India's 2025 Tax Overhaul: What NRIs in the Gulf and Beyond Must Know

India just made some of the most sweeping changes to its tax system in decades. And if you live in Saudi Arabia, Qatar, the UAE, Oman, Belgium, France, or anywhere else in the world, there are equally important developments that touch your financial life every single day. Whether you live in the US, UK, UAE, Oman, Qatar, Saudi Arabia, France, Singapore, or anywhere else, these developments matter if you have any income, investments, or business interests connected to India. Let us walk through each major change and what it means for you.

A Brand New Income Tax Act Arrives in 2026

The Indian government has officially enacted the Income Tax Act, 2025, replacing the Income Tax Act of 1961 that governed Indian taxation for over six decades. This new law takes effect from 1 April 2026 and applies from Financial Year 2026-27 onwards.

Why Should NRIs Care?

Every tax obligation you have in India flows from the Income Tax Act. Your TDS on property sales, your capital gains on mutual funds and ETFs, your rental income taxation, your DTAA (Double Taxation Avoidance Agreement) relief claims — all of these sit on the foundation of this law. When the foundation changes, everything built on top of it shifts too.

If you actively invest in Indian stock markets, mutual funds, InvITs, or private placements, the rules governing how your capital gains, dividends, and interest income get taxed will all derive from this new Act starting April 2026.

The government designed the new Act to:

• Simplify the language so taxpayers can actually understand what they owe without needing a law degree
• Streamline compliance so filing returns and claiming deductions becomes less painful
• Align with global best practices which matters enormously for NRIs who deal with tax systems in multiple countries
• Modernise the structure to reflect how people actually earn and invest money today

Critical Changes for NRIs Under the New Act

Deemed Residency Rule for High Income Earners

One of the most significant changes affects NRIs earning substantial income from Indian sources. If you are an Indian citizen earning ₹15 lakh or more from Indian sources and you are not liable to tax in any other country, you are now classified as a deemed resident and must pay tax in India. This provision directly impacts NRIs in tax-free Gulf jurisdictions like the UAE and Saudi Arabia where they would otherwise avoid taxation on Indian-sourced income.

Modified Residency Test

For individuals earning more than ₹15 lakh from Indian sources, the previous 182-day relaxation has been replaced with a modified 120-day rule. This affects NRIs returning to India for extended family visits, seasonal stays, or business engagements. If you spend more than 120 days in India during a financial year and earn significant Indian-source income, you may be classified as a resident for that year.

Reduced Tax Collection at Source (TCS) on Remittances

The TCS on overseas tour packages and remittances has been reduced to a flat 2% from the earlier 5%. This applies specifically to remittances under the Liberalized Remittance Scheme (LRS) and benefits situations where parents send money to children studying abroad, families transfer funds for medical treatment abroad, or NRIs receive remittances from India with lower upfront tax deduction.

Simplified Property Transaction Compliance

From 1 October 2026, resident buyers purchasing immovable property from NRIs no longer require a TAN (Tax Account Number) for deducting tax at source. They can now use their Permanent Account Number (PAN) instead. This streamlines the compliance process and aligns it with transactions between resident Indians.

Expanded Investment Opportunities

Budget 2026 increased the Portfolio Investment Scheme limit for individual NRIs in listed Indian companies from 5% to 10% per person, expanding capital market participation opportunities for NRIs.

What You Should Do Now

You do not need to panic or take immediate action since the new law kicks in only from April 2026. But you should start working with your tax advisor to understand how your specific situation — rental income, capital gains on stocks and mutual funds, business income, DTAA benefits, and your income levels from Indian sources — maps onto the new framework. The transition period between now and April 2026 gives you time to plan.

This is especially important if you hold investments in Indian equities, debt mutual funds, InvITs, or private placements, because the mechanics of TDS, capital gains computation, and treaty relief claims may all shift under the new framework. If you earn ₹15 lakh or more from Indian sources, review your residency status carefully and understand how the deemed residency rule might affect your tax obligations.

The Equalisation Levy Is Completely Gone

This one is big news, especially if you run a business that operates digitally across borders.

The Finance Act, 2025 abolished the equalisation levy on specified services like online advertising and digital advertising space with effect from 1 April 2025. India had already scrapped the equalisation levy on non resident e commerce operators back on 1 August 2024. With this latest move, the entire equalisation levy regime now stands completely abolished.

What Was the Equalisation Levy?

India introduced this levy to tax digital transactions where foreign companies earned revenue from Indian customers without having a physical presence in India. It applied a 6% tax on online advertisement services and a 2% tax on e commerce supply of goods and services by non resident operators.

How Does This Affect NRIs?

If you own or operate a business abroad that provides digital services to Indian clients, you no longer face this additional tax layer. This also simplifies your DTAA calculations since the equalisation levy existed outside the income tax framework and created complications when claiming treaty benefits.

For NRIs working in tech companies or running digital businesses that serve Indian customers, this removal eliminates a compliance headache and a cost burden.

Major New Tax Incentives for IFSC Units

India has been building the International Financial Services Centre (IFSC) in GIFT City, Gujarat, as a world class financial hub. The Finance Act, 2025 adds several powerful new tax incentives that NRIs should pay attention to, especially if you invest through IFSC based entities or consider relocating financial activities there.

Extended Deadlines for IFSC Benefits

The deadline for certain qualifying activities — like starting operations or moving funds to the IFSC — has been pushed to 31 March 2030. This gives you more runway if you have been considering setting up or investing through an IFSC unit.

Life Insurance Exemption

Amounts received under a life insurance policy issued by IFSC insurance intermediaries will now enjoy tax exemption. If you hold or plan to buy life insurance through IFSC based insurers, the payouts will not attract Indian tax.

Ship Leasing Tax Breaks

NRIs and IFSC units involved in ship leasing get two valuable exemptions:

• Capital gains exemption: Income from transferring equity shares of an IFSC ship leasing company will not attract tax for non residents or other IFSC ship leasing units
• Dividend exemption: Dividend income earned by an IFSC ship leasing unit from another IFSC ship leasing company will also enjoy tax exemption

Loans to Group Entities Will Not Trigger Deemed Dividend Rules

When a finance company or IFSC unit handling treasury operations extends loans to its group entity listed outside India, that loan will not be treated as deemed dividend income. This removes a significant tax trap that previously caught many cross border corporate structures.

Derivatives and Financial Instruments Exemptions

Non residents who trade in certain financial instruments through IFSC banking units or foreign portfolio investors in the IFSC now enjoy tax exemptions on:

• Income from transferring offshore derivatives instruments (ODIs), over the counter derivatives (OTCs), or non deliverable forwards (NDFs)
• Distribution of income on ODIs

Why IFSC Matters for NRIs

The IFSC in GIFT City is increasingly becoming a viable alternative to routing investments through Singapore, Dubai, or other international financial centres. With each round of incentives, India makes it more attractive for NRIs to use IFSC as a base for:

• Portfolio investments into India, including mutual funds, ETFs, and InvITs
• Insurance and wealth management
• Ship leasing and aircraft leasing
• Treasury and fund management operations

The New India Qatar DTAA: A Fresh Treaty for Gulf Based NRIs

This is one of the most significant developments for NRIs living in Qatar. India and Qatar have signed a brand new comprehensive Double Taxation Avoidance Agreement, and it is now officially in force.

Here are the key dates you need to know:

• Signature date: 18 February 2025
• Entry into force: 10 September 2025
• Effective date in India: 1 April 2026 (applies to income arising on or after the first day of the fiscal year immediately following the calendar year in which the Agreement entered into force)
• Effective date in Qatar: 1 January 2026
• Official notification: G.S.R. 789(E), dated 24 October 2025

Who Does This Treaty Cover?

The Agreement applies to persons who are residents of one or both Contracting States. This includes transparent entities (like certain partnerships or trusts) whose income is treated as that of residents under either country's tax law. So if you are an Indian national living and working in Qatar, or a Qatari resident earning income from India, this treaty directly governs how your cross border income gets taxed.

For fiscally transparent entities (such as partnerships), the treaty treats the income as that of a resident only if the entity's tax laws in either India or Qatar classify it that way. This prevents mismatches where one country taxes the entity and the other taxes the partners.

The treaty also includes strong anti avoidance measures. It denies treaty benefits if obtaining that relief is a principal purpose of your arrangement or structure. This means you cannot use the treaty to help third country residents avoid their home country taxes, and you cannot set up conduit arrangements purely to claim lower withholding rates. The treaty includes detailed limitation on benefits clauses that target these schemes. If your structure looks like treaty shopping, India and Qatar can deny you relief.

For non individuals like companies that are residents of both countries (dual residents), the treaty denies all treaty benefits including exemptions and reduced withholding rates unless the competent authorities of both countries agree otherwise through the mutual agreement procedure. This is a strong anti abuse measure.

What Taxes Does It Cover?

On the India side, the treaty covers income tax including surcharge. On the Qatar side, it covers taxes on income in Qatar. This means the full scope of your Indian income — salary, capital gains on Indian stocks and mutual funds, rental income, dividends, interest from fixed deposits and bonds, business profits — falls within the treaty's ambit.

How Double Taxation Relief Works Under This Treaty

The treaty provides clear relief mechanisms depending on which country you call home:

If you are a Qatar resident earning income taxable in India: Qatar will allow you a deduction from your Qatar tax equal to the income tax you paid in India. This deduction cannot exceed the portion of Qatar's tax that is attributable to your Indian source income. In practical terms, if India taxes your capital gains on Indian mutual funds or your rental income from an Indian property, Qatar gives you credit for that Indian tax.

If you are an India resident earning income taxable in Qatar: India will allow you a deduction from your Indian tax equal to the income tax you paid in Qatar (whether paid directly or deducted at source). Again, this credit cannot exceed the portion of Indian tax attributable to your Qatar source income. India also retains the right to consider exempted income when calculating the tax rate on your remaining income — this is the "exemption with progression" method.

Permanent Establishment Rules and Business Profits

The treaty specifically addresses permanent establishments and fixed bases, including workshops, mines, oil or gas wells, and quarries. It also covers construction sites that last more than 12 months and service PEs that operate for more than 6 months (not 12 months). NRIs who provide services or run business operations that straddle India and Qatar need to track their days carefully to avoid triggering permanent establishment status.

India Belgium DTAA Amendment 2025: Expanded Information Sharing

India and Belgium have enforced an amended Double Tax Avoidance Agreement (DTAA) effective 26 June 2025, that significantly expands information sharing between the two countries' tax authorities. The Indian government issued Notification No. 160/2025 on 10 November 2025, formally enforcing a protocol that amends the original 1993 India Belgium DTAA.

What Changed in the India Belgium Treaty?

Broader Definition of Competent Authority

The amended treaty expands who qualifies as a "competent authority" on the Belgian side. Now it includes the Minister of Finance of the federal Government and/or the Government of a Region and/or a Community (Flemish, French, or German speaking), or their authorized representatives. On the Indian side, the competent authority remains the Central Government in the Ministry of Finance (Department of Revenue) or their authorized representative.

New Definition of Criminal Tax Matters

The protocol introduces a brand new term: criminal tax matters. This covers tax matters involving intentional conduct that could lead to prosecution under criminal laws or tax laws of the country making the request. Importantly, this applies to conduct that occurred before or after the treaty amendment came into force.

Massively Expanded Information Exchange

This is the biggest change. The old Article 26 on Exchange of Information has been completely replaced with a much more comprehensive version. Here is what the new rules allow:

• Broader scope: Tax authorities can now exchange information relevant to administering or enforcing domestic tax laws of every kind and description, not just the taxes specifically covered by the treaty.
• Bank secrecy is gone: A country cannot refuse to share information simply because a bank, financial institution, nominee, or fiduciary holds that information. This is a direct strike against using bank secrecy as a shield.
• No domestic interest excuse: Even if Belgium has no domestic tax interest in the information India requests (or vice versa), the requested country must still gather and provide that information.
• Confidentiality protections remain: Information exchanged stays confidential and can only go to persons or authorities involved in tax assessment, collection, enforcement, prosecution, or appeals. However, information can appear in public court proceedings or judicial decisions.
• Cross purpose use: If both countries' laws allow it and the supplying country's competent authority agrees, shared information can even be used for purposes beyond tax enforcement.

The old Article 27 on "Aid and Assistance in Recovery" has been replaced with a new, more robust "Assistance in the Collection of Taxes" provision. Under the new rules:

• Both countries will actively help each other collect revenue claims, including unpaid taxes.
• This assistance extends beyond just the taxes covered by the treaty to potentially cover taxes of every kind.
• The assistance is not restricted by the treaty's usual scope limitations.

When Do These Changes Apply?

| Type of Provision | Effective Date | |---|---| | Criminal tax matters | From 26 June 2025 (date of entry into force), covering even past conduct | | All other provisions | For taxable periods beginning on or after 26 June 2025 |

What Should NRIs in Belgium Do Right Now?

Review Your Tax Compliance

If you have been less than thorough about reporting your Indian income in Belgium or your Belgian income in India, now is the time to get your house in order. The expanded information exchange means discrepancies will surface.

Disclose All Bank Accounts and Financial Assets

Indian tax residents must report foreign assets in their income tax returns (Schedule FA). If you hold Belgian bank accounts, investments, or property, make sure you report them accurately. Belgian authorities can and will share this data with India if asked.

Understand Your DTAA Benefits

The core purpose of the DTAA still stands: you should not pay tax twice on the same income. The information sharing provisions do not change how taxes are calculated or credited. They simply ensure that both governments have the information they need to verify that taxpayers are claiming the right benefits.

India and France Update Their Tax Treaty: 2026 Amending Protocol

India and France have signed a major protocol in February 2026 that amends their Double Taxation Avoidance Convention, originally signed back in 29 September 1992. The changes affect capital gains tax on share sales, dividend taxation rates, the definition of fees for technical services, and the controversial Most Favoured Nation clause.

Ravi Agrawal, Chairperson of the Central Board of Direct Taxes (CBDT), signed on behalf of India, while Thierry Mathou, the French Ambassador to India, signed on behalf of France.

Key Changes in the India France Treaty

Capital Gains on Sale of Shares: Source Country Gets Full Taxing Rights

Under the amended protocol, when you sell shares of a company, the country where that company resides now gets full taxing rights on the capital gains. So if you live in France and sell shares of an Indian company, India now has the right to fully tax those capital gains. Previously, the treaty may have limited or restricted India's ability to tax such gains. This change aligns with India's broader treaty renegotiation strategy that you may have seen in other updated DTAAs (like the India Mauritius and India Singapore treaties).

The Most Favoured Nation (MFN) Clause Gets Deleted

The original India France DTAC had a Most Favoured Nation clause, which essentially said that if India later signed a treaty with another OECD country offering lower tax rates, France could automatically claim those lower rates too. This clause created years of confusion and litigation. The amending protocol completely removes the MFN clause from the treaty. The Finance Ministry stated this "brings to rest all issues relating to it."

Dividend Taxation: New Split Rate Structure

The old treaty applied a single rate of 10% on dividends. The new protocol replaces this with a split rate system:

• 5% tax if you hold at least 10% of the capital of the company paying the dividend
• 15% tax for all other cases

Fees for Technical Services: New Definition

The protocol updates the definition of Fees for Technical Services (FTS) to align it with the definition used in the India US Double Taxation Avoidance Agreement. This matters because the definition of FTS determines which payments for services get taxed at source (in the country where the payer resides) versus in the country where the service provider lives. A broader definition means more types of service income could face withholding tax in India.

Expanded Definition of Permanent Establishment (Service PE)

The protocol adds a Service Permanent Establishment (Service PE) provision. This means that if you or your business provide services in India for a certain number of days within a specified period, India can treat you as having a permanent establishment there, even if you do not have a physical office.

Updated Exchange of Information and Tax Collection Assistance

The protocol updates the Exchange of Information provisions to meet current international standards. It also introduces a brand new article on Assistance in Collection of Taxes. In plain terms, India and France can now share taxpayer information more freely and even help each other collect taxes owed by residents of the other country.

BEPS MLI Provisions Now Built Into the Treaty

India and France both signed and ratified the Base Erosion and Profit Shifting (BEPS) Multilateral Instrument (MLI). The MLI had already modified how the India France treaty worked in practice. This protocol now formally incorporates those MLI changes directly into the treaty text. This is mostly a housekeeping measure, but it makes the treaty easier to read and understand.

India and Oman Update Their Tax Treaty

India has notified a protocol that amends the existing tax treaty (formally called the Double Taxation Avoidance Agreement, or DTAA) between India and the Sultanate of Oman. When India "notifies" a protocol, it means the government has formally published the changes in the official gazette, bringing the amended provisions into legal effect.

Why Should NRIs in Oman Care?

If you are an Indian national living and working in Oman, the DTAA between India and Oman directly affects how your income gets taxed. The whole purpose of a DTAA is to make sure you do not end up paying tax on the same income in both India and Oman. When the treaty gets amended, the rules of the game change, and you want to stay ahead of those changes.

Oman is home to a large Indian diaspora. Many NRIs earn salary income, run businesses, hold investments back in India, or receive rental income from Indian property. The DTAA governs the tax treatment of all these income streams across both countries.

What Is a DTAA Protocol Amendment?

Think of the original DTAA as a contract between India and Oman about who gets to tax what. A "protocol" is essentially an official update or addendum to that original contract. Countries periodically amend their tax treaties to:

• Align with international standards (such as OECD and BEPS guidelines)
• Introduce anti abuse provisions to prevent treaty shopping
• Update rules around taxation of specific types of income like capital gains, dividends, interest, royalties, and fees for technical services
• Improve exchange of information between the two countries' tax authorities
• Add provisions related to mutual agreement procedures for resolving tax disputes

Key Areas Typically Affected by Treaty Amendments

While the specific details of every clause in this protocol require careful reading of the notified text, here are the areas that treaty amendments between India and other countries commonly address:

Principal Purpose Test (PPT)

Many recent Indian treaty amendments introduce a Principal Purpose Test. This means that if one of the main purposes of an arrangement or transaction was to obtain a treaty benefit, the tax authorities can deny that benefit. This targets treaty shopping, where someone routes income through a country just to grab lower tax rates.

Taxation of Capital Gains

Amendments sometimes change how capital gains on shares and other assets get taxed. For NRIs who hold shares in Indian companies or own property in India, this can directly impact the tax you owe when you sell those assets.

Interest, Dividends, and Royalties

The withholding tax rates on interest, dividends, and royalties flowing between India and Oman may get updated. If you earn interest from Indian bank deposits or receive dividends from Indian companies, pay attention to any revised rates.

Exchange of Information

Modern treaty amendments typically strengthen the exchange of information provisions. This means the Indian tax department and Oman's tax authority can share more taxpayer data with each other. If you have been less than transparent about your global income, this is your signal to get compliant.

Mutual Agreement Procedure (MAP)

Updated MAP provisions give taxpayers a better mechanism to resolve disputes when both countries claim the right to tax the same income.

What Should You Do Right Now?

Review Your Tax Position

If you earn income in both India and Oman, or if you have investments, property, or business interests in India, take a fresh look at your tax situation in light of this amendment.

Check Withholding Tax Rates

If you receive interest, dividends, or royalty income from India, verify whether the withholding tax rates have changed under the amended treaty. Your Indian payer (bank, company, or tenant) should apply the correct rate, but it helps to know the numbers yourself.

Claim Treaty Benefits Properly

To claim DTAA benefits, you typically need a Tax Residency Certificate (TRC) from Oman's tax authority and may need to submit Form 10F to the Indian tax department. Make sure your paperwork stays current.

File Your Returns on Time

Whether you file in India, Oman, or both, timely filing protects your right to claim treaty benefits and avoids penalties.

Get Professional Advice

Treaty amendments can have nuanced implications depending on your specific income sources and residency status. A tax professional who understands both Indian tax law and DTAA provisions can help you optimize your position and stay compliant.

The Bigger Picture: A Global Tightening of Tax Rules

India has been actively updating its tax treaties with countries across the world. These updates reflect India's commitment to international tax transparency and its efforts to prevent tax avoidance. For NRIs, this trend means that the days of aggressive tax planning using treaty provisions are getting harder. The smart move is to focus on genuine compliance and legitimate tax optimization.

Across all these treaty amendments — with Qatar, Belgium, France, and Oman — you see a consistent pattern:

• Anti avoidance measures are getting stronger (Principal Purpose Tests, Limitation on Benefits clauses)
• Information sharing between countries is expanding dramatically
• Tax authorities are gaining more tools to track cross border income and assets
• Withholding tax rates on dividends and interest are being updated to reflect modern standards
• Permanent establishment rules are being tightened to catch more business activities

Action Items for NRIs Right Now

Immediate Steps (Before April 2026)

1. Review your residency status under the new Income Tax Act, especially if you earn ₹15 lakh or more from Indian sources 2. Audit your foreign asset disclosures in Schedule FA of your Indian tax returns 3. Verify your DTAA benefits are being claimed correctly with proper documentation (TRC, Form 10F) 4. Check your withholding tax rates on dividends, interest, and royalties under the updated treaties 5. Consolidate your financial records across all countries where you have income or assets 6. Consult a tax advisor who understands both Indian tax law and your country's tax system

Medium Term (April 2026 and Beyond)

1. Transition your tax planning to align with the new Income Tax Act framework 2. Evaluate IFSC structures if you have significant investments in India 3. Update your tax residency certificates and treaty benefit documentation 4. Monitor further amendments to treaties and Indian tax law 5. Consider voluntary disclosure if you have any past non compliance issues

Long Term Strategy

1. Build a sustainable tax compliance system that works across multiple countries 2. Invest in professional advice from tax advisors who specialize in cross border taxation 3. Keep detailed records of all income, deductions, and tax paid in each country 4. Stay informed about changes to Indian tax law and treaty updates 5. Plan proactively rather than reactively when tax rules change

The bottom line: India's tax system is modernizing rapidly, and NRIs need to modernize their approach to tax compliance at the same pace. The good news is that with proper planning and transparency, you can optimize your tax position while staying fully compliant with the law in every country where you have financial interests.