Budget 2026–27: Key Highlights for NRIs

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While the introduction of the New Income Tax Act, 2025, effective from April 1, 2026, remains the key highlight of the Union Budget 2026-27, the budget also announced several proposals particularly relevant for Non-Resident Indians (NRIs).

1. Capital gains taxation on buy-back of shares

Buy-back proceeds, presently taxed as dividend income in the hands of shareholders, are now proposed to be taxed as follows:

• Non-promoter shareholders: Taxed under the normal capital gains provisions
  
• Promoter shareholders: Taxed as capital gains, along with an additional tax component as outlined below:
  

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2. Five-year tax exemption on foreign income for eligible non-residents

To attract global talent, the Budget offers tax certainty on income earned outside India. Non-Resident Individuals can enjoy a five-year tax holiday on foreign-sourced income if they:

• Were non-resident for at least the five consecutive tax years immediately preceding the tax year of their visit to India, and
  
• Visit India for the first time to render services notified by the Government

3. Sovereign Gold Bonds (SGBs): Exemption clarified

The Budget clarifies that the capital gains exemption on redemption of SGBs is available only when

• The bonds are subscribed at original issuance from the Reserve Bank of India, and
  
• They are held until maturity

SGBs acquired from the secondary market will not qualify for this exemption.

4. Rationalisation of Income Tax Return (ITR) filing timelines

To ease compliance and provide additional time for the preparation of books of account, the Budget revised return filing due dates as follows:

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5. Extended timeline for filing revised returns

To provide additional time for correcting errors, the Budget proposes extending the time limit for filing a revised return by three months, increasing the overall period from nine months to twelve months from the end of the relevant tax year.

A fee of ₹1,000 will apply where the total income does not exceed ₹5 lakh, and ₹5,000 in all other cases.

6. Greater flexibility in filing updated returns

Taxpayers can now reduce losses reported in the original return, subject to payment of the applicable additional tax.

Further, updated returns may now be filed even after the issuance of a reassessment notice. In such cases, taxpayers must pay an additional 10% of the aggregate tax, over and above the existing additional tax and interest, with no separate penalty.

7. Lower and uniform Tax Collected at Source (TCS) rates on foreign remittances

The Budget has lowered TCS rates in certain cases, making it easier for NRIs and other recipients to receive higher amounts abroad.

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8. Tax Deduction and Collection Account Number (TAN) requirement waived for property purchases from non-residents

Resident individuals and Hindu Undivided Families no longer need a TAN when purchasing immovable property from NRIs. Tax can now be deducted and deposited using a Permanent Account Number-based challan.

9. Foreign assets of small taxpayers – Disclosure Scheme, 2026

The Budget introduces a special disclosure scheme that allows certain individuals to voluntarily declare previously undisclosed foreign assets or income below specified thresholds.

The scheme applies to residents, as well as non-residents and not ordinarily residents, who were residents of India in the year the foreign income was earned or the undisclosed foreign asset was acquired.

To avail of the scheme, the individual must file a declaration in the prescribed manner and pay the applicable tax or fee.

Key benefits include:

• Immunity from further tax, penalty and prosecution under the Black Money Act
  
• Exclusion of the declared income or assets from the computation of total income

10. Higher portfolio investment limits for NRIs

To encourage foreign portfolio participation, the Budget proposes the following changes:

• The investment cap per individual is proposed to be increased from 5% to 10% of a listed company’s paid-up capital.

These changes provide greater flexibility for NRIs to invest directly in Indian equity markets.

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