Finance Minister Nirmala Sitharaman made history on Sunday by presenting her ninth consecutive Union Budget, becoming the first finance minister in India to achieve this remarkable milestone. This landmark Budget, also the first to be presented on a Sunday, introduced a series of significant measures aimed at easing compliance burdens for Non-Resident Indians (NRIs) and other overseas individuals, while simultaneously widening their access to India's dynamic equity markets.
Major Compliance Relief for NRI Property Transactions
A substantial compliance relief has been proposed for individual home buyers purchasing immovable property from non-residents. Under the new provisions, resident individuals or Hindu Undivided Families (HUFs) will no longer be required to obtain a Tax Deduction and Collection Account Number (TAN) to deduct and deposit Tax Deducted at Source (TDS) on such transactions.
Simplified TDS Reporting Mechanism
Instead of the cumbersome TAN requirement, TDS will now be reported using the buyer's Permanent Account Number (PAN), mirroring the process used for transactions between two resident parties. This significant change is scheduled to come into effect from October 1, 2026.
Currently, buyers purchasing property from non-residents must obtain a TAN even for a single transaction, a requirement that does not apply when both buyer and seller are residents. This distinction created unnecessary administrative hurdles, as TAN is generally issued to corporate entities, while PAN is used by individuals.
Explaining the proposal during her Budget speech, Finance Minister Sitharaman stated, "TDS on the sale of immovable property by a non-resident is proposed to be deducted and deposited through the resident buyer's PAN-based challan instead of requiring TAN."
Legal Framework and Rationale
According to the annexure to the Budget speech, a resident individual or HUF will not be required to obtain a TAN to deduct tax at source on consideration paid for the transfer of immovable property by a non-resident under section 393 of the Income Tax Act. The deduction will be reported by quoting PAN, in the same manner as similar transactions between two residents.
The Budget memorandum highlighted that while Section 397(1)(a) of the Income Tax Act requires every person deducting or collecting tax to apply for a TAN, clause (c) of the same section provides exceptions where TAN is not required. Previously, buyers were exempt from obtaining TAN when purchasing property from resident sellers, but the requirement continued when the seller was a non-resident.
"This creates unnecessary compliance burden for the buyer, as he would need TAN for a single transaction," the memorandum noted. To reduce this burden, the government has proposed amending section 397(1)(c) of the Act to exempt resident individuals or HUFs from obtaining a TAN for deducting TDS on the transfer of immovable property under section 393.
Expanded Access to Indian Equity Markets
The Union Budget 2026-27 has also proposed groundbreaking measures to widen equity market access for NRIs and other overseas individuals, creating new investment pathways that promise to diversify foreign capital sources and deepen market participation.
New Investment Route Through Portfolio Investment Scheme
The Budget has opened a fresh route for overseas individuals to invest directly in Indian equities by allowing Persons Resident Outside India (PROIs), including NRIs and foreign nationals, to purchase listed shares under the Reserve Bank of India's Portfolio Investment Scheme (PIS). This represents a significant expansion of investment opportunities beyond traditional foreign portfolio investor or foreign direct investment routes, both of which involved more complex registration and compliance requirements.
Enhanced Investment Limits
Under the new proposal, the individual investment cap for PROIs has been substantially increased to 10% of a company's paid-up capital, up from the previous limit of 5%. Simultaneously, the aggregate limit for all such investors has been raised to 24% from 10%. These enhanced limits will apply to shares and convertible debentures purchased on recognised stock exchanges, providing greater flexibility and investment capacity.
Comprehensive Framework and Strategic Objectives
The expanded PIS framework will now explicitly cover all PROIs, allowing investments on both repatriation and non-repatriation bases through designated banks, in alignment with Foreign Exchange Management Act (FEMA) rules. This comprehensive approach ensures regulatory consistency while facilitating easier market access.
Government officials indicated that these changes follow extensive discussions between the Reserve Bank of India and the Securities and Exchange Board of India since early 2025. The primary objectives include widening the investor base, supporting capital inflows amid sustained foreign portfolio investor outflows, and improving the overall ease of doing business in India's financial markets.
The government expects these measures to achieve multiple strategic benefits:
- Diversification of foreign capital sources
- Deepened market participation across broader investor segments
- Enhanced liquidity and market depth
- Improved ease of doing business for international investors
- Strengthened integration with global financial markets
These Budget proposals represent a thoughtful balancing act between regulatory simplification and market expansion, addressing long-standing concerns about compliance complexity while creating new opportunities for international investment in India's growing economy.
