6 big takeaways for NRIs in the 2026 Budget proposals

Finance Minister Nirmala Sitharaman has proposed several big reforms for the non-resident Indians (NRIs) during her Budget 2026 presentation. From raising limits of investments in Indian equity markets to easing real estate transactions to exclude specified business of NRIs under presumptive taxation from the applicability of Minimum Alternate Tax, there are several proposals aimed at NRIs. Investing in Indian Equity Individual Persons Resident Outside India (PROI) are permitted to invest in equity instruments of listed Indian companies through the Portfolio Investment Scheme. It is also proposed to increase the investment limit for an individual PROI under this scheme from 5% to 10%, with an overall investment limit for all individual PROIs to 24%, from the current 10%. Vinod Joseph, Partner, Economic Laws Practice, explains the new proposal, “Schedule III of the FEMA (Non‑Debt Instruments) Rules, 2019 (“Non-Debt Rules”) regulates investments by NRIs or OCIs on a “repatriation basis”. Schedule III of the Non-Debt Rules, until now, provided that the total holding by any individual NRI or OCI cannot exceed 5% of the total paid-up equity capital (on an FDB) of any Indian company or 5% of the paid-up value of each series of debentures or preference shares or share warrants issued by an Indian company. Further, the total holdings of all NRIs and OCIs put together shall not exceed 10% of the total paid-up equity capital or of the paid-up value of each series of debentures or preference shares or share warrants. The aggregate ceiling of 10% can be raised to 24% if a special resolution to that effect is passed by the General Body of the Indian company. Today, the FM has announced that the individual limit shall be enhanced from 5% to 10% and the aggregate limit for NRIs and OCIs shall be increased from 10% to 24%. However, even before this, a company could, by passing a special resolution, increase the aggregate limit for NRI/OCI holdings in the company from 10% to 24%. So, the real change announced by the FM today is only in the individual limit, which has been enhanced from 5% to 10%.” A person resident outside India (PROI) includes any individual or entity that does not meet India’s residency criteria under FEMA. This broadly covers NRIs, foreign nationals, and overseas entities who live or operate outside India for employment, business, or any long-term purpose. It also includes offices or branches located outside India, even if they are owned or controlled by an Indian resident. In simple terms, if a person or entity is based outside India and does not qualify as a resident, they are treated as a PROI. Real Estate Transactions The FM has proposed to relax the requirement to obtain a tax deduction and collection account number (TAN) by a resident individual or HUF, where the seller of the immovable property is a non -resident. Section 397(1)(a) of the Act provides that every person, deducting or collecting tax shall apply to the Assessing Officer for the allotment of a “tax deduction and collection account number” (TAN). Clause (c) of the said sub-section provides for cases where a person is not required to obtain TAN. Presently, if a person buys an immovable property from a resident seller, the person is not required to obtain a TAN) to deduct tax at source. However, where the seller of the immovable property is a non-resident, the buyer is required to obtain TAN to deduct tax at source. This creates an unnecessary compliance burden for the buyer, as he would need TAN for a single transaction. To reduce compliance burden for the resident individual and Hindu undivided family, it is proposed to amend section 397(1)(c) of the Act to provide that a resident individual or Hindu undivided family, is not required to obtain TAN to deduct tax at source in respect of any consideration on transfer of any immovable property under section 393(2). The amendment will take effect from the 1st day of October, 2026. Foreign Assets of Small Taxpayers – Disclosure Scheme, 2026 FM has proposed relief measures for small taxpayers holding foreign assets. It has been observed that non-compliance is particularly prevalent in cases involving legacy or inadvertent non-disclosures for small taxpayers, including holdings arising from foreign employment benefits such as ESOPs or RSUs, dormant or low-value foreign bank accounts of former students, savings or insurance policies of returning non-residents, and assets held by individuals on overseas deputation. To facilitate voluntary compliance and enable the resolution of such legacy cases of small taxpayers, it is proposed to introduce a time-bound scheme for the declaration of foreign assets and foreign-sourced income, with payment of tax or fee based on the nature and source of acquisition and grant of limited immunity from penalty and prosecution under the Black Money Act in respect of matters covered by the declaration. Cases involving prosecution or proceeds of crime are proposed to be excluded. The proposed scheme shall form part of the Finance Bill, 2026 and shall come into force from the date to be notified by the Central Government. Minimum Alternate Tax The FM proposes to exclude specified business of Non-residents which are under presumptive taxation from the applicability of Minimum Alternate Tax. Certain foreign companies are excluded from the application of Minimum Alternate Tax (MAT) under the present provisions. The income of non-residents derived from certain business who opt for the presumptive rate of taxation under section 61 of the Act are also excluded. However, certain other businesses that have opted for presumptive taxation under section 61 have not been so excluded. To ensure similar treatment among all the different specified businesses of non-residents opting for presumptive taxation, the FM has proposed that two other specified businesses (business of operation of cruise ships and the business of providing services or technology for the setting up an electronics manufacturing facility in India to a resident company) shall also be excluded from the applicability of MAT. This amendment is proposed to take effect from the 1st day of April, 2026, and will accordingly apply to tax year 2026-27 and subsequent tax years. Exemption on account of providing capital equipment The FM proposes to exempt the total income of the eligible non-residents, foreign companies arising on account of providing capital equipment etc., to an electronic goods manufacturer located in a customs bonded area. To promote manufacturing of electronic goods by a contract manufacturer and provide certainty on taxation of supply of capital equipment by a foreign company to such manufacturer, it is proposed to provide exemption to a foreign company for a period up to the tax year 2030-2031, on any income arising on account of providing capital goods, equipment or tooling to a contract manufacturer, being a company resident in India, who is located in a custom bonded area and produces electronic goods on behalf of such foreign company for a consideration.