Budget 2026: India Doubles Equity Investment Limits for NRIs and PROIs

The Union Budget 2026-27, presented by Finance Minister Nirmala Sitharaman on February 1, 2026, has introduced structural reforms aimed at attracting long-term foreign and NRI capital. The government is positioning overseas Indians as a strategic pillar of India's capital inflows, particularly at a time when foreign institutional investment has turned cautious. By lifting investment caps and simplifying cross-border rules, the budget seeks to reinforce India's position as a global financial hub while deepening the domestic equity market.

Direct Equity Access for Overseas Individuals

One of the most significant changes introduced in the budget is the provision for individual Persons Resident Outside India (PROIs) to invest directly in listed Indian companies. This access is facilitated through the Portfolio Investment Scheme (PIS). Previously, overseas individuals often had to rely on complex intermediary structures such as funds, trusts, or the institutional Foreign Portfolio Investor (FPI) route. The new direct access allows investors to hold shares in their own name on either a repatriable or non-repatriable basis. This shift mirrors the way domestic investors participate in the market, offering a more transparent and simpler pathway for the global Indian diaspora to engage with Indian equities.

Doubling the Investment Thresholds

The government has substantially increased the limits for individual and aggregate investments by non-residents. The per-investor cap for a single PROI in a listed Indian company has doubled from 5% to 10% of the company's paid-up capital. Furthermore, the aggregate investment limit for all individual PROIs in a single company has been raised from 10% to 24%. These expanded limits are designed to allow high-conviction investors to take more meaningful ownership positions in Indian firms. By widening the pool of potential foreign capital, the government aims to create a more diversified shareholder base beyond large institutional funds.

Strengthening the Portfolio Investment Scheme

The timing of these reforms is critical, as the Indian equity market witnessed significant outflows from foreign institutional investors in the recent past. In 2025, foreign investors pulled out approximately Rs 19 billion, followed by another Rs 4 billion in January 2026. By strengthening the PIS framework, policymakers are attempting to offset these volatile institutional flows with more stable, long-term capital from the diaspora. The PIS allows NRIs to buy and sell shares through designated bank accounts approved by the Reserve Bank of India, reducing the reliance on complex routing mechanisms and institutional registration hurdles.

GIFT City: The Onshore Offshore Advantage

While direct PIS investments offer simplicity, the budget continues to promote Gujarat International Finance Tec-City (GIFT City) as the preferred destination for structured investments. GIFT City's International Financial Services Centre (IFSC) provides a globally competitive platform for NRIs and foreign investors to set up family offices, funds, or invest through Alternative Investment Funds (AIFs). These structures offer onshore benefits with an offshore feel, including exemptions from certain capital gains and dividend taxes. The growing ecosystem at GIFT City is intended to reduce friction in compliance for diaspora investors who want to operate in both rupee and foreign currency instruments.

Long-term Tax Predictability at IFSC

To enhance the attractiveness of GIFT City, the budget has extended the Section 80LA profit-linked tax holiday for IFSC units to 20 consecutive years. Following this holiday period, a flat tax rate of 15% will apply. This extension provides much-needed clarity and predictability for fund life cycles, aligning India's financial hub with global capital deployment horizons. Experts suggest that this move will help GIFT City compete more effectively against traditional offshore hubs like Mauritius or Singapore. For investors, this means a more stable tax environment for long-term wealth creation and fund management activities within India.

Offsetting Volatile Institutional Outflows

Market analysts have noted that the expansion of direct access for overseas individuals could reshape participation patterns in Indian equities. By doubling the per-investor cap, the government is creating more headroom in sectors where foreign ownership limits previously restricted inflows. Diaspora investors typically have longer investment horizons compared to institutional traders. This patient capital can help stabilize markets, reduce short-term volatility, and improve price discovery. The move is expected to benefit large-cap sectors such as banking, financial services, capital goods, and technology, where stable ownership is vital for growth.

The FAST-DS 2026 Disclosure Window

In addition to equity reforms, the budget introduced the Foreign Assets of Small Taxpayers - Disclosure Scheme (FAST-DS) 2026. This is a one-time, six-month window for the voluntary disclosure of undisclosed foreign income or assets below specified thresholds. The scheme is targeted at small taxpayers, including relocated NRIs, students, and young professionals. It offers a six-month amnesty for disclosing foreign assets below Rs 1 crore (or Rs 5 crore in specific cases) with reduced penalties. This measure is intended to address legacy compliance issues and support the smooth reintegration of the diaspora into the Indian financial system.

Strategic Comparison of Investment Limits

The following table summarizes the changes in investment limits for individual persons resident outside India as proposed in the Union Budget 2026.

Expert Perspectives on Market Stability

Financial experts have generally welcomed these structural reforms, though some caution that immediate market traction may depend on valuations. Analysts emphasize that allowing foreign individuals to invest directly could create a pool of high-conviction capital that acts as a counterweight to global institutional volatility. The 20-year extension of the IFSC tax holiday is seen as a move that brings clarity to fund registrations. However, some market insiders suggest that the immediate impact might be muted as many NRIs still prefer developed market allocations. The long-term success of these measures will depend on implementation and the narrowing of remaining regulatory gaps.

Future Outlook for Diaspora Capital

The measures outlined in Budget 2026 represent a broader shift from a control-oriented regime to one of facilitation. By simplifying Foreign Exchange Management Act (FEMA) rules and easing compliance hurdles, the government is making it easier for NRIs to invest in startups, unlisted companies, and alternative assets. The ultimate goal is to build a stable investor base that is economically tied to India's future growth. As the Indian economy continues to expand, these reforms are expected to deepen capital markets and ensure that the global Indian community remains a partner in the country's next development phase.