The Income-tax Act, 2025, which replaced the 1961 law in April 2026, has introduced updated compliance rules for non-resident Indians. Investors must now use new forms for tax relief and property transactions to avoid processing delays. Understanding these structural changes is essential for managing investments, reporting foreign assets, and ensuring smooth repatriation of funds.
The tax framework for non-resident Indians (NRIs) underwent a major transition when the Income-tax Act, 2025, came into effect on April 1, 2026. While the core tax rates and basic liabilities remain largely consistent with the previous regime, the structural changes significantly alter how NRIs must file paperwork and comply with tax rules for their Indian assets.
One of the most notable changes is the consolidation of Tax Deducted at Source (TDS) provisions. These rules have been reorganized into a unified tabular format under Section 393 of the new Act. For investors, this replaces the older, fragmented system where different TDS rules were scattered across various sections. For example, processes previously handled under Section 195 are now covered under Section 393(2), and requests for lower or nil tax deduction certificates have moved from Section 197 to Section 395, requiring the use of Form 128.
Changes also apply to how NRIs claim tax relief under Double Taxation Avoidance Agreements (DTAA). The older Form 10F has been discontinued and replaced by Form 41. Failing to update to this new form when claiming treaty benefits can result in the rejection of tax relief claims by the authorities. Additionally, property transactions have been simplified for non-residents. The requirement to obtain a Tax Deduction and Collection Account Number (TAN) for TDS on property purchases has been removed. NRIs can now conduct these transactions using a PAN-based system, which is intended to reduce the administrative burden.
The government also introduced the Foreign Assets for Small Taxpayers Disclosure Scheme (FAST-DS 2026). This one-time window allows individuals to declare previously undisclosed foreign assets, offering immunity from certain penalties. This scheme is particularly relevant for NRIs returning to India or those who have built assets abroad while maintaining financial ties to the country.
From an operational standpoint, the shift from legacy forms to new documentation presents a primary risk for investors. Using outdated paperwork—such as submitting Form 10F instead of Form 41 or using old section references on tax returns—can lead to system-level rejection of filings. Furthermore, there is a risk of technical mismatches on the income tax e-filing portal if employers or financial institutions continue to use legacy reporting formats instead of the new standard forms like Form 130. NRIs should ensure that their financial consultants and tax advisors have fully transitioned their internal reporting systems to align with the 2025 Act requirements to avoid processing delays.