This article describes the tax benefits announced in Budget 2025 that can be used by NRIs planning to retire in India to create a tax-free and inflation-indexed passive income stream.
This article is a part of our detailed article series on Union Budget 2025. Ensure you have read the other parts here:
This article gives a high-level overview of the most important points which affect your portfolio and taxation in Union Budget 2025 for both residents and NRIs.
This article describes the tax benefits announced in Budget 2025 for the NPS Vatsalya Scheme to understand if these benefits make NPS Vatsalya a good scheme for children’s future.
This article describes the tax benefits announced in Budget 2025 applicable to retirees and other fixed-income investors.
This article describes how to use the Arthgyaan goal-based investing tool as a calculator to determine if switching to the New Tax Regime makes sense from 1st April 2025.
NRIs planning to return to India in 2025 and beyond now have a reason to be happier with higher tax-free income possible from safe investments like Fixed Deposit, Rent and even share dividends. This is now possible due to the taxation changes allowing tax-free income below ₹12L per person from 1st April 2025.
Budget 2025 declared that any income below ₹12.75 lakhs (₹12 lakhs plus ₹75,000 standard deduction) will be tax-free in the new tax regime. However, the standard deduction of ₹75,000 is available only for salary and pension income. For retirees without salary and pension, the ₹12 lakhs exemption from dividends, interest, rent and bonds coupon offers a significant benefit which we will now cover.
₹12 lakhs per person is tax-free. If this income comes from a portfolio offering an average of 3% income from rent, interest, coupons and dividends, then each investor can hold
12 / 3% = ₹4 cr assets tax-free
For spouses, this amount doubles to ₹8 crore and the monthly income is ₹12 * 2 / 12 which is ₹2 lakhs. This income is tax free and easily managed from sources like rent and dividend. Incidentally, at ₹85/USD, 8.5 crore is around $1 million USD.
It should be kept in mind that capital gains, from stocks / Mutual funds / Real estate etc. are not a part of this tax-exempted limit. For example, if you have interest income and capital gains of ₹10 lakhs each, then the interest income is tax free but the capital gains will be taxable at specific rates from 10%-30% or slab rates.
Note: For an NRI returning to India, the RNOR status applies first and then only resident Indian tax status applies: Understanding RNOR Tax Status in India: Key Rules and Tax Obligations Explained.
We can generalise the calculation to find out how investors investing either singly or as a couple can allocate their portfolio to these investments and still pay no tax in FY 2025-26:
| Interest rate | Per person | Two spouses | Investments | In USD | In GBP | In EUR |
|---|---|---|---|---|---|---|
| 1.0% | 12.00 | 24.00 | Rent | 1.41 | 1.14 | 1.33 |
| 1.5% | 8.00 | 16.00 | Rent, Dividends | 0.94 | 0.76 | 0.89 |
| 2.0% | 6.00 | 12.00 | Above plus savings interest | 0.71 | 0.57 | 0.67 |
| 2.5% | 4.80 | 9.60 | –’’– | 0.56 | 0.46 | 0.53 |
| 3.0% | 4.00 | 8.00 | –’’– | 0.47 | 0.38 | 0.44 |
| 3.5% | 3.43 | 6.86 | –’’– | 0.40 | 0.33 | 0.38 |
| 4.0% | 3.00 | 6.00 | –’’– | 0.35 | 0.29 | 0.33 |
| 4.5% | 2.67 | 5.33 | –’’– | 0.31 | 0.25 | 0.30 |
| 5.0% | 2.40 | 4.80 | Above plus FD interest | 0.28 | 0.23 | 0.27 |
| 5.5% | 2.18 | 4.36 | –’’– | 0.26 | 0.21 | 0.24 |
| 6.0% | 2.00 | 4.00 | –’’– | 0.24 | 0.19 | 0.22 |
| 6.5% | 1.85 | 3.69 | Above plus Bond coupon | 0.22 | 0.18 | 0.21 |
| 7.0% | 1.71 | 3.43 | –’’– | 0.20 | 0.16 | 0.19 |
Exchange rates used:
Note: Beyond 7%, it becomes increasingly difficult to create a stable income stream via fixed-income investments only. All values beyond 7% are for reference only and should not be considered practical.
In the table above, a couple with around $1million i.e. ₹8.5 crores invested half in the name of each spouse investing in a mix of rental income and dividends at 3% will make ₹24L/year (₹12.75L pre-tax and pay ₹74,1000 tax per person)
Here is a YouTube video talking about this as a case study:
Here is the complete case study for reference: Barista FIRE Calculator for NRI Returning to India: Can $1 million be enough for this NRI returning to India in 5 years for early-retirement?
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This post titled Budget 2025: how NRIs planning to retire in India can get ₹2 lakhs per month tax-free with a $1million investment first appeared on 01 Feb 2025 at https://arthgyaan.com
