be taxed. However, a majority of respondents said if taxes are still levied, assets held for more than three years should be exempted because they bore the weight of currency depreciation and conversion.
Also Read: Top 5 Income Tax rule changes expected from Budget 2023
For most NRIs, TDS is a big dampener when selling a property. About 92% of respondents said that the 20%-23% TDS on property sales, that too based on sale value rather than capital gain, should be decreased. Because obtaining the Low TDS certificate from the Income Tax Department takes little time and effort, and purchasers rarely wait that long.
Though Real Estate is the most preferred investment product for NRIs, encashing the gains from the RE investment is the most time-consuming and difficult process for the NRI, the survey found.
A few respondents suggested that, at the very least, a CA certificate verifying the Capital Gain be obtained and subtracted, preventing TDS from being deducted on the overall selling amount.
TDS on rentals was another key concern raised by NRIs who participated in the survey. TDS @ 30% is deducted by tenants, which leads to low cash in hand and most tenants don’t want to deal with the trouble of making TDS payments on a regular basis – as a result, it becomes difficult for NRIs to find tenants for their properties.
Fixed deposits & FCNR category
As many as 70% of respondents said that NRE FDs with terms of less than a year should be introduced, or they should receive interest if their terms are broken early.
Tax Filing and Compliance
Most of the respondents expressed their gratitude to the government for simplifying tax filing. However, they also pointed out the following:
- 90% of the NRI respondent want that intimation of various communications from the IT department should also be sent on the international contact number.
- Regarding tax notifications, NRIs want more time to respond to and act on enquiries. They find it difficult to supply data while they are abroad, as NRI must be physically present in India to collect specific documents – such as those stored in a locker
- NRIs also suggested that local liaison offices in significant foreign cities should be set up to promote the resolution of important Tax and compliance issues.
- To enhance the ease of Investing in India, the implementation of Online KYC and Demat Account Opening for Indians located overseas will be a highly welcome step.
- Many NRIs said that an exclusive NRI Helpline Number for Taxation and Compliance can be established.
“Every year, the finance ministry works on the Union Budget and solicits views and comments from businesses and taxpayers. This time, we decided to reach out to the NRI population in about 15 nations,” said Nishant Kohli, Founder, Director and Business Head-Wealth, Mudra Portfolio.
Also Read: Tax-free interest income up to Rs 1 lakh for senior citizens, suggests SBI Research
“Normally, a survey consists of a series of questions, but this often excludes the originality/suggestion component. So, we approached NRIs with only one question and asked them to indicate what they would want to see included in the budget, which would give room for them to express the problems they were experiencing and the solutions they desired. And the responses we received were quite overwhelming,” he added.
Mudra Portfolio is a Mumbai-based global NRI and HNI financial service management company that also assists NRIs with tax filing and taxation solutions. The respondents in the survey were individual NRIs from USA/Canada, Africa, Europe, Asia Pacific, Australia, the Middle East, and China.