Budget 2026: NRIs look for tax clarity, simpler residency rules, investment-friendly reforms

With the Union Budget 2026–27 set to be presented on February 1, taxation rules affecting visiting Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) are once again under scrutiny. From residency thresholds to capital gains and compliance burdens, the Indian diaspora is watching closely for measures that simplify rules and encourage deeper engagement with India’s economy.

What are the top expectations

Aditya Bhattacharya, Partner, King Stubb and Kasiva, said: "Non-Resident Indians (NRIs) will be closely tracking Budget 2026 for steps that make taxation simpler, reduce compliance burdens, and bring greater clarity to investments in India. A key expectation is rationalisation of the tax framework applicable to NRI income, particularly capital gains on equity, mutual funds, and immovable property, along with clearer rules on residential status and the taxability of overseas income. NRIs also hope for smoother processes for claiming tax refunds, easier access to credit for taxes paid abroad, and more consistent application of Double Taxation Avoidance Agreements."

He added that NRIs would also welcome measures that encourage participation in India’s growth story, including more liberal norms for investments in real estate, start-ups, alternative investment funds and debt instruments. Simplification of FEMA regulations, faster digital KYC processes and more efficient banking services for NRE and NRO accounts could significantly ease financial interactions. Targeted incentives in infrastructure, renewable energy, manufacturing and start-ups, along with smoother repatriation of funds and policy stability, could further strengthen diaspora confidence.

Tax year and 182 days stay

Alongside investment-related expectations, residency rules remain a major pain point. Experts at the Bombay Chambers of Commerce and Industry (BCCI) have flagged that changes introduced by the Finance Act, 2020 have added complexity to the taxation of visiting NRIs and PIOs. Earlier, taxpayers primarily had to ensure that their stay in India did not exceed 182 days in a financial year. Under the revised framework, individuals must also track their India-sourced income threshold of Rs 15 lakh and their physical presence in India over the preceding four tax years.

In its pre-Budget memorandum, BCCI has urged the government to restore the earlier 182-day residency rule without linking it to income thresholds. According to the chamber, reverting to the simpler rule would encourage NRIs and PIOs to spend more time in India, boost travel and hospitality-related spending, and have a net positive economic impact through ancillary consumption. It would also remove confusion arising from the graded residency system and make compliance easier for both taxpayers and the tax department.

BCCI has also argued that the reduced 120-day threshold does not fully achieve its stated objective of taxing individuals who conduct substantial economic activity from India. Instead, it may prompt NRIs to restrict their stay further or limit Indian income to remain outside the residency net, potentially discouraging investments and wealth creation in India. The chamber noted that, at best, the current framework results in higher taxation of certain India-sourced incomes, while complicating residency determination.

Before the Finance Act, 2020, visiting NRIs and PIOs were treated as non-residents if their stay in India was below 182 days in a tax year, regardless of their presence in earlier years, and were not taxed on foreign income. The 2020 amendment introduced a graded system, lowering the stay threshold to 120 days in certain cases and linking residency to India-sourced income levels.

Finance Minister Nirmala Sitharaman will present her ninth consecutive Union Budget on February 1, amid global geopolitical volatility and slowing growth in parts of the world. As expectations build, NRIs and tax experts alike are hoping Budget 2026 delivers clarity and predictability, reinforcing India’s appeal as a stable and attractive destination for diaspora capital.