Union Budget 2022–23 and Its Impact on NRIs

Introduction

Finance Minister Ms Nirmala Sitharaman presented the Budget for the financial year 2022–23. It is a paperless budget due to the ongoing pandemic situation in India. The economic growth of India for the financial year 2022–23 is expected to be 9.2% which is the highest among all the economies across the globe, according to the statement of Ms Nirmala Sitharaman. Further, she also added that India is in a strong position to face challenges as a result of higher rates of vaccinations.

The Budget 2022–2023 aims to keep on track of the development of the economy of India considering the ongoing pandemic of COVID-19 in India. To sum up, the Government of India has emphasized on capital investment and expenditure in order to power the GDP growth of the country by coming forward with a pro-growth budget.

Apart from that, the Government of India is also aiming to spend around $529.7 billion (Rs 39.45 trillion) in the upcoming fiscal year in order to drive the infrastructure and growth of the Indian economy. It is to be noted that, this consists of a wide range of fiscal deficits as compared to record borrowing and targeted borrowing.

According to the Budget presented by Ms Sitharaman, it was mentioned that the total spending by the Government of India in the 2022–23 fiscal year beginning on 1 April 2022 will be 4.6% which is more than the current year. The growth is estimated to be 9.2% for the financial year 2021–22.

Highlights of Budget 2022

The following are some of the main highlights of budget 2022;

• The Public issue of Life Insurance Corporation is expected: Finance Minister
• The Union Budget to lay the foundation and blueprint of the Indian economy over “Amrit Kal” from India 75 years to 100 years
• Four priorities: PM Gati Shakti, Inclusive Development, Productivity Enhancement & Investment, Sunrise opportunities, Energy Transition, and Climate Action, Financing of investments
• 400 new generations Vande Bharat trains will be launched.
• In the upcoming 3 years, 100 PM Gati Shakti cargo terminals are determined to be developed.
• ECLGS will be extended till March 2023. Guaranteed expansion by Rs. 50,000 crores to aid MSME sectors to a total cover of 5 Lakh crores.
• In the year 2022, a 5G spectrum auction has been decided to be conducted. 5G telecom player will be introduced during the financial year 2022–23
• Cooperative societies will get income tax relief with a reduction in the rate of surcharge 7% for income up to Rs 10 crores.
• With the help of blockchain technology, the issuance of a digital rupee will be made.
• Rs. 2.37 lakh crore will be made to farmers of around 1.63 crores for the procurement of wheat and paddy.
• 1.5 lakh post offices will join forces to the core banking system.
• Income from investment in cryptocurrency to be taxed at a flat rate of 30%.

Impact of Union Budget 2022 on Non-Resident Indians (NRIs)

The following are some of the impacts that a Non-Resident Indian may face due to Budget 2022–23;

• The introduction of digital currency may be an advantage to NRIs in order to reduce the cost of cross-border remittances.
• The embedded chip structure in E-passports will help in the management of arrival and departure easily. Apart from that, the chip will help in linking of data with the Indian Tax Authorities and the Indian Ministry of External Affairs.
• NRIs who want to file updated income tax returns can do the same for two years at the end of a particular assessment year. This provision will help NRIs who are living outside India.
• Income earned from virtual digital assets is subject to tax. Gains are taxable at the rates of 30% without deduction, excluding the cost of acquisition. It will be beneficial for an NRI as well.

Bharat Bhatia, the founder and CEO of Conares (A private steel manufacturing company), an NRI based in UAE, said that the Budget presented by the finance minister is quite promising, and it reflects a lot of good opportunities for investment and growth which can be proved beneficial to the economy of India or large scale. He further added that the Budget also provides marginal allocation of resources for urban buildings and modernization of building as per laws, schemes of town planning and transit-oriented development can also be implemented.

Mr Bhatia also appreciated the revocation of custom duty on stainless steel, high steel bars and flat products, along with the extension of custom duty exemption on steel crap of a year for small and medium-sized businesses.

NRI businessman Dr Sunil Kumar K, Managing Director of SAM Corporate based Dubai, UAE, also appreciated the announcement made with regard to digital currency and e-passports. He stated that the e-passport service will be helpful to NRIs, and the digital Rupee by the Reserve Bank of India will be a trendsetter in the world of digital currency. He added that the future is bright as states can play as a catalyst and can bring confidence and control.

During the Budget Speech, the Finance Minister, Ms Sitharaman, also proposed that the Reserve Bank of India should introduce digital currency in the beginning of the financial year 2022, i.e., from 1 April 2022. This will work as a means to boost the effectiveness of currency management and the digital economy of India.

Further, Mr Kumar stated that the voluntary winding up of the companies can also bring a rise in the growth without any bad reputation and also can improve the confidence of the investors. He added that investment financing is a welcoming move, provided the growth potential is huge for early startup companies. Nothing can be a better option than supporting young generation entrepreneurs.

Budget 2022 and Taxation Policies for NRI’s in India

As a non-resident Indian, it is hard and unfortunate to pay tax twice in a year. Considering the residential status rules of two different countries, NRIs are paying taxes. NRIs are paying taxes in India in case they have investments, assets, and business transactions etc., as per the provisions of the Income-tax Authorities in India as the income earned in India.

Around 3 crore NRI communities have a significant contribution towards the economy of India. India is considered as the largest recipient of remittances across the globe, with inflows of around $90 billion in the year 2021. Largely, NRIs invest in real estate and financial products in India.

The Budget thus is crucial in terms of reforms of the Government of India, and it is expected that NRIs will be encouraged to make a financial investment in India. The following are some of the main factors that can boost the investment of NRIs in the financial assets and real estate considering the current Budget in India;

Easy Investment for NRIs

Provided to the interests of the NRIs bringing their earning to India, the NRIs expect that the Indian Government rewards them with ease of compliances under the Income Tax Act, 1961, which includes withholding of rates of taxes, concessions and relaxations etc. The aforesaid measure will ultimately help to boost the GDP inflow, which every developed country wants to prefer. It also indicates that India will move to the 3rd spot globally on GDP size behind China and USA by 2020 from the current 7th spot.

It is possible if the focus is provided on the development of the country in directing investments, providing required direction with a good governance structure and making India the first choice for all foreign investors.

Positive Impact on Rental Housing

The real estate market has become lucrative in India, more specifically for NRIs. Recently, as a result of transparency concept implementation by RERA, the norms of investments have become easier. The NRIs having the intention to invest or purchase residential properties in India gets a higher rate of the standard deduction for renting out that residential property. It seems very lucrative as renting out any residential property has a huge potential in terms of investment. In such cases, retail investors expect higher incentives, get access to low-cost credit and also get tax advantages for rental housing.

The Government is expected to continue its promotion of affordable housing schemes with announcements related to income tax reliefs for renting out housing properties; It will ultimately improve the speed of the investment in the real estate sector.

With an objective to enhance innovations and digitalization in the real estate sector and to make it keep pace with future technology, estate will witness a rise in capital investment with specific tax relaxation schemes. Further, the agenda of offering affordable rental housing, waivers will be provided under GST for properties that are under construction.

Tax Relief Scheme for NRIs at Budget 2022

India is spending on infrastructure to boost economic activity and create employment opportunities in the country. Some industry experts are of the opinion that Budget 2022 mainly focuses on the larger economic growth of the country and is not much useful for the taxation aspect for NRIs. Further, they say that NRIs are expected for the residential issue as mentioned as a result of an increase in the threshold limit of Rs. 1.5 million or increase in the number of days from 120 days to some other specific number of days.

The NRIs were also expecting that Long Term Capital Gains will get exemption from taxes, or a reduced tax rate will ultimately encourage more investments from NRIs in the markets of India. The calculation of capital gain tax will be the same for an NRI as that of a resident Indian. For NRI, the Long-Term Capital Gain tax will be taxed at a tax rate of 20%, and short-term capital gain will be taxed as per the applicable income tax slab rates based on the total income of an NRI in India.

Rise of Inflation for NRIs

One of the main outcomes of inflation in an economy is the slowdown of the economic aspect. This occurs when the rates of unemployment rise, there is a decrease in the purchasing power of the consumer, and the credits become too expensive. All of the aforesaid aspects can cause a slowdown in the whole financial system of the country. As the Union Budget 2022 passed, the finance minister announced that the Central Government will be spending half-a-trillion-dollar annually, which is a 35% increase as compared to the previous year.

Conclusion

The Government of India has passed a highly promising budget offering a lot of good opportunities which will contribute towards investment and economic growth. The Non-Resident Indians (NRIs) are also excited to know how this year Union Budget will financially benefit them in any means. According to the opinions of Industry experts and Scholars, Budget 2022 is extremely important for the economic growth of India, and this Budget is showing signs of relief for NRIs.