New Changes for NRIs & Foreign Investors: All You Need to Know under Finance Bill, 2026

The Finance Bill, 2026 brings several focused changes for Non-Resident Indians, returning NRIs and foreign investors having business or financial interest in India. These changes aim to provide tax certainty, simplify compliance, resolve disputes and allow controlled disclosure of foreign assets.

PAN-Based TDS for Property Purchase from Non-Residents

One key change relates to Tax Deducted atSource on purchase of immovable property from a non-resident. Earlier, a resident buyer was required to obtain a Tax Deduction Account Number to deduct and deposit TDS. The Finance Bill, 2026 removes the TAN requirement for resident individuals and Hindu Undivided Families.

The buyer will now deduct and deposit TDS using the buyer PAN along with seller PAN. This change applies only where property is purchased from a non-resident. The provision comes into effect from 1 October 2026. This reform reduces procedural hurdles for resident buyers and makes property transactions smoother for NRIs.

One-Time Foreign Asset Disclosure Scheme for Small Taxpayers (FAST-DS 2026)

The Finance Bill, 2026 also introduces the Foreign Assets of Small Taxpayers Disclosure Scheme, 2026. This scheme gives a one-time chance to disclose certain foreign income or foreign assets. It provides immunity from further tax, penalty, and prosecution under the Black Money Act for the items disclosed. The scheme is meant for taxpayers holding small or old foreign assets which were not reported earlier.

Eligibility under FAST-DS

The scheme applies to:

• Persons who are residents in India during the relevant period.
• Persons who are non-residents or not ordinarily resident now, but were resident when the foreign income arose or when the foreign asset was acquired.

The scheme does not apply to undisclosed foreign immovable property beyond specified limits.

Category A: Undisclosed Foreign Income or Asset

Category A covers undisclosed foreign income or undisclosed foreign assets.

The aggregate value must not exceed Rs. 1 crore as on 31 March 2026.

The taxpayer must pay:

• 30 percent tax, and
• An additional amount equal to 100 percent of such tax.

The total payment equals 60 percent of the value of the foreign income or asset, based on valuation rules.

Category B: Explained Asset Not Reported in Return

Category B applies where the foreign asset was acquired from disclosed income but was not reported in the return schedules.

• The aggregate asset value must not exceed Rs. 5 crore as on 31 March 2026.
• The taxpayer must pay a flat fee of Rs. 1 lakh.

This category targets reporting failures rather than tax evasion.

Process and Timeline under FAST-DS

• Declarations must be filed through a prescribed electronic process.
• The tax authority will issue an order within one month from the end of the month of declaration.
• The taxpayer must make payment within two months from the end of the month of receipt of the order.
• A further two-month window applies with interest at one percent per month.
• The scheme will commence on a date to be notified by the Central Government.
• This scheme offers a controlled exit route for returning NRIs with minor foreign holdings.

Prosecution Relief under the Black Money Act for Small Assets

• The Finance Bill, 2026 amends the Black Money (Undisclosed Foreign Income and Assets) Act.
• Prosecution under sections 49 and 50 will not apply where the aggregate value of foreign assets other than immovable property does not exceed Rs. 20 lakh.
• This relief applies only to financial and movable assets.
• Foreign immovable property remains fully covered under prosecution provisions.
• The amendment takes effect from 1 October 2024.
• This change reduces criminal exposure for small foreign bank accounts, securities, or insurance policies.

Expanded Immunity Framework for Underreporting and Misreporting

The Finance Bill, 2026 expands the immunity framework under the Income-tax Act.

Immunity now extends to certain misreporting cases, subject to statutory conditions.

Taxpayers must pay:

• Tax and interest, and
• An additional income-tax amount in place of penalty.

For specified cases, the additional income-tax equals 100 percent of tax on underreported income. In defined categories, the additional income-tax equals 120 percent of such tax. This framework replaces discretionary penalty exposure with a fixed settlement cost. Foreign investors gain a predictable dispute closure mechanism.

Advance Pricing Agreement Relief for Group Entities

• The Finance Bill, 2026 strengthens the Advance Pricing Agreement (APA) framework.
• An associated enterprise of a taxpayer who has entered into an APA can now file a modified return.
• The modified return applies to tax years covered by the APA.
• This change aligns group-level tax positions after APA implementation.
• Multinational groups benefit from reduced double taxation risk.

Income Tax Exemption for Non-Resident Experts

• The Finance Bill, 2026 introduces a targeted exemption for non-resident experts.
• Non-resident experts working under notified government schemes receive exemption on global income for five years.
• The exemption applies only to schemes notified by the Central Government.
• The measure supports talent inflow into priority national projects.

Income Tax Exemption Linked to Data Centre Services

• The Finance Bill, 2026 introduces an income-tax exemption for a notified foreign company.
• The exemption applies where the foreign company procures data centre services from a specified data centre in India.
• The exemption runs up to 31 March 2047, subject to notified conditions.
• This provision supports long-term digital infrastructure investment.
• The exemption applies only to notified entities and structures.

FEMA and Market Access Announcements: Policy Direction

The Budget speech also refers to:

• Review of FEMA Non-Debt Instrument Rules.
• Portfolio investment access for persons resident outside India.
• Market-making framework and total return swaps.

These items represent policy direction, not enacted tax law under the Finance Bill. NRIs and foreign investors must await separate FEMA notifications for operational details.

Why These Changes Matter for NRIs and Foreign Investors

The Finance Bill, 2026 reflects a shift toward:

• Defined compliance windows.
• Fixed-cost settlement mechanisms.
• Reduced criminal exposure for small defaults.
• Long-term tax certainty for strategic investments.

The reforms address legacy issues faced by returning NRIs and cross-border groups.

Key Compliance Points to Remember

NRIs and foreign investors must:

• Track effective dates for PAN-based TDS changes.
• Evaluate eligibility under FAST-DS before declaration.
• Distinguish between movable and immovable foreign assets.
• Review APA coverage for group entities.
• Monitor notified schemes and exemptions.

Non-compliance attracts statutory consequences.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates