In a move aimed at bolstering foreign investment and simplifying market access for overseas Indians, the Union Budget 2026 has unveiled significant changes to equity investment regulations for Non-Resident Indians (NRIs). Finance Minister Nirmala Sitharaman announced the decision to permit Persons Resident Outside India (PROIs) to invest directly in the Indian stock market through the Portfolio Investment Scheme (PIS).
The budget proposes to increase the individual investment limit for PROIs from 5% to 10% in listed Indian companies. Furthermore, the aggregate investment limit for all PROIs will be raised from 10% to 24%. This pivotal decision marks a significant step towards easing foreign participation in Indian markets and is expected to have a positive impact on long-term capital formation.
Previously, overseas investors primarily channeled their funds through Foreign Portfolio Investors (FPIs) or specific NRI routes, often involving complex compliance procedures and intermediaries. The new framework aims to create a more regulated and standardized equity route, making it easier for individual overseas investors to access the Indian market. This move is expected to widen the ownership base of Indian equities while keeping systemic risks contained through an overall cap.
According to Rajarshi Dasgupta, Executive Director - Tax, AQUILAW, this change would allow serious foreign individual investors to take more meaningful stakes in Indian companies, potentially improving price discovery, deepening shareholding, and supporting long-term capital formation.
The increased limits enable foreign investors to build more substantial positions in Indian companies, which could enhance market efficiency, broaden the shareholder base, and foster stronger long-term investment in Indian capital markets, according to Tanvi Kanchan, Associate Director & Head - NRI Business, Anand Rathi Share and Stock Brokers Limited.
Divam Sharma, Co-Founder and Fund Manager at Green Portfolio PMS, highlighted that the Budget's increased focus on NRI participation in Indian markets is a timely and strategically important move, especially at a time when FPI flows have moderated. He added that enhancing participation thresholds under the Portfolio Investment Scheme and raising overall foreign holding limits meaningfully widens the pool of long-term capital available to Indian companies. These reforms enable global Indians to invest directly in India's growth story rather than relying primarily on FPI structures for larger allocations.
In addition to the eased equity investment norms, the budget included measures aimed at simplifying taxation and compliance for NRIs. The government has proposed that Tax Deduction at Source (TDS) on immovable property sales by non-residents will be deducted and deposited by resident buyers using their Permanent Account Number (PAN)-based challan. This removes the requirement for a Tax Deduction Account Number (TAN), making compliance easier for NRIs.
The Union Budget 2026 demonstrates the government's commitment to recognizing the Indian diaspora as a vital source of long-term capital. Targeted incentives for investments in sectors such as infrastructure, renewable energy, manufacturing, and start-ups could further strengthen NRI participation. It is expected that easing procedural hurdles around repatriation of funds and sale proceeds, along with ensuring policy stability and reducing interpretational disputes, would help build investor confidence.
