New Tax Bill 2025 ends Nil TDS Certificate for Non-Resident Indians

Key Takeaways

• Nil TDS Certificates will be eliminated for all, including NRIs, starting April 1, 2026.
• NRIs must file an Indian tax return to claim a refund for excess TDS.
• Lower TDS Certificates remain available, but Nil Certificates are no longer an option for anyone.

The Indian Government’s New Tax Bill 2025 is a very important legal update that brings direct changes for Non-Resident Indians (NRIs) and other taxpayers. Expected to take effect from April 1, 2026, the new law removes the ability for anyone—including NRIs—to apply for a “Nil TDS Certificate.” This update changes how tax is withheld, or TDS (Tax Deducted at Source), on income earned in India by NRIs and other taxpayers.

What Has Changed with TDS and the Nil Certificate?

Previously, when someone believed their actual tax bill was lower than the standard TDS rate, or even zero, they could apply to the Indian tax authorities for a Nil TDS Certificate. If this was granted, the payer (such as a company making a payment to a supplier, or a bank paying out interest) was told not to deduct any tax at source, or to deduct it at a much lower rate. This meant the taxpayer’s money was not blocked by tax payments they didn’t really owe; they also avoided a long waiting period for a tax refund later.

But the New Tax Bill 2025 changes this system. Under the new rules, no Nil TDS Certificates will be issued to anyone. Not even NRIs can apply for Nil TDS, regardless of how low or zero their tax actually ends up being. What remains is the option to apply for a Lower TDS Certificate, which means tax authorities could still approve a rate lower than the standard if a person’s real tax duty is less than the usual.

If a Non-Resident Indian, or any taxpayer, finds that too much tax was taken as TDS but cannot get a Nil TDS Certificate, the only way to get the extra money back is to file an Indian income tax return and claim a refund. There’s no way around this process.

The change is clearly summed up in the Economic Times Wealth report:

“If the current provision of this proposed bill is implemented as it is, you won’t be able to get a nil TDS certificate. But you can still get a lower TDS certificate… Earlier with the nil TDS certificate you could have avoided all of these processes.”
— Economic Times Wealth

Why Is the Law Changing?

The main reason for this update is to strengthen India’s system for collecting and tracking tax. The government wants to make sure that all income—especially income that could otherwise go untaxed or unreported—passes through the TDS process. When everyone must have some tax deducted at the start, the government can better track flows of income, especially those paid to people who live outside India, like Non-Resident Indians.

By forcing all taxpayers, including NRIs, to file Indian tax returns if they want a refund for taxes that were over-deducted, the authorities gain better monitoring and control of income leaving the country. It also reduces the risk of mistakes or errors that could let some people avoid proper tax altogether.

Another, smaller reason is that the government wants to make the law simpler. By removing the Nil TDS Certificate option, there is one fewer process to check and one less exception to understand.

Which Aspects of Immigration Law and Tax Are Affected?

The changes in the New Tax Bill 2025 mainly cover:

• TDS (Tax Deducted at Source) rules for Non-Resident Indians and other taxpayers
• Removal of the Nil TDS Certificate as an option for anyone
• Continued option to seek a Lower TDS Certificate, but not a Nil one
• A new rule that requires anyone who wants a TDS refund—including NRIs—to file an Indian tax return

These changes do not directly increase tax rates for NRIs or make big new reporting demands. They only affect the process of withholding and the need to claim back any tax by filing a tax return.

Comparing New Rules and Old Rules

A simple look at the shift, based on reports from Economic Times Wealth and VisaVerge.com:

How Will This Affect Non-Resident Indians?

The impact of the New Tax Bill 2025 is largest for NRIs who earn Indian-sourced income, such as interest, dividends, rental income, or consultancy fees.

In the past, many NRIs could avoid TDS entirely on their Indian earnings by using a Nil TDS Certificate. This meant they kept their cash flow strong because no money was blocked by tax payments that weren’t really owed. Now, there will be more cases where tax is taken out, even if the NRI’s actual tax bill (after deductions or exemptions) is much lower or zero.

This ties up more money early, and NRIs must wait for a refund after filing a tax return to get their money back if too much was withheld. This is a clear headache for those who don’t plan their money flows carefully. It also adds an extra step—mandatory Indian income tax return filing—for any NRI who would otherwise have avoided it by using a Nil Certificate.

For many NRIs who may have only a single short-term payment or a simple investment in India, the extra paperwork and wait will feel like a real cost in time and effort.

Compliance Burden and Government Oversight

By making return filing necessary to claim back excess tax, the government increases the reporting duty for NRIs. This is intended to improve oversight and shut down loopholes where some incomes could escape tax reporting. According to analysis from VisaVerge.com, the system becomes more watertight, but also less flexible for global Indians.

For NRIs unfamiliar with the process, or those living in countries with very different systems, there’s a real chance of missed deadlines, misplaced forms, or even double-taxation if the paperwork is not handled right.

Other Key Points from the New Tax Bill 2025

Along with this major update on Nil TDS Certificates, the New Tax Bill 2025 also tries to make life easier in small ways. For example, it includes simpler forms and streamlined language in some sections of the law. However, there are not many other big changes for NRIs within the law.

Importantly, no new NRI-specific tax rates or penalties have been added. The biggest extra burden for Non-Resident Indians is this shift in how and when tax is withheld.

In all cases, the government points out this is aimed to help stop tax evasion and improve fairness, not to punish genuine taxpayers. Still, for those affected, especially NRIs who used to count on the Nil TDS system, this will feel like a setback in both cash flow and convenience.

What Should Non-Resident Indians Do Now?

To adapt and avoid surprises, NRIs need to review their Indian income sources and check how much may be withheld as TDS under the new rules. Those who expect excess deduction (for example, because they qualify for exemptions or deductions under Indian tax law) should keep in mind the following steps:

1. Plan Finances: Prepare for higher upfront tax deductions from April 2026 onwards. Don’t assume credits or low final tax will prevent withholding at source.

2. Apply for Lower TDS Certificates Where Possible: If eligible, try for a lower TDS certificate under clause 395 of the new law. This can help reduce—not eliminate—the deduction.

3. Ensure Correct and Timely ITR Filing: If you have any chance of excess TDS, make sure to file your Indian income tax return every year, on time, with all supporting paperwork. Only then can you get back any overpaid tax.

4. Seek Good Tax Advice: This is not the time for guesswork or risky shortcuts. Consult a professional who can explain exactly how the new law works in your case and can help you get the right certificates or handle refunds smoothly.

5. Stay Updated with Official Rules: Read regular updates from official Indian income tax websites and recognized publications. The Central Board of Direct Taxes often publishes the latest rules and forms. For complete and current information, see the Government of India’s Income Tax Department.

6. Double-Check Overseas Impacts: If you live in a country that has a tax treaty with India, make sure you don’t face double taxation. The new system may require more paperwork to prove what has already been deducted or refunded.

Implementation Timeline and Transition

The New Tax Bill 2025 is planned for implementation from April 1, 2026. That means all NRIs and other taxpayers should use the current system through the 2025-26 tax year. The Nil TDS Certificate system will remain in place for incomes earned up to March 31, 2026. After that, all new income will be subject to the updated rules.

If you already have a Nil TDS Certificate that covers income past that date, check with your tax advisor whether it remains valid or if you must start following the new requirements straight away. Interim guidance from the tax authorities is likely closer to the implementation date.

Debates and Reactions

Some business groups and NRI advocacy organizations have raised questions about whether the new rule puts an unfair burden on the global Indian community, especially those with only minor Indian income. The Economic Times Wealth article points out that the system, while more predictable, sacrifices convenience and speed for better oversight. Others in the legal and business world agree the system could be improved to allow easier refunds or automatic matching of exemptions.

However, the government stands by its move, insisting that the real aim is better transparency and easier enforcement—not extra hassle or new taxes for honest NRIs.

Frequently Asked Questions

• Do NRIs have to file every year if they want a refund?
  Yes. If more TDS is deducted than needed, you must file an Indian income tax return to get your money back.

• What if all income is exempt—do I still have to file?
  Yes, if TDS was deducted and you want to claim a refund.

• Can Lower TDS Certificates still help?
  Yes, but only to reduce (not stop) TDS on eligible incomes.

• Will existing Nil TDS Certificates last after April 2026?
  Clarification is awaited, but certificates for payments after March 2026 are unlikely to remain valid.

Legal Challenges and Ongoing Court Cases

Right now, there are no reported court cases directly challenging the removal of Nil TDS Certificates. Legal experts note, however, that questions about fairness or application could be raised after the law begins to apply and practical difficulties emerge.

Advice for Compliance and Next Steps

The best course for any Non-Resident Indian affected by these changes is to plan ahead for the loss of the Nil TDS Certificate after April 2026, and to make Indian income tax return filing a regular annual habit. Early review of possible eligibility for Lower TDS Certificates is also wise.

For more details and primary sources, you can check the Indian Government’s official Income Tax site and refer to recent explanations in Economic Times Wealth and VisaVerge.com.

Disclaimer: This article provides general information only. Tax and immigration matters can be complex, and everyone’s personal situation is different. Please seek advice from a qualified tax professional before making decisions about your Indian income or compliance as a Non-Resident Indian.

Learn Today

Nil TDS Certificate → A document issued by Indian tax authorities allowing income payments without any tax deducted at source if no tax is owed.
TDS (Tax Deducted at Source) → A mandatory tax withheld by the payer from payments like interest, rent, or fees before giving to the recipient.
Lower TDS Certificate → A certificate permitting tax deduction at a lower rate when the actual tax liability is less than the standard TDS rate.
Non-Resident Indian (NRI) → An Indian citizen residing outside India for a specified period, subject to unique taxation and compliance rules in India.
Income Tax Return (ITR) → An official form filed annually by taxpayers to report income, claim deductions, and settle any tax refunds or liabilities.

This Article in a Nutshell

The New Tax Bill 2025 eliminates Nil TDS Certificates for everyone, including NRIs, from April 2026. All income subject to TDS must now be withheld. NRIs must file returns for any TDS refund. Lower TDS Certificates remain possible, but fuller compliance and early tax deduction will impact cash flows and planning.
— By VisaVerge.com

Read more:

• How NRI Tenants Can Apply for TDS Reduction
• TDS Guide for NRI Property Sale in India
• TDS Guidelines for NRI Property Sales and Token Payments
• Simplified TDS on NRI Property: India’s Budget 2024 Update
• How to open a State Bank of India (SBI) Account as a NRI: A complete Guide