Union Budget 2025: A Game-Changer for NRI Real Estate Investment in India!

For many Non-Resident Indians (NRIs), owning property in India is much more than an emotional connection; it’s the smart decision to invest in the booming real estate sector in the country. Even the Indian government is encouraging NRIs to invest in this sector and thus has introduced many reforms on taxation, financial regulations, and investment policies in the Union Budget 2025. These reforms will change the dynamics of real estate investment for NRIs, a sector which always witnesses surging demand due to high returns and emotional value.

Read this blog to know the Union Budget 2025 NRI impact and how it will shape the NRI real estate investments in the coming years. But before that, let's discuss the kind of properties NRIs can buy in India.

Types of Properties NRIs Can Buy in India

The Reserve Bank of India (RBI) has laid out clear guidelines on the kind of properties NRIs can buy in India. NRIs are free to invest in:

• Residential Properties – Apartments, independent houses, and other residential units are fully permitted for purchase.
• Commercial Properties – Office spaces, retail units, and other commercial buildings can also be bought without restrictions.

However, NRIs are not allowed to invest in agricultural land, farmhouses, or plantation property.

Union Budget 2025 Real Estate India: Reforms for NRI Real Estate Investors

1. Higher Tax-Free Limit and Better Rental Income Rules

One of the main announcements made in the Union Budget 2025 is an increase in the basic income tax exemption limit. For NRIs earning rental income from their Indian properties, this will make a larger part of their income tax-free.

• The Union Budget 2025 has raised the Tax Collected at Source (TCS) threshold under the Liberalised Remittance Scheme (LRS) from INR 7 lakh to INR 10 lakh.
• This means remittances up to INR 10 lakh are now exempt from TCS, thereby offering significant relief when transferring funds abroad for personal, investment, or travel purposes.

For NRI landlords, the real estate incentives budget means less money locked up in tax deductions and more cash in hand throughout the year.

2. Relief on Owning Multiple Homes

Until now, if NRIs own more than one property in India and do not rent it out, the tax department has considered the second property as if it were earning rent (called “notional rent”) and taxed it accordingly. However, the Union Budget 2025 reforms allow NRIs to declare two properties as self-occupied without paying tax on notional rent.

Now, as per this new rule, owning more than one property for personal or family use would be cheaper. The Budget 2025-26 revised previous reforms, allowing property owners, including NRIs, to enjoy tax-free ownership of up to two self-occupied properties in the country.

By reducing the burden on second homes, the India budget and diaspora policy supports NRIs who want to diversify their real estate portfolios without incurring unnecessary holding costs.

3. Changes in Capital Gains on Property Sales

Selling property is where the biggest shift comes. Under the old regime, long-term capital gains (LTCG) on property were calculated post applying “indexation,” which adjusted the purchase price for inflation and reduced taxable gains.

Under the new system, NRIs will now pay a flat 12.5% tax on gains without indexation for properties registered on or after July 23, 2024.

This means NRIs who brought property recently might benefit from the lower 12.5% rate, while those holding older assets might find the removal of indexation less favourable. Properties bought before the cut-off date can still choose the older 20% rate with indexation, depending on which is more tax-efficient.

4. Boost for Affordable and Stalled Projects

Union Budget 2025 provided a significant boost to affordable and stalled housing sectors by allocating INR 15,000 crore to SWAMIH Fund 2 to complete 100,000 stalled units and through tax reliefs for the middle class, increasing disposable income and boosting housing demand.

This is good news for NRIs, especially the ones planning to invest in mid-range homes or upcoming areas. Increased infrastructural spending on projects such as metro lines, smart cities, and tier 2 and tier 3 city development will further drive the demand in both residential and commercial sectors.

Relief in TCS and TDS Regulations for Non-filers

Before the Budget 2025-26, NRIs who did not file taxes in India- despite having permanent establishment – were subject to higher TCS or Tax Deducted at Source (TDS) rates. However, this rule has now been withdrawn, giving more financial flexibility to NRIs. Also, it eliminates the need to file returns solely to avoid higher upfront tax deductions.

Final Thoughts

The Union Budget 2025 provides a transformative opportunity to NRIs looking to optimise their financial plans and investments in India. The budget reforms for NRIs, which made affordable housing for NRIs, higher tax-free limits, and better TDS rules, will make investing and earning rental income easier. At the same time, the removal of indexation on long-term gains calls for careful planning before selling property.

For NRIs, the key is to stay updated, seek professional advice, and plan investments with these new budget reforms for NRIs. Done right, this budget can open doors to higher income, lower holding costs, and stronger property appreciation in the years ahead.

If you are looking to invest in high-quality residential and commercial projects in India, consider reputed developers like Adani Realty, known for offering luxury projects with state-of-the-art technology and sustainable practices. Whether you look for long-term capital appreciation or a regular rental income, our developments align perfectly with your needs.