The Union Budget 2026 introduces several tax and compliance changes that indirectly impact Non-Resident Indians (NRIs). While many of these provisions primarily apply to residents making payments from India, they influence cross-border financial transactions involving NRIs—particularly remittances abroad, overseas spending, and property transactions in India.
These measures are aimed at simplifying procedures, reducing upfront tax deductions, and improving liquidity in international financial transactions connected with India.
- Lower TCS on LRS Remittances for Education and Medical Purposes
Under the Liberalised Remittance Scheme (LRS), resident individuals are permitted to remit money abroad for approved purposes such as education, medical treatment, travel, and investments.
Earlier Provision
Previously, remittances made for overseas education or medical treatment were subject to Tax Collected at Source (TCS) at 5% once the total remittance exceeded ₹10 lakh in a financial year.
New Provision in Budget 2026
The Union Budget 2026 has reduced this TCS rate to 2%.
Relevance for NRIs
Although LRS remittances are generally initiated by residents in India, the change indirectly benefits NRIs in several situations:
- Parents transferring funds to children studying abroad will face lower upfront tax deductions.
- Families sending money for overseas medical treatment will experience better cash flow.
- NRIs receiving such funds abroad will have less money blocked as TCS, reducing reliance on tax refunds.
Example
| Particulars | Earlier Rule | New Rule |
| TCS Rate | 5% | 2% |
| Remittance | ₹15,00,000 | ₹15,00,000 |
| TCS Amount | ₹75,000 | ₹30,000 |
The lower TCS requirement reduces the immediate tax outflow and improves liquidity for individuals sending funds abroad.
- Rationalisation of TCS on Overseas Tour Packages
Budget 2026 also modifies the tax collection structure on international tour packages purchased through Indian travel operators.
Earlier Structure
Under the Income Tax Act, 1961, the earlier TCS rates were:
- 5% for overseas tour packages up to ₹7 lakh
- 20% for amounts exceeding ₹7 lakh
This resulted in significant upfront tax deductions on international travel bookings.
New Rule
Budget 2026 replaces the earlier slab-based structure with a flat TCS rate of 2% on overseas tour packages.
Impact on NRIs
This change may affect NRIs indirectly in the following ways:
- Family members travelling from India to visit NRIs abroad will face lower tax deductions.
- Companies arranging international travel for employees will experience reduced cash blockage.
- Taxpayers will need to claim fewer refunds due to excess TCS.
Overall, the revised structure simplifies tax compliance and reduces the financial burden associated with overseas travel bookings.
- Simplified TDS Compliance on Property Purchases from NRIs
Another important reform relates to property transactions involving non-resident sellers.
When a resident purchases property from an NRI, the buyer must deduct tax at source under Section 195 of the Income Tax Act, 1961.
Earlier Compliance Requirement
Previously, buyers had to:
- Obtain a Tax Deduction and Collection Account Number (TAN)
- Deduct TDS under Section 195
- File TDS returns using the TAN
For individual buyers, this often-created procedural challenges because TAN registration and return filing were unfamiliar processes.
New Rule (Effective October 1, 2026)
Budget 2026 removes the requirement for buyers to obtain a TAN in such cases. Instead:
- TDS compliance can be completed using the Permanent Account Number (PAN) of the buyer.
Impact on NRI Property Transactions
This change simplifies property transactions involving NRIs by:
- Reducing procedural barriers for buyers
- Making property sales smoother and faster
- Minimising compliance delays in transactions involving non-resident sellers
The reform is particularly helpful for individual buyers purchasing residential property from NRIs.
- Higher Investment Limits for NRIs under the Portfolio Investment Scheme
Budget 2026 also expands investment opportunities for NRIs in Indian capital markets through the Portfolio Investment Scheme (PIS).
Under this scheme, NRIs can invest in shares of Indian listed companies through designated bank accounts.
Earlier Limit
- Maximum investment allowed for an individual NRI in a listed company: 5%
Revised Limit
Budget 2026 increases this limit to 10% per individual NRI.
Impact
The increase in the investment cap:
- Allows NRIs to allocate more capital to Indian equities
- Encourages greater participation of foreign investors in Indian markets
- Reflects growing interest from overseas Indians in domestic capital markets
- Compliance Relief for Disclosure of Foreign Assets
Another significant compliance reform announced in Budget 2026 is a special window for voluntary disclosure of previously unreported foreign assets.
New Provision
The government has introduced a six-month compliance window allowing taxpayers to voluntarily report undisclosed foreign assets.
Key Benefits
Taxpayers who disclose such assets during this period may receive:
- Protection from prosecution
- Relief from heavy penalties
- An opportunity to regularise past reporting omissions
Relevance for NRIs
NRIs who previously held foreign assets while they were residents in India and did not report them may use this opportunity to correct earlier disclosures and avoid potential disputes with tax authorities.
- TCS on Other LRS Remittances Remains Unchanged
While Budget 2026 reduces TCS for education and medical remittances, the tax treatment for other LRS transactions continues to remain unchanged.
These include:
- Foreign investments
- Gifts sent to relatives abroad
- Purchase of foreign assets
- Other international financial transactions
Such remittances will continue to attract 20% TCS under the existing rules.
Important Clarification
TCS does not represent an additional tax liability. Instead, it functions as an advance tax collection. Taxpayers can claim the amount as:
- Tax credit when filing their income tax return, or
- A refund if their final tax liability is lower than the tax collected.
However, higher TCS can temporarily block funds, which is why the reductions introduced in Budget 2026 are considered significant.
Conclusion
The tax reforms introduced in Union Budget 2026 are aimed at improving the efficiency of cross-border financial transactions involving India. Although several of these provisions apply primarily to residents making remittances or payments abroad, they indirectly benefit NRIs by simplifying procedures and reducing upfront tax deductions.
Key highlights include:
- Reduction of TCS to 2% for education and medical remittances under LRS
- Introduction of a flat 2% TCS on overseas tour packages
- PAN-based TDS compliance for property purchases from NRIs
- Higher investment limits for NRIs in listed Indian companies
- A compliance window for voluntary disclosure of foreign assets
These measures collectively aim to reduce compliance complexity while improving liquidity in cross-border financial transactions.
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Disclaimer: Aim of this article is to give basic knowledge about the topic to people who are not in touch with Indian tax norms. When anybody is dealing with these kinds of cases practically, he shall consider all relevant provisions of all applicable Laws like FEMA/Income Tax/RBI /Companies Act etc