Union Budget 2026: India Eases Equity Investment Rules for Overseas Individuals, Brings Personal Finance & Tax Reforms

In a move aimed at improving the ease of doing business and attracting more global capital, the Government of India has proposed relaxed investment norms for Persons Residing Outside India (PROI). The announcement was made by Finance Minister Nirmala Sitharaman while presenting her ninth consecutive Union Budget.

Under the new proposal, the maximum equity investment limit for an individual PROI in a listed Indian company will be increased to 10%, up from the current 5%. Additionally, the overall cap for combined investments by all individual PROIs in a single company will be raised to 24%, compared to the existing 10% limit.

At present, PROIs can invest in Indian companies only through the Foreign Direct Investment (FDI) or Foreign Portfolio Investment (FPI) routes. By expanding the limits under the portfolio investment framework, the government is signaling greater openness to overseas participation in Indian equity markets.

Based on the Budget’s priorities and past investment trends of overseas Indians, a few sectors are expected to see maximum interest from Persons Residing Outside India (PROIs):

Financial Services & Wealth Management:

Wealth advisory firms and portfolio management service (PMS) providers are set to benefit as PROIs are now allowed to directly access these services, without the need to route investments through GIFT City. This simplifies the process and makes investing more convenient.

Manufacturing & Industrial Sectors:

The Budget highlighted seven key manufacturing areas for expansion under the PLI framework, including Semiconductors, electronics, pharmaceuticals, chemicals, capital goods, textiles, and sports goods. Companies operating in these sectors could attract higher overseas investments.

Infrastructure & Real Estate:

With a record capital expenditure allocation of ₹12.2 trillion, infrastructure developers, engineering companies, and real estate players focused on urban development are expected to be major long-term beneficiaries of increased foreign participation.

Consumption & FMCG:

Consumer-focused companies, especially those with strong brands and consistent dividend payouts, are likely to draw more interest from the Indian diaspora as higher investment limits make it easier to build meaningful ownership stakes.

Overall, this policy change is expected to enhance capital inflows, deepen market liquidity, and reinforce India’s position as an attractive investment destination for global investors.

From a personal finance and income tax perspective, Budget 2026–27 delivers a mix of relief measures and structural changes.

The Union Budget 2026–27 introduces several important changes aimed at simplifying taxation and improving ease of living for individual taxpayers.

A landmark reform is the rollout of the Income Tax Act, 2025, which will replace the existing law from April 1, 2026. The new framework promises simpler tax forms, clearer rules, and smoother compliance. Filing timelines have been rationalised, and taxpayers will now be allowed to revise their returns up to March 31 of the following year, offering greater flexibility to correct omissions.

On the relief front, interest received on motor accident compensation has been made fully tax-exempt, removing both tax liability and TDS. For overseas remittances, the government has reduced TCS to 2% on foreign spending related to education, medical treatment, and tour packages, improving cash flows for families and frequent travellers. Small taxpayers will also benefit from an automated online system to obtain nil or lower TDS certificates, eliminating manual approvals.

From an investment perspective, share buybacks will now be taxed as capital gains, altering post-tax returns for shareholders. Trading costs in the derivatives market will rise due to higher Securities Transaction Tax rates. Additionally, tax-free maturity benefits on Sovereign Gold Bonds will be limited to original subscribers who hold the bonds till maturity.

To reduce litigation, minor procedural defaults have been decriminalised, and a one-time disclosure window has been introduced for small taxpayers with undisclosed foreign assets, encouraging voluntary compliance.

Overall, the budget signals a shift toward simpler, more predictable personal taxation with targeted tightening in investment taxation.                                                                                                                            

Disclaimer: The article is for informational purposes only and not investment advice.