Budget 2026 call: NRIs seek resident-like treatment on investment caps, tax clarity

As the Union Budget approaches, expectations are running high among two influential groups shaping India’s financial future: Non-Resident Indians (NRIs) and stakeholders in GIFT City, India’s only international financial services centre. While both view India as a long-term growth opportunity, their expectations from the Budget reflect distinct priorities.

For NRIs, simplicity and certainty remain paramount. Many overseas Indians continue to face complexity around tax residency rules, tax deducted at source (TDS) on investments, and cross-border inheritance planning. Greater clarity on residential status thresholds, faster refund mechanisms for excess TDS, and rationalisation of capital gains taxation would significantly improve confidence and reduce disputes.

Sachin Sawrikar, Managing Partner, Artha Bharat Investment Managers IFSC LLP, said: “NRIs are also keen to see stable repatriation norms and targeted incentives that encourage long-term investments into India, particularly in infrastructure, green energy, and domestic financial markets. A key expectation is that NRIs are treated on par with domestic investors rather than as foreigners for foreign direct investment limits, especially in sectors where ownership caps apply. Such a move would recognise the Indian diaspora as long-term partners in India’s growth story and help unlock patient capital without increasing external vulnerabilities.”

The Indian diaspora has historically been a steady source of support during periods of foreign exchange stress, subscribing to quasi-sovereign foreign currency–denominated bonds and ensuring a regular flow of hard-currency remittances—among the largest for any diaspora globally. In this context, treating NRIs at par with resident Indians is a measure that Indian authorities may want to consider favourably.

Sawrikar added: “GIFT City stakeholders, on the other hand, are focused on deeper structural reforms. Over the past few years, GIFT City has emerged as a credible platform for global fund management, with the Economic Survey 2025–26 noting that within a year it climbed nine places in the Global Financial Centres Index to rank 43 among 120 global financial centres. Its fintech ranking also improved by ten positions, supported by a dedicated regulatory sandbox, innovation centres, and academic partnerships. The next phase of growth now depends on whether the Union Budget addresses regulatory and tax frictions that affect commercial viability.”

One major expectation is greater operational flexibility for fund managers, particularly those running sophisticated global strategies such as hedge funds and long-short portfolios. Current regulatory frameworks often assume traditional investment models, while global funds rely heavily on leverage, derivatives, and prime brokerage arrangements.

Sawrikar noted: “The requirement to pay withholding tax on payments made to overseas service providers for funds investing outside India is emerging as a key hurdle and is affecting the viability of India’s only IFSC as a credible alternative to competing offshore jurisdictions that have traditionally been preferred for this purpose. Stakeholders are hopeful that the Budget will encourage closer coordination between regulators and tax authorities to allow practical exemptions in line with global best practices.”

Boosting entrepreneurship has been a key goal of the government under Prime Minister Narendra Modi. In this context, smaller and mid-sized funds—particularly those operating under third-party management models—often find compliance costs disproportionately high. This runs counter to efforts to encourage more investment managers to become entrepreneurs by leveraging IFSCA-piloted innovations, such as smaller set-ups that use the infrastructure of more established, licensed players through third-party fund management structures. GIFT City participants are seeking a more proportionate regulatory approach that preserves governance and investor protection while allowing shared resources and flexible staffing for smaller schemes.

Perhaps the most critical expectation relates to tax neutrality for outbound funds. Unlike global financial hubs where investors are taxed only upon redemption, outbound funds from GIFT City often face tax leakage at the fund level. This reduces returns and places India at a competitive disadvantage. Stakeholders are therefore seeking a tax deferral or pass-through regime that ensures investors are taxed only when gains are actually realised.

Ultimately, both NRIs and GIFT City participants are seeking the same outcome: predictability, competitiveness, and long-term policy clarity.

“A Budget that rewards trust, reduces friction, and thinks globally can turn both the Indian diaspora and GIFT City into powerful engines of long-term capital for India.”