The Government of India has unveiled the Union Budget for the 2026–2027 fiscal year, introducing a comprehensive suite of tax and regulatory reforms designed to cement the nation’s status as a primary destination for global capital. Finance Minister Nirmala Sitharaman presented the proposals with a clear mandate to simplify compliance for taxpayers while aggressively courting international investors and the vast Indian diaspora. These measures span across critical sectors including digital infrastructure, electronics manufacturing, and information technology services, all while addressing longstanding administrative hurdles that have historically complicated the ease of doing business for non-resident entities.
Central to the new fiscal strategy is a significant expansion of investment access for Persons Resident Outside India. The government proposes to allow these individuals to participate more robustly in the Indian equity markets through the Portfolio Investment Scheme. Under the new guidelines, the individual investment limit for non-residents in listed Indian companies will double from 5 percent to 10 percent. Furthermore, the aggregate cap for all individual non-resident investors is set to rise from 10 percent to 24 percent. This adjustment is specifically intended to mobilize the financial resources of the global Indian community and provide foreign individual investors with a more substantial stake in the domestic growth story.
Real estate transactions involving non-resident Indians are also slated for a major administrative overhaul. In an effort to reduce the friction associated with property dealings, the budget proposes that resident buyers be permitted to deduct and deposit tax at source using a Permanent Account Number based challan system. This replaces the more cumbersome requirement of obtaining a Tax Deduction and Collection Account Number, which has often acted as a deterrent in secondary market transactions. By streamlining these procedural requirements, the government expects to see a resurgence in NRI-led investments in the Indian housing and commercial property sectors.
In a forward-looking move to establish India as a global hub for digital infrastructure, the 2026 Budget introduces a landmark tax holiday for foreign companies utilizing domestic data centers. Companies that provide digital services to international customers using infrastructure located within India will be eligible for this holiday until 2047. The policy is structured to encourage the massive scaling of data center capacity while ensuring that services sold to the domestic Indian market are routed through local resellers and taxed appropriately. To provide further fiscal certainty, resident entities providing these services to foreign affiliates will benefit from a safe harbor margin of 15 percent, aimed at minimizing transfer pricing disputes and fostering long-term capital expenditure in the technology sector.
The manufacturing sector, particularly electronics, is another primary beneficiary of the proposed reforms. The government has introduced a safe harbor regime for non-residents who operate bonded warehouses for electronic components. By applying a profit margin of 2 percent of invoice value, the effective tax burden is reduced to approximately 0.7 percent. This rate is intentionally positioned to be more competitive than other major manufacturing jurisdictions in Asia. Additionally, foreign companies that supply capital goods and specialized equipment to manufacturers in bonded zones will receive tax exemptions for a five-year period starting April 1, 2026. These incentives are part of a broader strategy to integrate India more deeply into global electronics supply chains and support just-in-time manufacturing models.
To bolster India’s human capital and encourage the influx of specialized knowledge, the budget proposes a specific exemption for international experts. Global income not sourced in India will be exempt from domestic taxation for experts visiting the country under notified government schemes. This exemption applies for five years, provided the individual was a non-resident for the five years preceding their arrival. This measure reflects the government’s recognition that attracting top-tier global talent is essential for high-tech industrial growth and the successful implementation of complex infrastructure projects.
Digital transformation remains a cornerstone of the administrative reforms presented by the Finance Minister. The budget outlines a shift toward a rule-based, automated system for tax certificates. This will allow small taxpayers and non-residents to obtain lower or nil tax deduction certificates without manual intervention from tax officers. Taxpayers will also be empowered to file declarations directly with depositories for income derived from mutual funds and dividends, ensuring that Tax Deduction at Source is not applied unnecessarily. Furthermore, the deadline for revising tax returns has been extended to March 31 with a nominal fee, providing greater flexibility for those managing complex international tax profiles.
Significant changes are also coming to the capital markets regarding share buybacks. The taxation of these transactions will shift from being treated as dividend income to being classified as capital gains for the shareholder. This alignment is intended to simplify the tax treatment of corporate actions and bring India in line with international standards. The budget also proposes differential tax rates for promoters, with domestic company promoters taxed at 22 percent while others are subject to a 30 percent rate.
The Information Technology sector will see a consolidation of various service categories. IT-enabled services, knowledge process outsourcing, and software research and development will now be unified under the umbrella of Information Technology Services. A standardized safe harbor margin of 15.5 percent will apply, and the eligibility threshold for these provisions will be increased from 300 crore rupees to 2,000 crore rupees. This massive expansion of the threshold is expected to bring a much larger number of medium and large-scale service providers under a predictable tax regime, reducing the need for protracted litigation.
For returning non-residents and professionals who may have struggled with complex foreign asset reporting, the government has introduced a one-time six-month disclosure scheme. This initiative offers a pathway for taxpayers to regularize their filings. Those with undisclosed overseas income or assets up to 1 crore rupees can gain immunity from prosecution by paying a combined tax and additional levy totaling 60 percent. For those who disclosed income but failed to report assets up to 5 crore rupees, immunity is available upon payment of a 1 lakh rupee fee. Notably, the non-disclosure of non-immovable foreign assets valued below 20 lakh rupees will now receive retrospective immunity from prosecution, a move designed to protect students and young professionals who may have held small foreign bank accounts or assets while working or studying abroad.
In her concluding remarks, Finance Minister Sitharaman emphasized that these reforms are part of a broader “Reform Express” aimed at accelerating economic growth and enhancing national productivity. The budget is built upon three pillars of duty: sustaining growth through competitiveness, fulfilling the aspirations of the citizenry, and ensuring equitable access to resources across all sectors. The focus remains on a supportive ecosystem characterized by structural reforms, a resilient financial sector, and the integration of cutting-edge technologies like artificial intelligence to improve governance.
The 2026–2027 Budget signals a clear intent to maintain a predictable and transparent tax environment. By balancing the need for strict compliance with the necessity of attracting foreign capital, the Indian government seeks to improve the nation’s ease of doing business index. The outlook for the coming fiscal year suggests a period of stabilization and growth, as these measures are expected to bolster investor confidence and provide a clearer roadmap for the millions of non-residents who remain integral to India’s economic trajectory.
