Income Tax Bill 2025: Changes to 9 ITR Forms for UAE Expats Earning in India

DUBAI – Indian expatriates in the UAE with income or investments in India will soon face a new set of tax regulations following the passage of the Income Tax (No. 2) Bill, 2025, in the Lok Sabha on August 11.

This bill replaces the 63-year-old Income Tax Act of 1961 and aims to modernize the tax framework with updated slabs, compliance relief, and provisions specifically tailored for non-resident Indians (NRIs).

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Effective from April 1, 2026, the new law introduces several notable changes for UAE-based NRIs, including revised tax slabs and clarity on offshore investments.

Dixit Jain, Managing Director at The Tax Experts DMCC in Dubai, emphasized that the bill offers significant relaxations and clarifications that will simplify tax calculations and compliance.

Key Changes for UAE NRIs:

1. New Tax Slabs: Income up to ₹4,00,000 will be tax-free, while income from ₹4,00,001 to ₹8,00,000 will be taxed at 5%. Higher income brackets will face rates of up to 30%, applicable primarily to rental income and business profits from India.
2. Offshore Investment Relief: The bill ensures that investment funds managed by Indian fund managers outside India will not be taxed in India, addressing a key concern for NRIs.
3. Capital Gains Retention: NRIs will continue to benefit from concessional tax rates on capital gains from foreign exchange assets, including shares and bank deposits.
4. Clarification on Offshore Derivatives: Income from certain offshore instruments will remain outside India’s tax scope, providing NRIs with greater certainty in their investments.
5. Property Income Deductions: Municipal taxes can now be deducted before applying the standard deduction on rental income, potentially reducing taxable income for NRIs with properties in India.
6. Pension Income Exemption: Full tax exemption on commuted pensions from approved funds is now available, regardless of the taxpayer’s employment history in India.
7. Simplified Compliance: NRIs with only investment income or long-term capital gains may be exempt from filing returns if tax has been deducted at source.
8. Refunds and NIL-TDS Certificates: Filing is mandatory for claiming refunds, and NRIs can obtain NIL-TDS certificates to avoid unnecessary withholding on their income.
9. Transition Period: The 2025-26 financial year will serve as a transition period for planning under the new law.

The Income Tax Bill, 2025, while not radically altering existing tax structures, offers increased clarity and eases compliance for NRIs.

Early preparation before the April 2026 deadline will help expatriates optimize their tax strategies and avoid unnecessary complications.

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