Budget 2026: NRI Investment Limits Hiked, Property TDS Eased

The Union Budget 2026-27, presented by Finance Minister Nirmala Sitharaman, has introduced a series of significant reforms aimed at Non-Resident Indians (NRIs) and other overseas individuals. The key measures focus on easing tax compliance for property transactions and expanding access to Indian equity markets, signaling a clear intent to attract long-term capital from the global Indian diaspora.

Expanded Equity Investment for Overseas Indians

A headline announcement in the budget is the enhancement of investment limits for Persons Resident Outside India (PROIs), a category that includes NRIs and Persons of Indian Origin (PIOs). Under the Portfolio Investment Scheme (PIS), the investment cap for an individual PROI in a single listed Indian company has been doubled from 5% to 10% of the company's paid-up capital.

Furthermore, the aggregate investment limit for all PROIs in one company has been substantially increased from 10% to 24%. This change provides significantly more room for overseas Indians to increase their holdings in Indian equities. The move is expected to attract more stable, long-term investment into the Indian stock market, diversifying the sources of foreign capital beyond institutional investors.

Major Relief in Property Transactions

In a significant move to reduce compliance burdens, the budget has simplified the process of Tax Deducted at Source (TDS) on the sale of immovable property by a non-resident. Previously, a resident individual purchasing property from an NRI was required to obtain a Tax Deduction and Collection Account Number (TAN) for the transaction, a procedural hurdle that often caused delays.

Effective from October 1, 2026, this requirement has been removed. The resident buyer can now deduct and deposit the applicable TDS using their own Permanent Account Number (PAN) through a challan. This aligns the process with transactions between two resident parties, making it simpler and faster. The Finance Minister stated that this change is intended to remove an "unnecessary compliance burden" on individual buyers who may only be conducting a single such transaction.

Key Changes for NRIs in Budget 2026

Rationalisation of Tax Collected at Source (TCS)

The budget also introduced changes to the TCS regime under the Liberalised Remittance Scheme (LRS) to provide relief to individuals sending money abroad. The TCS rate on overseas tour packages has been rationalised to a flat 2%, removing the previous tiered structure that applied higher rates above certain spending thresholds.

Similarly, for remittances made for education and medical treatment, the TCS rate has been lowered from 5% to 2%. This measure reduces the upfront cash blocked during such transactions, providing direct relief to families funding overseas education or covering medical expenses abroad.

Other Compliance and Disclosure Measures

To further improve ease of compliance, the budget has proposed staggered deadlines for filing Income Tax Returns (ITR). While individuals filing ITR-1 and ITR-2 will continue to have a deadline of July 31, the due date for non-audit business cases and trusts has been extended to August 31.

Additionally, a one-time, six-month Foreign Asset Disclosure Scheme has been announced. This window is aimed at students, technology professionals, and relocated NRIs who may have undisclosed foreign income or assets. It allows them to regularise their compliance by paying applicable taxes and a nominal fee, with immunity from prosecution and penalties under certain conditions.

Market Impact and Analysis

Experts view these budgetary measures as a strategic effort to deepen India's capital markets and improve the ease of doing business. By raising investment limits for PROIs, the government is tapping into a more stable and patient source of capital compared to the often-volatile flows from Foreign Portfolio Investors (FPIs).

Analysts note that simplifying TDS rules for property sales removes a significant procedural irritant that discouraged potential buyers and complicated transactions for NRI sellers. This rationalisation is expected to bring more transparency and efficiency to the real estate market. The combined effect of these changes is a more predictable and investor-friendly environment, which is critical for attracting and retaining cross-border investment.

Conclusion

The Union Budget 2026-27 has delivered a targeted set of reforms for overseas Indians. By increasing equity investment limits, simplifying tax compliance on property sales, and rationalising TCS on foreign remittances, the government has addressed several long-standing demands. These measures are poised to strengthen the financial integration of the Indian diaspora with the domestic economy, encouraging greater participation in India's growth story.