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The Union Budget 2026 introduces several changes that indirectly benefit Non-Resident Indians (NRIs). While many of these amendments primarily apply to residents making payments or remittances from India, they significantly influence financial transactions involving NRIs—especially remittances, overseas spending, and property transactions.

These reforms aim to reduce compliance burdens, improve liquidity, and simplify cross-border transactions involving India.

1. Reduction in TCS on LRS Remittances for Education and Medical Purposes

Under the Liberalised Remittance Scheme (LRS), resident individuals in India can remit money abroad for permitted purposes such as education, medical treatment, travel, and investments.

Earlier Provision

Previously, remittances for education and medical treatment abroad attracted Tax Collected at Source (TCS) at 5% once the remittance exceeded ₹10 lakh in a financial year.

New Provision (Budget 2026)

Budget 2026 reduces this TCS rate to 2%.

Impact on NRIs

Although the remitter under LRS is usually a resident individual, the change indirectly benefits NRIs in multiple situations:

• Parents sending money to children studying abroad will face a lower upfront tax deduction.
• Families transferring funds to support medical treatment abroad will experience improved cash flow.
• NRIs receiving such remittances from India will see less money blocked as TCS, reducing dependency on tax refunds.

Practical Example

If a parent remits ₹15 lakh for overseas education:

The reduction directly improves liquidity for families and students abroad.

2. Reduced TCS on Overseas Tour Packages

Budget 2026 also rationalises TCS on overseas tour packages purchased from Indian travel operators.

Earlier Structure

The previous structure under the **Income Tax Act 1961 involved:

• 5% TCS on tour packages up to ₹7 lakh
• 20% TCS for amounts exceeding ₹7 lakh

This structure resulted in high upfront tax deductions for international travel bookings.

New Rule

Budget 2026 introduces a flat TCS rate of 2% on overseas tour packages.

Indirect Impact on NRIs

This change can affect NRIs in several ways:

• Family members travelling from India to visit NRIs abroad will face lower tax deductions.
• Corporate travel arrangements involving international tours will experience reduced tax blockage.
• Refund claims due to excess TCS will reduce significantly.

Overall, the change simplifies the tax structure and improves affordability for international travel.

3. Simplification of TDS Compliance on Property Purchases from NRIs

Another important reform relates to property transactions involving NRIs.

When a resident buyer purchases property from an NRI, the transaction falls under Section 195 of the Income Tax Act, which requires the buyer to deduct tax at source.

Earlier Compliance Requirement

Previously, buyers were required 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 created significant compliance hurdles because TAN registration and return filing were not familiar processes.

New Rule (Effective October 1, 2026)

Budget 2026 removes the requirement for buyers to obtain a TAN for such transactions. Instead:

• TDS compliance can be completed using the Permanent Account Number (PAN) of the buyer.

Impact on NRI Property Transactions

This reform simplifies property transactions involving NRIs by:

• Reducing compliance barriers for buyers
• Encouraging smoother real estate transactions
• Minimising procedural delays in property sales involving non-residents

The change is particularly beneficial for individual buyers purchasing residential property from NRIs.

4. Increase in Investment Limits under the Portfolio Investment Scheme

Budget 2026 also proposes increased participation opportunities for NRIs in Indian capital markets.

Under the Portfolio Investment Scheme, NRIs can invest in shares of Indian listed companies through designated bank accounts.

Earlier Limit

• Individual NRI investment limit in a listed company: 5%

Revised Limit

Budget 2026 increases this limit to 10% per individual NRI.

Impact

This change:

• Expands investment capacity for NRIs in Indian equity markets
• Improves foreign capital participation
• Aligns regulatory limits with increasing NRI investment interest

For companies, this reform may also lead to higher foreign portfolio participation from non-resident investors.

5. Relief for Disclosure of Foreign Assets

Another significant compliance reform introduced in Budget 2026 provides an opportunity for taxpayers to regularise previously undisclosed foreign assets.

New Provision

The government has introduced a six-month compliance window allowing taxpayers to voluntarily disclose foreign assets.

Key Benefits

Taxpayers making voluntary disclosure may receive:

• Immunity from prosecution
• Relief from severe penalties
• Opportunity to regularise foreign asset reporting

Relevance for NRIs

NRIs who previously held assets while resident in India and failed to report them may use this window to rectify past reporting errors and avoid litigation.

6. TCS on Other LRS Remittances Remains Unchanged

While Budget 2026 reduces TCS for education and medical remittances, other LRS transactions continue to attract higher TCS rates.

Examples include:

• Foreign investments
• Gifts to relatives abroad
• Purchase of foreign assets
• International financial investments

These remittances will continue to attract 20% TCS under existing rules.

Important Clarification

TCS is not an additional tax liability. It is only an advance tax collection that can be claimed as:

• Tax credit while filing the income tax return, or
• Refund if the taxpayer’s final tax liability is lower.

However, higher TCS still creates temporary cash flow constraints, which is why the reductions introduced in Budget 2026 are significant.

Conclusion

The reforms introduced in Union Budget 2026 aim to simplify tax compliance and improve liquidity in cross-border financial transactions involving India. Although several provisions primarily apply to residents making payments abroad, they indirectly benefit NRIs by reducing procedural complexities and lowering upfront tax deductions.

Key takeaways include:

• Reduced TCS to 2% for education and medical remittances under LRS
• Flat 2% TCS on overseas tour packages
• Simplified property transaction compliance through PAN-based TDS
• Higher investment limits for NRIs in listed Indian companies
• Compliance relief for disclosure of foreign assets 

If you have any further questions or need assistance, feel free to reach out to us at admin@ushmaassociates.com or info@nricaservices.com, or contact us via call/WhatsApp at +91 9910075924. 

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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