Union Budget 2026 has unveiled a series of targeted measures aimed at easing investment, taxation and compliance for non-resident Indians (NRIs) and persons resident outside India (PROIs), signalling a renewed effort by the government to deepen economic engagement with the Indian diaspora.
Finance minister (FM) Nirmala Sitharaman, presenting her ninth consecutive Budget, announced reforms covering equity investments, real estate transactions, tax relief for foreign assets, minimum alternate tax (MAT) exemptions and incentives linked to electronics manufacturing. The proposals come at a time when foreign portfolio inflows into Indian markets have slowed amid currency volatility and weaker post-tax returns.
Higher Equity Investment Limits for Overseas Indians
One of the most significant announcements in Budget 2026 concerns NRI and overseas individuals' participation in Indian equity markets through the portfolio investment scheme (PIS).
Under existing FEMA (Non-Debt Instruments) Rules, an individual NRI or overseas citizen of India (OCI) is permitted to hold up to 5% of the paid-up equity capital of a listed Indian company, while the combined holding of all NRIs and OCIs is capped at 10%. Companies are allowed to raise the aggregate limit to 24% by passing a special resolution.
The finance minister has now proposed raising the individual investment limit from 5% to 10% and increasing the overall ceiling for all PROIs from 10% to 24%. While companies could previously raise the aggregate cap with shareholder approval, the key change announced in this budget is the doubling of the per-investor limit which provides significantly more headroom for individual overseas investors.
Persons resident outside India include NRIs, foreign nationals and overseas entities that do not meet India’s residency criteria under the Foreign Exchange Management Act (FEMA), 1999. In effect, the proposal widens the base of overseas individuals who can directly participate in India’s equity markets through the portfolio route, with funds remaining freely repatriable.
Market experts see the move as timely, especially as foreign investors pulled out around ₹19bn (billion) in 2025 and another ₹4bn in January 2026.
Easing Real Estate Transactions Involving NRIs
Budget 2026 also addresses a long-standing compliance hurdle in property transactions involving non-resident sellers.
Currently, when a resident individual or Hindu undivided family (HUF) purchases immovable property from a non-resident, the buyer is required to obtain a tax deduction and collection account number (TAN) to deduct tax at source. This requirement does not apply when the seller is a resident, making NRI property transactions more cumbersome and compliance-heavy.
To reduce this burden, the finance minister has proposed amending the Income-tax Act to exempt resident buyers from obtaining a TAN when deducting tax on property purchases from non-residents. Instead, the deduction will be facilitated through a permanent account number (PAN)-based challan mechanism. The amendment is proposed to take effect from 1 October 2026 and is expected to simplify property sales and purchases involving NRIs.
One-time Relief for Small Taxpayers with Foreign Assets
Recognising that many NRIs and returning residents face inadvertent non-compliance related to overseas assets, Budget 2026 proposes a time-bound foreign asset disclosure scheme for small taxpayers.
Ms Sitharaman says, the government has observed that non-disclosure is particularly common in cases involving legacy assets such as employee stock options or restricted stock units received during foreign employment, dormant overseas bank accounts held by former students, savings or insurance policies of returning non-residents and assets acquired during overseas deputations.
Under the proposed scheme, eligible taxpayers will be able to declare foreign assets and foreign-sourced income, pay tax or a prescribed fee depending on the source of acquisition, and receive limited immunity from penalty and prosecution under the Black Money Act. Cases involving prosecution or proceeds of crime will be excluded. The scheme will form part of the Finance Bill, 2026 and will come into force on a date to be notified by the Central government.
MAT Exemption for Specified Non-resident Businesses
The Budget has also proposed an important rationalisation of the MAT regime for non-resident businesses opting for presumptive taxation.
While certain foreign companies and non-resident businesses are already excluded from MAT, some specified businesses under presumptive taxation are not extended the same benefit. To ensure uniform treatment, the FM Sitharaman has proposed excluding two additional categories from MAT. These include the business of operating cruise ships and the business of providing services or technology for setting up an electronics manufacturing facility in India for a resident company.
The amendment is proposed to take effect from 1 April 2026 and will apply to tax year 2026–27 and subsequent years, offering greater tax certainty to non-resident operators in these sectors.
Tax Exemption for Supplying Capital Equipment to Electronics Manufacturers
In a move aligned with India’s electronics manufacturing push, Budget 2026 proposes a tax exemption for eligible non-residents and foreign companies supplying capital goods to contract manufacturers in India.
Under the proposal, income earned by a foreign company from providing capital goods, equipment or tooling to an Indian contract manufacturer located in a customs bonded area will be exempt from tax until the end of tax year 2030–31. The exemption applies where the Indian manufacturer produces electronic goods on behalf of the foreign company for a consideration.
The measure is intended to provide certainty to global manufacturers and encourage deeper integration of foreign companies into India’s electronics supply chains.
Strengthening India’s Economic Link with Its Diaspora
Beyond individual measures, Budget 2026 underscores the government’s broader intent to strengthen India’s economic relationship with its overseas population. The expansion of the portfolio investment scheme, the proposed review of FEMA rules relating to non-debt instruments and the emphasis on financial hubs such as GIFT City all point towards a strategy of attracting long-term, stable capital from global Indians.
Industry experts believe the changes could help diversify foreign participation beyond large institutional investors and unlock patient capital from Indian communities across the Middle East, North America, Europe and Southeast Asia.
Taken together, the Budget 2026 proposals represent one of the most comprehensive reform packages for NRIs in recent years. By easing equity investment limits, simplifying property-related compliance, offering relief for legacy foreign assets and improving tax certainty for non-resident businesses, the government has sent a clear signal that it wants overseas Indians to play a larger role in India’s growth story.
The effectiveness of these measures will now depend on the clarity of rules and speed of implementation, but the direction of policy is unmistakable: India is positioning itself as a more accessible, predictable and investor-friendly destination for its global diaspora.
