Budget 2026: NRIs and global investors get easier access to Indian equities; GIFT City gains subtle clarity

The Union Budget 2026-27, presented by Finance Minister Nirmala Sitharaman on February 1, laid out measures designed to attract long-term foreign and NRI capital into Indian equities, while reinforcing India’s position as a global financial hub through incentives at GIFT City’s International Financial Services Centre (IFSC). Direct access for NRIs and other non-residents One of the key changes allows individual Persons Resident Outside India (PROIs) to invest directly in listed Indian companies through the Portfolio Investment Scheme (PIS). This “direct” access means investors can hold shares in their own name on a repatriable or non-repatriable basis, without relying on intermediary structures such as funds, trusts, or the institutional Foreign Portfolio Investor (FPI) route. In essence, it is similar to how domestic investors buy stocks, offering a simpler, more transparent pathway for foreign individuals to participate in Indian equity markets. The Budget has also increased the limits for these direct investments. The per-investor cap has doubled from 5% to 10% of a company’s paid-up capital, while the aggregate cap for all individual PROIs in a single company rises from 10% to 24%. This expansion significantly widens the pool of potential foreign capital, offering a new avenue for high-conviction, stable investments in Indian equities. GIFT City opportunities While direct PIS investments provide simplicity and broad access, GIFT City remains an ideal destination for PROIs and NRIs seeking more structured or tax-efficient investment options. The Budget extended the Section 80LA profit-linked tax holiday for IFSC units to 20 consecutive years, with a post-holiday flat tax rate of 15%. This offers greater predictability for fund life cycles, aligning with global capital deployment horizons and enhancing GIFT City’s competitiveness against traditional offshore hubs such as Mauritius or Singapore. For instance, GIFT IFSC structures are particularly attractive for NRIs and foreign investors looking to set up family offices, funds, or invest through IFSC-based Alternative Investment Funds (AIFs) or banking units. These setups can provide onshore “offshore” benefits — exemptions from certain capital gains, interest, or dividend taxes, and in some cases, relief from the Minimum Alternate Tax (MAT) for eligible non-residents. In comparison, direct PIS investments remain subject to standard capital gains taxes, such as 12.5% long-term capital gains for NRIs, but offer the simplicity of direct shareholding without intermediaries. Optimism with caution Experts have welcomed the Budget’s structural reforms but caution that near-term traction may be limited. Komal Dani, Partner – Tax Practice at Trilegal, said the combination of extended tax holidays and expanded direct PIS access could materially widen the foreign capital pool and support a gradual migration of fund management activities to India’s IFSC. Gopal Jain, MD & CEO of Gaja Capital, emphasized that allowing practically all foreign individuals to invest directly in Indian equities could create a pool of “high conviction capital” that acts as a stabilizing counterweight to volatile global inflows. Pradeep Ramakrishnan, Executive Director at the IFSCA, welcomed the 20-year extension of the IFSC tax holiday, noting that it brings much-needed clarity and predictability for fund registrations and operations. However, some market insiders flagged limitations. One source observed that the government seems focused on channeling foreign capital directly into onshore Indian equities rather than through GIFT City. PMS activity inside the IFSC, already limited, may see slower growth given that direct PIS investments now offer a more accessible alternative for NRIs. Other gaps remain, particularly the unchanged Section 9A (safe harbour for offshore funds) and tax treatment of outbound investments, which are important for Indian investors seeking genuine global diversification beyond US stocks. NRI-heavy PMS managers also caution that the immediate impact may be muted, noting that most NRIs still prefer allocating the bulk of their equity portfolios to developed markets. As they point out, “The NRI move is not going to move the needle at this stage. To attract FPIs back, we need far more reasonable valuations than are currently prevalent in India.” Experts see the potential for deeper offshore participation and more diversified inflows over time, but actual outcomes will depend on implementation, market conditions, and addressing remaining regulatory gaps. Saurabh Mukherjee of Marcellus summed it up, “It will be a good thing for Indian equities when NRIs are more inclined toward investing in Indian equities.” Other NRI reforms To further support diaspora compliance and ease legacy burdens, the Budget introduces the Foreign Assets of Small Taxpayers – Disclosure Scheme (FAST-DS), 2026 — a one-time, six-month window for voluntary disclosure of undisclosed foreign income or assets below specified thresholds. Targeted at small taxpayers—including relocated NRIs, students, young professionals, and tech employees. The Budget also extends relief to relocated NRIs through the FAST-DS 2026 — a six-month amnesty for disclosing foreign assets/income below Rs 1 crore (or Rs 5 crore in some cases) with reduced penalties/immunity, addressing legacy compliance issues and supporting smoother diaspora reintegration alongside the equity and IFSC reforms. 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