Overall, the direction appears to balance revenue protection with fairness and predictability, strengthening India’s position as a stable and credible tax jurisdiction for its global Indian community
Budget 2026 is expected to bring renewed focus on the taxation framework applicable to Non-Resident Indians (NRIs), with an emphasis on simplification and administrative efficiency rather than widening the tax net, reported outlookmoney.com.
Policymakers appear increasingly aware that for NRIs, compliance complexity and cash-flow disruptions often outweigh the actual revenue collected. As a result, the upcoming Budget may aim to recalibrate how taxes are collected on Indian-source income without materially altering the underlying tax liability.
One key area of attention could be tax deducted at source (TDS) on interest, rental income, and capital gains. Currently, high withholding rates frequently lead to excess deductions, forcing NRIs into prolonged refund cycles. Budget 2026 may seek to align withholding more closely with final tax liability through lower rates, faster access to nil or reduced deduction certificates, and improved coordination between computation provisions and TDS rules. Such measures would ease liquidity pressures, particularly in high-value property transactions and investment exits.
- Residency determination is another area where clarifications are anticipated. While a complete overhaul of residency provisions appears unlikely, refinements to day-count thresholds, income-linked triggers, and the scope of Resident but Not Ordinarily Resident (RNOR) status could be on the table
- With enhanced use of immigration data and financial reporting, the government may also aim to reduce ambiguity in borderline cases
- Even technical adjustments in this space can have significant consequences, potentially reclassifying individuals who have traditionally viewed themselves as non-residents
Capital gains taxation could also see rationalisation. There is growing expectation that long-term capital gains (LTCG) rates may be standardised across asset classes, possibly at 12.5 per cent without indexation. Such a move could substantially reduce disputes around asset classification, holding periods, and the frequent controversy over whether income should be treated as capital gains or business income. Given the large volume of pending litigation, greater certainty in this area would be welcomed by both taxpayers and tax authorities.
At the same time, expectations should remain measured. The recently introduced Income-tax Act, 2025—effective from April 1, 2026—was positioned as a structural rewrite without substantive policy shifts. Historically, the government has preferred incremental reforms through successive budgets, gradually streamlining procedures and rates. In that context, Budget 2026 is likely to reinforce continuity while fine-tuning pain points.
