Ease of doing business
One major step forward is the permission to set up One Person Companies (OPCs) in India. An OPC is a corporate entity with a single person and offers several advantages, such as easier compliances and minimum requirements even as it enjoys the legal status of a company and gets the same access to capital.
Till now, only a resident Indian who stayed in the country for over 182 days in the previous calendar year could set up an OPC. The Budget has proposed relaxation in these provisions, reducing the residency limit for an Indian citizen to set up an OPC from 182 days to 120 days and allow NRIs to incorporate OPCs in India.
This move will not only boost the ease of doing business in India but could also be a shot in the arm for startups. Many projects, especially those in the IT sector, need to be run as a company and not individually. Entrepreneurs will find the OPC route less cumbersome.
No more double tax on retirement funds
Another big reform for the NRI community is the promise to eliminate double taxation of retirement funds. When they return to India after retirement, NRIs are often forced to again pay tax on their post-tax income earned in foreign lands. In many cases, they are not able to claim credit for the tax they paid overseas due to a mismatch in taxation periods. Finance Minister Nirmala Sitharaman has promised to notify rules which will remove the anomaly of double taxation.
Real estate
The Budget has given a big boost to real estate by extending the tax benefits to affordable housing and the tax holiday to projects in this segment of the market. The additional deduction of Rs 1.5 lakh for interest on home loans under Sec 80EEA is now available on loans taken till 31 March 2022. This deduction is over and above the deduction of Rs 2 lakh for interest under Section 24. Given that home loan rates have fallen to less than 7%, this additional deduction presents a golden opportunity for NRIs to invest in real estate in the home country.
The affordable housing segment accounts for more than 35% of the total housing supply in top metros across India. Rental yields of budget housing are also higher than in other segments.
The extension of the tax holiday for builders will ensure a good supply of housing by developers, thus providing NRIs good investment options.
Unfulfilled wishes
Though the Budget has also proposed to lessen the tax related problems of NRIs, some of the long standing demands remain unfulfilled.
The raising of the tax audit limit for NRIs from Rs 5 crore to Rs 10 crore is a welcome step. Even so, the TDS rules continue to be a major pain point for NRIs. Resident investors in stocks and mutual funds are not subjected to TDS, but NRIs have to shell out 15% on short-term gains from stocks and equity funds and even higher for gains from debt funds and debentures, gold and property. Even long-term gains from property and gold are subject to 20% TDS.
On bank deposits, NRIs have to cough up 30% TDS. Hopefully the government will ease the TDS rules for NRIs thereby encouraging investments in India.
The author is Managing Director, MyMoneyMantra.com
