DUBAI 5 February 2021: In the whole debate about how the Covid-19 pandemic impacted Indian economy – and what was expected from Union Budget 2021-22 to revive it – the very important market community of Non-resident Indians (NRIs) cannot be sidelined.
As per the World Bank, India is said to have received inward remittances of approx. US$75.9 billion in 2020, which is nearly 2.9% of the overall GDP.
NRIs are among the most important drivers of residential and commercial real estate in the country. As such, the NRI community had high expectations from Union Budget 2021-22 – and while the hoped-for key tax reforms did not materialize, they were not disappointed.
What did the budget offer NRIs?
- In a major positive move to incentivise overall entrepreneurship in the country, the government has now allowed NRIs to incorporate one-person companies (OPCs) in India. This doesn’t just help start-ups and innovators – it will also encourage NRIs with the entrepreneurial capabilities to enter the Indian market and participate in Digital India’s growth story. It will also boost investments across sectors.
- In a major relaxation to NRIs – especially the white-collar professionals – the government proposes to eliminate double taxation for them on foreign retirement funds. When NRIs return to India, they face challenges with their accrued incomes in their foreign retirement accounts, usually due to a mismatch in taxation periods. They also struggle with getting credit for Indian taxes in foreign jurisdictions. The government proposes to notify rules for removing the hardship of double taxation.
- The FM also reduced the time limit for reopening of income tax assessment cases to three years from the previous six years (10 years for serious tax fraud cases involving concealment of INR 50 lakh or more). This will give relief to innocent NRIs who were sometimes pulled up for alleged tax evasion in previous years, resulting in lengthy litigation.
- The government’s latest push for affordable housing also bodes well for NRIs. To boost this segment, the government extended the period for extra deduction of INR 1.5 lakh available for loans up to 31st March 2022. The move will keep demand buoyant for affordable housing in 2021, as well.
The additional housing supply that ensues from the one-year tax holiday extension for affordable housing projects has favourable implications for both resident Indians and NRIs, since new supply helps keep prices in check. Affordable housing currently accounts for more than 35% of the overall housing supply in the top 7 cities – which are also of highest interest to NRI investors.
A generous pipeline of housing supply by branded developers assures NRIs of reliable investment options even in affordable housing. The rental yields of budget housing are currently better than in any other budget segment, including luxury real estate.
Note: The author is Chairman of India-based Anarock Property Consultants