NRIs may still face tax scrutiny under new Income Tax Bill

Key Takeaways

• Income Tax Bill, 2025 introduces stricter NRI residency and reporting requirements for global income.
• DTAA loopholes are closing; large transactions, bank deposits, and mismatched filings now trigger greater tax scrutiny.
• NRIs must disclose foreign assets, file returns accurately, and maintain records to avoid audits and penalties.

Indian Non-Resident Indians (NRIs) have always paid close attention to the country’s tax laws, looking for ways to make the most of their non-resident status and avoid unnecessary taxes back home. However, new updates through the Union Budget 2025 and the upcoming Income Tax Bill, 2025 have made it clear that things are changing. Even people who plan every detail of their move outside India 🇮🇳 to reduce their taxes may find themselves under tax scrutiny. It is important for NRIs, their families, and anyone thinking about working or moving abroad to understand what’s new, what has changed, and what it means for their money and peace of mind.

Key Updates for NRIs: Major Shifts in Tax Rules

The government in India 🇮🇳 is taking a closer look at how NRIs report their income and how they meet the rules for being a non-resident. This is mainly because of:

• Stricter scrutiny of money earned abroad, thanks to better agreements with other countries to share data.
• Tighter rules to decide who counts as a non-resident, especially for people who make a lot of money.
• Demand for more reporting and tighter checks on big transactions, especially when an NRI moves money or invests large sums.
• Changes in agreements (called DTAAs) with other countries that used to make it easier for some NRIs to avoid double taxes.

Let’s look at each of these changes more closely and see how they impact the daily lives and plans of Non-Resident Indians.

1. Stricter Scrutiny of Foreign Income

For a long time, if a person left India 🇮🇳 and qualified as an NRI, there was little worry about income made abroad being watched or taxed by Indian tax officials. Now that is changing quickly:

• India 🇮🇳 has signed many new data-sharing agreements with other countries, especially those with whom it has Double Tax Avoidance Agreements (DTAAs). These agreements help tax authorities track money crossing borders.
• If an NRI earns money abroad, Indian tax authorities can now get details about these earnings more easily.
• The Income Tax Bill is also pushing for tighter reporting. If you earn income in another country, you may have to declare these details in your Indian tax return, even if you think you are not a resident for tax purposes.
• If you don’t report this income properly, or if the numbers do not match between the money in your overseas accounts and what is reported in India 🇮🇳, it could trigger automatic alerts and tax notices.

This means being extra careful when you fill out your tax forms, and not thinking that foreign income is “out of sight, out of mind”.

2. Expanded Residency Definitions: Who Really Counts as NRI?

Under older Indian tax rules, the basic rule was simple. If you spent less than 182 days in India 🇮🇳 during a financial year, you were a non-resident. For people with very high incomes, the cutoff was already lowered to 120 days in past budgets.

But under the new Income Tax Bill, the bar is set even higher in some cases:

• The special 182-day rule to be considered a non-resident will now mostly help only people who leave India “for employment outside India”. This means if you leave just to “look for a job” or to try your luck at self-employment, you might not get non-resident status as easily as before.
• If you earn ₹15 lakh or more from Indian sources in a year and don’t pay taxes anywhere else, you could end up classified as a “resident”. That means you’d have to report and pay tax on your global income—not just what you earn in India 🇮🇳.
• These tighter rules mean simple tricks like spending just a few days less in India each year may not keep you safely outside the tax authorities’ radar.

So being an NRI is now less about clocking how many days you are in (or out of) India and more about why you left, where your money comes from, and where you pay taxes.

3. Tighter DTAA Provisions & Reporting Requirements

Double Tax Avoidance Agreements (DTAAs) used to give many NRIs a sense of comfort. By structuring your investments or shifting where you legally reside, you could avoid getting taxed twice—once in India 🇮🇳 and again in another country.

But:

• New Indian policies aim to close loopholes in these agreements.
• The government is now requiring more info whenever an Indian citizen leaves the country. You have to provide:
  • Your Permanent Account Number (PAN)
  • The reason for your travel
  • How long you plan to stay abroad
  • Other details or official certificates if asked

As reported by VisaVerge.com, these steps show that the government wants more complete information to track people’s travel and finances.

Common Triggers for NRI Tax Scrutiny

Even if you do everything you can to fit the NRI definition, you could still get a notice from tax officials. This often happens when you are linked to:

• Large property deals—buying or selling a house in India 🇮🇳 catches attention, especially if the amounts are big.
• Investing lots of money—like big stock or mutual fund transactions.
• Big bank deposits—putting more than ₹1 crore (ten million rupees) in a current account can set off a flag.
• Not reporting taxable income from Indian sources—like rent from real estate, capital gains, or interest from NRO accounts. Even if the actual money isn’t much, failing to report it honestly still gets noticed.
• Mismatch in TDS (tax deducted at source)—for example, the bank reports one number, and your return shows something different.

Missing these red flags, or failing to file your required returns, is likely to bring official tax questions, and you’ll need to explain where your money came from and prove that you followed all the rules.

Implications for Financial Planning: Side-by-Side Comparison

Let’s compare the old rules with what is changing under the new Income Tax Bill:

This table shows how much more detailed NRIs need to be when planning their finances, keeping records, and filling tax paperwork.

New Required Disclosures for NRIs

When an NRI leaves India, the expectations are now stronger:

• You need to give your PAN number
• State clearly the purpose of your travel (for work, studies, etc.)
• Give a sense of how long you plan to stay abroad
• Show certificates or proof if the authorities ask

Failing to give clear information or giving confusing answers can draw attention and possibly stop you from being treated as a non-resident—even if you lived most of the year abroad.

Expert View: It’s Not Just About Days Anymore

A quote from recent government guidance says it best:

“Even if you plan your stay outside India precisely so as not to meet resident criteria… high-value transactions or failure to disclose global assets/income could still bring you under scrutiny.”

This holds a clear lesson: Meeting the technical number of days outside India is no longer a safety net for NRIs. Officials are now looking at the whole picture—how much you earn, where your money travels, and whether you report everything honestly.

Real-World Triggers That Bring NRIs Under The Tax Lens

Let’s walk through some simple examples:

• You are an NRI living in the United States 🇺🇸. You sell a property in Mumbai and the amount is large—over ₹1 crore. This is likely to be checked by tax authorities in India 🇮🇳.
• You have not lived in India much for years, but you have big investments in Indian stocks. The brokers report these trades to the government. If your returns don’t match, or if you skip filing just because your income looks small, you may get called out.
• You put a very large deposit in your Indian bank account from your overseas earnings. If you do not have good paperwork explaining where this money came from, or if you did not disclose this money before, you could face questioning.

Action Points: What NRIs Should Do Now

The safest way for NRIs to avoid trouble from tax authorities under the new Income Tax Bill is to stay one step ahead. Key steps include:

• File all mandatory returns: Even if your Indian income is so small that you do not owe any tax, file your tax returns. This way, you have proof if questions come up later.
• Be truthful about all foreign assets and income: Even if the reporting requirements seem confusing, always give the full picture.
• Save your paperwork: Whether it’s property documents, stock statements, or records of money sent home, keep them handy for at least seven years. This way, you can quickly answer any questions if a notice arrives.
• Keep up with changes: The rules for NRIs, DTAAs, and NRI-residency status can change year to year. Watch for news and updates.
• Use expert help if needed: If the situation gets complicated, a good tax expert can save you time and worry.

You can always check the requirements for filing income tax returns on the official Indian income tax portal for the latest updates.

What Lies Ahead: Long-Term Impacts for NRIs

With India’s 🇮🇳 changing tax landscape, Non-Resident Indians should be ready for further tightening in the years to come:

• You can expect more and more countries to share tax info with Indian officials, as DTAAs are reviewed and re-signed.
• High earners who try to keep money hidden abroad or who do not report big deals are at the greatest risk.
• Even small missteps—like not updating your address or misunderstanding reporting rules—can cause problems.

VisaVerge.com’s investigation reveals that while these changes may feel stressful now, they are aimed at fairness and at reducing the risk of tax cheats slipping through the cracks. For most ordinary NRIs who report honestly and keep simple, organized records, these new rules are more about paperwork than pain.

Final Thoughts: What NRIs and Families Should Remember

The Income Tax Bill, 2025 and the recent Union Budget changes are a strong signal from the Indian government that it wants clearer, safer, and more complete tax reporting from Non-Resident Indians. Old ways—like simply counting days or ignoring small Indian income—are not enough anymore. Instead, it’s about showing clear paperwork, following new reporting rules, and being ready for more attention to overseas money.

For everyone thinking of becoming an NRI, or for current Non-Resident Indians planning their tax year, the message is simple: tidy records and honest answers matter now more than ever. Stay prepared, keep informed, and use the official resources available—because the rules are not likely to get any easier anytime soon.

Learn Today

Non-Resident Indian (NRI) → An Indian citizen living abroad who qualifies for tax benefits and reporting requirements under Indian law.
Double Tax Avoidance Agreement (DTAA) → A treaty between India and other countries to prevent double taxation on the same income.
Permanent Account Number (PAN) → A unique 10-digit alphanumeric code for identifying Indian taxpayers and tracking financial transactions.
Tax Deducted at Source (TDS) → A system where tax is collected at the point of income generation by the payer before payment is made.
Residency Threshold → The number of days an individual can stay in India before being classified as a resident for tax purposes.

This Article in a Nutshell

India’s new Income Tax Bill, 2025, brings huge changes for NRIs. Stricter residency definitions, expanded reporting, and tighter scrutiny mean global income, assets, and major transactions are under the microscope. Meticulous compliance, full disclosure, and careful record-keeping are now essential for Non-Resident Indians to avoid penalties and retain peace of mind.
— By VisaVerge.com

Read more:

• NRIs See Tax Relief on Mutual Fund Capital Gains in India
• New Income Tax Bill May Change Rules for NRIs Earning Over Rs 15 Lakh in India
• Union Budget 2025 Brings Key Tax and Investment Changes for NRIs
• India Introduces Major Income Tax Reforms in Union Budget 2025: Key Benefits
• India’s Revised Income Tax Slabs: Old vs New Regime Explained