Removal Of Excessive TDS Main Expectation Of NRIs From Union Budget 2023-24: Survey

Union Finance Minister Nirmala Sitharaman will present Budget for financial year 2023-24 on February 1 and the event assumes significance as it will be the last full year Budget of Prime Minister Narendra Modi government going into an election year in 2024.

In a global survey, conducted by Mudra Portfolio, a Mumbai-based global non-resident Indians (NRI) and high net-worth individuals (HNI) financial service management company that also assists NRIs with tax filing and taxation solutions, over 92 per cent of the 430-odd NRI respondents, said that reduction or removal of excessive tax deducted at source (TDS) across asset classes is their key expectation from the Union Budget 2023-24, as mostly the tax liability is way less than the TDS and necessitates them to wait till return filing to claim the same. 

Over 90 per cent of them preferred the Income Tax department to send notifications to their overseas contact number instead of their Indian contact number for ease of access.

Currently, the TDS rate (excluding surcharges) for interest on NRO accounts and deposits is 30 per cent, while that of Long-Term Capital gains and Short Term Capital gains on equities are 10 per cent and 15 per cent respectively. The TDS rate on Short Term Capital Gains from debt (non-equity) Mutual Funds is 30 per cent and the same on property sale (on the sale value), and rental income are 20 per cent and 30 per cent respectively. The rate for dividend income is 20 per cent, Mudra said. 

A part of Mudra’s Investor Awareness & Suggestion Program, this interactive survey collected a comprehensive list of what NRIs expect from the upcoming Indian Budget. The respondents were individual Non-Resident Indians from USA/Canada, Africa, Europe, Asia Pacific, Australia, Middle East, and China. 

“Every year, the finance ministry works on the Union Budget and solicits views and comments from business and taxpayers. This time, we decided to reach out to the NRI population in about 15 nations,” Nishant Kohli, Founder, Director and Business Head-Wealth, Mudra Portfolio, said and added, “Normally, a survey consists of a series of questions, but this often excludes the originality/suggestion component. So, we approached NRIs with only one question and asked them to indicate what they would want to see included in the budget, which would give room for them to express the problems they were experiencing and the solutions they desired. And the responses we received were quite overwhelming.”

Most of the respondents of the survey are Mudra’s clients who are in the 35-plus age group. They are qualified professionals or middle-to-senior level executives. About 88 per cent of respondents have invested in real estate, 72 per cent in mutual funds, 15 per cent in direct stocks, 100 per cent in NRE/NRO fixed deposits, 15 per cent in FCNR, and 6 per cent in other products such as PE, PMS, VC, and so on.

“We received several excellent recommendations, and the response was positive. The results should not be interpreted from the perspective of the percentage of respondents who had the same opinion, but rather from the angle of quality and distinctive recommendations offered by the respondents, as the survey was not based on predetermined questions,” Kohli said. 

The survey revealed that 85 per cent of respondents who have invested believe that long-term capital gains on MF/stocks should not be taxed. However, a majority of respondents stated that if taxes are still levied, assets held for more than three years should be exempted because they bore the weight of currency depreciation and conversion.

Another unique recommendation given by a few responders was to lower the 20 per cent flat tax rate on dividends. As it impacts total post tax return on the investment.

Under real estate category TDS was considered as a big dampener for NRIs while selling a property. About 92 per cent of respondents stated that the 20-23 per cent TDS on property sales, that too based on sale value rather than capital gain, should be decreased. Because obtaining the Low TDS certificate from the income tax department takes little time and effort, and purchasers rarely wait that long.