Simplification of Compliance and Processes for NRIs and individuals

In recent years, the Government has made significant strides in simplifying the process for filing tax returns. With Budget 2025 around the corner, it is expected that the Government will bring in further changes to ease the process:

1.  Simplifying TDS 

Simplifying tax deducted at source (TDS) compliance for home buyers where the seller is an NRI. Currently, a TDS of 1% is required to be deducted by home buyers if the property value is INR 50 lakhs or more. The buyer can deposit the TDS in a challan-cum-statement Form (Form 26QB), if the seller is a resident. 

If the seller is a non-resident, tax is withheld at a higher rate and the buyer is required to obtain a Tax Deduction Account (TAN) number and file e-TDS returns. To address this issue, the government could make the TDS process simpler by introducing a challan cum statement Form similar to resident sellers.

2. Simplified tax return Form for non-residents 

Resident individuals with income from salary, one house property, and income from other sources can file the simplified Form ITR-1 if their total income is upto INR 50 lakhs.There are many NRIs who have income from investments situated in the country. If the benefit of filing a simpler tax return Form is extended to non-residents and not ordinarily residents, it would ease their compliance burden.   

3. Enabling Refunds to Overseas Bank Accounts

NRIs could receive refunds from income-tax authorities for various reasons. Currently, refunds can only be credited to active, pre-validated Indian bank accounts, and tax payments must also be made through specific Indian accounts. Budget 2025 could simplify this process by enabling refunds directly to overseas accounts.

4.    Extending timelimit for e-verification

Currently, the tax return form must be e-verified either online or physically. Under the online mode, e-verification could be done through an Indian mobile number linked to Aadhaar, EVC generated through pre-validated bank/demat account, netbanking, or digital signature certificate.

For physical e-verification, taxpayers can e-verify by sending the physically signed copy of ITR-V to a Centralized Processing Centre within 30 days,which may sometimes not be possible especially if the taxpayers are located outside India.  The government could extend the timelimit for filing the physically signed ITR-V, to 90 days with a view to providing relief to such NRI taxpayers.

5.    Ease in Compliance with respect to Form 10F

When an NRI claims treaty relief in the income tax return under a Double Taxation Avoidance Agreement (DTAA) between India and another country, the NRIisrequired to obtain a Tax Residency Certificate (TRC) from the foreign country. Additionally, the NRImust file Form 10F online and submit the TRC alongside it. Generally, tax return filing overseas is delayed and hence taxpayers may not be able to produce the TRC or Form 10F at the time of filing the return.  The government may permit submission of a TRC /Form 10F later to alleviate this issue.

6. E-Verification through Email OTPs or Foreign Mobile Numbers

The income tax return needs to be verified within 30 days of filing. Taxpayers must complete e-verification using an OTP sent to their Indian mobile numbers or send a signed acknowledgment to the Centralized Processing Centre (CPC). NRIs often face difficulties receiving OTPs if their Indian mobile number is inactive. Budget 2025 could introduce options to receive OTPs on foreign numbers or via email, easing compliance for NRIs.

6.    Setting up a timeline for disposal of appeals before Commissioner of Income-tax (Appeals)

Currently, there are no timelines for disposal of appeals filed before the CIT(A). This results in delay in settling tax litigation, causing anxiety to taxpayers. The government has been taking steps to reduce tax litigation by coming out with various amnesty schemes, setting up a timeline to ensure that appeals are disposedoff in a time bound manner.

7.    Increasing the time-limit for filing revised return

Currently, the due date to file revised returns is 31 December of the following financial year. In a situation where the assessee is ROR in India, claiming foreign tax credit (FTC), it would be difficult to finalise the FTC to be claimed in his India tax return when the return for the calendar year is not yet finalised in the overseas jurisdiction (for e.g. in US, 2024 return would be finalised only in April 2025. The revised/belated returns can be filed for FY 2023-24 only till 31 December 2024 to claim the credit for taxes paid for the period Jan-March 2024).

>  If the due date for belated/revised return filing is not extended, then the FTC claimed on the return may not be the final one as it would be claimed on estimated basis or based on the taxes withheld at source in the overseas jurisdiction.

> Thus, there is a requirement to extend the due date of filing the belated/revised return to least till 31st March instead of 31st December.

The aforesaid measures will help the taxpayers in fulfilling their compliances with ease and in a timely manner.

Homi Mistry is a Partner, Ajay Nahata is a Director and Sakina Suterwala is a Deputy Manager, with Deloitte India. The views expressed are personal.