Union Budget 2026: Government Simplifies Compliance for NRIs in Property and Investment Sectors
The Union Budget for 2026-27 has introduced significant changes aimed at benefiting Non-Resident Indians (NRIs) and other overseas investors. Presented by Finance Minister Nirmala Sitharaman, this budget marks her ninth consecutive presentation and is notable for being the first to be delivered on a Sunday. Key proposals include easing compliance for property transactions involving NRIs and expanding access to Indian equity markets, which could enhance investment opportunities for overseas individuals.
TAN Requirement Eliminated for NRI Property Transactions
One of the most impactful changes in the budget is the removal of the requirement for a Tax Deduction and Collection Account Number (TAN) for resident individuals or Hindu Undivided Families (HUFs) when purchasing property from non-residents. This shift means that buyers will now report Tax Deducted at Source (TDS) using their Permanent Account Number (PAN), aligning the process with transactions between two resident parties. This change is set to take effect on October 1, 2026.
Previously, buyers were obligated to obtain a TAN for each transaction involving non-resident sellers, a requirement that did not apply when both parties were residents. TAN is typically issued to corporate entities, while PAN is designated for individual taxpayers. In her budget speech, Sitharaman explained that this adjustment aims to simplify the compliance process for buyers. The proposal seeks to amend Section 397(1)(c) of the Income Tax Act, thereby exempting resident individuals and HUFs from the TAN requirement when deducting TDS on property transfers from non-residents. This amendment is expected to alleviate the unnecessary compliance burden on buyers, who previously needed a TAN for a single transaction.
Expanded Access to Indian Equity Markets
The budget also proposes significant changes to enhance access to Indian equity markets for NRIs and other overseas investors. A new route has been introduced, allowing Persons Resident Outside India (PROIs), which includes NRIs and foreign nationals, to invest directly in Indian equities. This will be facilitated under the Reserve Bank of India’s Portfolio Investment Scheme (PIS).
Under the new proposal, the individual investment cap for PROIs will increase from 5% to 10% of a company’s paid-up capital. Additionally, the aggregate limit for all such investors will rise from 10% to 24%. These limits will apply to shares and convertible debentures purchased on recognized stock exchanges. Previously, overseas investors primarily accessed Indian equities through foreign portfolio investor or foreign direct investment routes, which involved complex registration and compliance processes. The expanded PIS framework will now explicitly include all PROIs, allowing for investments on both repatriation and non-repatriation bases through designated banks, in accordance with FEMA regulations.
Officials have indicated that these changes are the result of discussions between the Reserve Bank of India and the Securities and Exchange Board of India, initiated in early 2025. The goal is to broaden the investor base and support capital inflows, especially in light of recent foreign portfolio investor outflows. The government anticipates that these measures will diversify sources of foreign capital, enhance market participation, and improve the overall ease of doing business in India.
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