Context
Recently, the Union Budget 2026–27 announced a significant liberalization of investment norms for Non-Resident Indians (NRIs) and Persons Resident Outside India (PROIs), yet data from the National Stock Exchange (NSE) reveals a stark contrast in actual participation.
While the finance minister doubled the individual NRI investment limit to 10% and the aggregate cap to 24% to “ease doing business,” reports highlight that NRIs currently hold a mere 0.62% of the total equity in NSE-listed firms.
Key Highlights: NRI Investment Reforms (Budget 2026-27)
1. New Investment Thresholds
The government has substantially increased the “headroom” for the diaspora to participate in India Inc. through the Portfolio Investment Scheme (PIS):
- Individual Limit: Raised from 5% to 10% of the total paid-up equity capital of a listed Indian company.
- Aggregate Limit: The total share that all NRIs/PROIs combined can hold in a single company has jumped from 10% to 24%.
- Approval Mechanism: These increases are now permitted without the prior approval of the Reserve Bank of India (RBI), aiming to reduce bureaucratic friction.
2. The 0.6% Paradox
Despite these expansive limits, current data paints a picture of under-utilization:
- Ownership Stagnation: NRIs hold only 0.62% of the shares of NSE-listed companies as of Q3 FY 2025–26.
- Historical Trend: This figure has remained below 1% for the past three fiscal years, fluctuating between 0.57% and 0.64% regardless of market performance.
- Nifty 50 Absence: None of the top 50 representative companies of corporate India (Nifty 50) are among the firms with the highest NRI shareholding.
3. FPI vs. NRI: Regulatory Distinction
- FPI (Foreign Portfolio Investment): Institutional entities (mutual funds, etc.) or individuals registered with SEBI. NRIs are generally not allowed to register as FPIs but can be part of an FPI “investor group” with specific caps (less than 25% individual or 50% aggregate contribution to the corpus).
- NRI Route (PIS): A direct route for non-resident individuals to buy/sell shares on stock exchanges through a designated bank branch.
4. Other Diaspora-Friendly Measures
- Property Transactions: Resident buyers purchasing property from NRIs no longer need a TAN (Tax Deduction Account Number); the buyer PAN is now sufficient for TDS compliance.
- TCS Rationalization: Tax Collected at Source (TCS) for overseas education and medical remittances has been slashed to 2% (from 5%).
- Foreign Asset Disclosure: A one-time, six-month window was announced to allow NRIs and professionals to regularize undisclosed foreign assets with immunity from prosecution.
Q. With reference to the Union Budget 2026–27 and NRI investment regulations in India, consider the following statements:
I. The individual investment limit for a Non-Resident Indian (NRI) in a listed company has been doubled to 10%.
II. NRIs are classified as Foreign Portfolio Investors (FPIs) under the latest SEBI guidelines to simplify market entry.
III. For the sale of immovable property by an NRI, the resident buyer is now required to obtain a Tax Deduction Account Number (TAN) to deposit TDS.
Which of the statements given above is/are correct?
A) I only
B) I and II only
C) II and III only
D) I, II, and III
Correct Answer: A
Explanation
• STATEMENT I IS CORRECT: The Union Budget 2026–27 officially hiked the individual NRI/PROI limit from 5% to 10%.
• STATEMENT II IS INCORRECT: NRIs do not come under the FPI category; they invest via the Portfolio Investment Scheme (PIS) regulated under FEMA. While they can contribute to an FPI fund, they cannot be registered as an FPI individual.
• STATEMENT III IS INCORRECT: The Budget 2026 removed the TAN requirement for resident buyers, allowing them to use their PAN for simpler compliance when buying from NRIs.
