If you're an Indian expat living in the UAE with rental income, capital gains, or other earnings sourced in India, the 2025 Income Tax (No. 2) Bill brings key changes—new tax slabs, simplified rules, better compliance, and more clarity on how you file your ITR (Income Tax Return).
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Dubai, August 2025 – Indian nationals staying in the UAE and earning income in India—whether from property rent, investments, or dividends—will face updated tax rules when the new Income Tax (No. 2) Bill becomes effective on 1 April 2026. Here’s a breakdown of nine critical changes that will shape how NRIs (Non-Resident Indians) manage their Indian taxes.
A fresh progressive structure replaces the outdated system. Income up to ₹4 lakh is completely tax-free, with subsequent brackets set at 5%, 10%, 15%, 20%, 25%, and 30% for higher income levels.
The bill brings clarity for UAE residents with income in India, especially regarding property-based earnings and offshore investment gains—helping to minimize confusion during ITR filing.
Once the bill is law, several sections merge or vanish, reducing legislative clutter and making compliance smoother and more transparent.
Good news for expats: existing rules for determining NRI or Resident (Not Ordinarily Resident, RNOR) status remain intact, ensuring only India-sourced income is taxed.
Digital-first, faceless tax assessments and a reduced number of legal sections aim to simplify procedures and minimize the burden on taxpayers.
Refunds can be claimed after the deadline without penalty. Plus, the new framework prohibits tax officials from issuing actions without prior written notice—enhancing taxpayer rights.
NRIs can still claim deductions up to ₹1.5 lakh under 80C for investments in instruments like ELSS, LIC, and principal repayments—helpful for optimizing tax liabilities.
The bill eliminates the distinction between “Assessment Year” and “Previous Year,” moving to a single “Tax Year” model—making it more intuitive to track tax events.
Capital gains, dividends, and other offshore earnings will come under greater clarity—helping NRIs better understand what falls under taxable Indian income.
Financial Benefits: The expanded zero-tax threshold and structured slabs could significantly reduce tax on moderate Indian incomes.
Less Paperwork: Fewer legal sections and a streamlined filing system mean fewer headaches trying to stay compliant.
Security and Transparency: Protections against arbitrary tax actions bring greater confidence for expats navigating cross-border tax laws.
Better Financial Planning: NRIs can better organize investments, transfers, and rental income knowing how deductions and deadlines now align.
These updates are not in effect until April 2026—but understanding them now helps in planning positive tax outcomes and avoiding late surprises.
