It is that time of the year when all eyes are on the Finance Minister, curious to see what is going to be announced in Budget 2013 i.e, on 28^th February 2013 by the Finance Ministry before the audience in the parliament.

It is very well known that NRI (Non-Resident Indian) community plays a vital role in the Indian economy and their regular remittances into India add to the foreign exchange reserves and help in strengthening the Indian rupee. So, it is in everyone’s concern to keep this society happy.

In common dialect, an NRI is a person who is a citizen of India or is a person of Indian origin working outside India. The definition of NRI, however, varies under the exchange control law and the Income-tax law. If the NRI palate is to be thought of, they would be expecting a Budget having the following benefits:

1. Introduction of the threshold level required to deduct tax at source (TDS) on payments to NRIs:

In case of resident Indians it is required to deduct TDS, only when the amount is above a certain pre-specified limit for a financial year. For example, TDS on rental income is applicable only when the total rental income paid to the resident Indian exceeds Rs.1, 80,000 per financial year. Similarly, TDS on professional income is applicable only when the total professional income exceeds Rs.30, 000.

However, the above provision is not applicable for NRIs. Any amount, chargeable to tax, paid to an NRI is subject to TDS irrespective of the amount of income. The Budget may introduce certain thresholds for TDS for NRIs as well. At present, the general rate at which TDS is deducted on payments made to NRIs is 30%.

2. Expecting Re-Introduction of Deduction for Investments in Infrastructure Bonds:

Today infrastructure sector plays a vital role in India’s economic development. Estimates say that India requires USD 1 trillion for infrastructure development in the next five years. NRIs can contribute significantly to the development of this sector if remittances into infrastructure are made more lucrative.

It is important to provide generous incentives to NRIs to contribute to infrastructure development. A welcome step introduced in the Finance Act 2012 was reduction in the rate of TDS on interest payable on long term infrastructure bonds to non-residents.

A deduction of Rs. 20,000 was available till Financial Year 2011-12 from investment in infrastructure bonds. This may be reintroduced in this Budget, along with introducing exemption from tax on interest income from Infrastructure bonds.

3. Elasticity to claim advantage under the tax treaty:

The Finance Act 2012 made it mandatory for a non-resident to obtain a tax residency certificate (TRC) from his country of residence to claim benefit under the tax treaty. Obtaining a TRC is a tedious and onerous task as it involves different tax jurisdictions. Further, a notification from the CBDT provides that the tax residency certificate should contain prescribed particulars as verified by the government of country of residence. The said particulars may be relaxed or be made more flexible for NRIs.

4. Extension of wealth tax exemption limit to Rs. 1 Crore:

NRIs often invest in immovable assets in India. These assets are subject to wealth tax at 1% on net wealth above Rs. 3,000,000 for both residents and non-residents. Keeping in mind the current market value of properties, the current wealth tax exemption limit seems very low. It is important to raise this exemption limit of wealth tax. The Finance Minister may raise the wealth tax exemption limit to at least Rs. 1 crore. This would give NRIs an incentive to invest on a larger scale in India and act as an impetus to the real estate sector.

5. Extension of deductions under Section 80DD and 80DDB to NRIs:

NRIs may incur expenses on maintenance and medical treatment of their parents and other dependants living in India.

Deduction, in respect of expenditure on medical treatment of a dependant with disability/specified disease, is available only to persons who are resident in India. NRIs are excluded from claiming deduction in respect of the above.

It may seem inequitable to deprive NRIs of this benefit. NRIs with such dependants in India may be allowed certain deductions.

Thus, these are some expectations that an NRI is expecting from the Finance Minister. Hopefully, it will be served in the budget 2013.