How India's financial reforms will affect NRIs

Observer

07-04-2025

The Indian financial year begins on April 1 every year. The Financial Year (FY) 2025 marks the implementation of several important changes in the Indian financial system. While the regulatory changes aim to improve transparency, compliant and investor protection across various financial products and services, the relief in direct taxation gives a big bonanza to all sections of the society.
Therefore, it is very important for the Indian diaspora living abroad to know the changes that are affecting them from April 2025. Though there are many changes taking place in the Indian financial system, those concerning the Non-Resident Indians are summarized below.
1. Changes in Income Tax Basic Exemption Limit and Tax Slabs
The Union budget presented in the Indian Parliament on February 1, 2025, by the Finance Minister Nirmala Sitharaman was a big bonanza to the salaried and middle-income groups in respect of income tax reliefs. NRIs also partially benefitted from the new tax rules effective from the financial year 2025-26. Accordingly, the basic exemption limit under the new tax regime has been enhanced from Rs 3 lakhs to Rs 4 lakhs for the NRIs on their domestic income, while income on their NRE accounts is fully exempted. The reduced tax slabs also apply to the domestic income of NRIs. Undoubtedly this is a big relief to the NRIs who have income in India, for which the applicable tax has to be paid by them.
2. UPI Deactivation
A large number of NRIs living in the Sultanate of Oman use the UPI payment system like G-Pay, Paytm, etc. As part of enhanced security, the National Payment Corporation of India (NPCI) has decided to deactivate the dormant and inoperative mobile numbers. Therefore, NRIs to ensure that their Indian Bank accounts are linked to an active mobile number to avail the services.
3. Minimum Balance in Savings Bank Accounts
Major Banks like State Bank of India, Punjab National Bank, Canara Bank, decided to implement minimum balances in Savings Bank (SB) accounts. The minimum amount may vary from metro and non-metro centres. Non-maintenance of the minimum balance will result in penalties. The low-income group of NRIs to take note of the above changes and to maintain the required minimum balances to avoid penal charges.
4. Higher charges of ATM withdrawals
Effective from May 1, 2025, banks may charge Rs 23- per ATM withdrawal made on other bank ATMs in excess of the monthly prescribed limit of three instances in metro centres and five instances on non-metro centres. The NRIs and their family members may encourage the use of internet banking and UPI services in lieu of cash transactions.
5. Re-confirmation for cheques above Rs 50,000
If you are issuing cheques worth above Rs 50,000 - the details of such cheques are to be informed to your bank through email communication. This reconfirmation system is called the Positive Pay System (PPS) and was introduced to prevent fraud. Therefore, the NRIs are advised to use maximum digital transactions like NEFT/UPI payments to avoid inconveniences in this regard.
6. Higher limit of Liberalized Remittance Scheme (LRS)
The Tax Collected at Source (TCS) limit for foreign remittances from India has been revised from Rs 7 lakhs to Rs 10 lakhs. No tax for taxes for remittance towards education purposes, if the loan is availed from approved institutions. This change is effective from the April 1, 2025.
7. Updating of Know Your Customer (KYC) records
This is compulsory for Mutual Fund investments. Nominee re-verification is also made mandatory. Those who have not linked their Aadhaar with PAN will not receive dividend income, and also this will not get reflected in your tax statement viz 26AS.
8. Credit cards
Most of the NRIs have credit cards issued by Indian Banks. Major Banks have decided to reduce the complimentary benefits available to the cardholders. Now onwards, there will not be any loyalty points on certain payments using the credit card or a cut in the existing reward points.
The above list is not exhaustive. The changes made in the Indian financial system are affecting the financial and non-financial areas of Indians living abroad. Lack of understanding or awareness of the changes brought in, may lead to unpleasant situations on a future date. Please remember the phrase 'ignorance of rule is not an excuse'.