Budget 2012: Five things NRIs want

Union Budget 2012-13|pre-budget news|NRI TDS

1. Make TDS less taxing Tax deduction at source (TDS) is perhaps one of the biggest pain points for a Non Resident Indian's (NRI) transactions. The budget could do well to address some of these issues:

> Introduce basic exemption limit for NRIs before TDS applies: While Resident Indians are charged TDS only when income exceeds a certain limit, no such provision exists for NRIs

> Individuals need not have to deduct TDS on payments to NRIs: If payment is made to a Resident Indian by an individual, the individual need not deduct TDS. But if payment is being made to an NRI, an individual is expected to get a TAN number and deduct tax at source.

> Make it easy to claim exemption: To claim TDS exemption, NRIs must submit tax residency certificate obtained from tax authorities of the country they are resident of.

> Clarity on TDS for NRIs living in countries where there is no tax:

You can get details here

2. Relax NRI related provisions of the Direct Tax Code

The Direct Tax Code (DTC) is expected to become effective, at least partly, from the 1st of April 2012. A few provisions of the DTC are a little harsh for Non Resident Indians:

> Change in definition of NRI: According to the new definition, those NRIs present in India for more than 60 days in a financial year will be treated as Residents. This change would have an adverse impact on the NRIs frequently visiting India either for personal or business visits, since, they now need to plan and check the duration of each of their visits in any year to avoid becoming resident.

> Change in wealth tax provisions: Beneficial provisions for Resident Not Ordinary Residents, that is for those returning to India, do not exist in the DTC with respect to Wealth Tax

>Compulsory tax residence certificate: proposed DTC specifically provides that a non-resident shall not be entitled to claim relief under the provisions of the relevant tax treaty, unless, a certificate of tax residence is obtained by him from the tax authority of the overseas country in a prescribed form. While this certificate is practically required under the current provisions also (if the case was picked up for assessments); in the proposed DTC the same will become a mandatory requirement.

Read more about these provisions of DTC here

3. Allow NRIs to invest in corporate and infrastructure bonds The finance ministry is considering allowing individual foreign investors to directly buy corporate bonds issued by Indian companies, extending to debt a similar facility recently allowed for equity investments that could, in the long run, help deepen the country's shallow bond market.

Currently, foreign individuals are allowed to invest in Indian bonds only as a sub-account of a foreign institutional investor (FII). FIIs in turn are allowed to buy a total of USD 45 billion of corporate debt, of which USD 25 billion is allocated for infrastructure bonds.

Read more about this proposal here

4. Give direction of Real Estate Bill

Real Estate has been a hot investment favorite for NRIs. But the sector in India has not always been easy to deal with. Common complaints include the developers' demand for cash, delays in completion of projects, developers not delivering on promises and the sub standard quality of construction.

And for NRIs who have spent a large part of their lives in developed systems, these pain points can be quite overwhelming. The proposal for a Real Estate Bill has been doing the rounds in the various State and Central Ministries for a while now. The bill is touted to be pro-consumer. The Budget could do well to indicate the progress of the Bill.

5. Raise wealth tax exemption to Rs 1 crore

The current wealth tax exemption limit is Rs 30 lakh. Today, with property prices in India on an uptrend, this limit might be low. Agarwal says that the wealth tax exemption limit could be raised from the current Rs 30 lakh to Rs 1 crore.