Best Investment Options for NRIs in 2026: A CA’s View on Tax and Repatriation

Best Investment Options for NRIs in 2026: A CA's View on Tax and Repatriation

Two changes in 2026 matter more to NRI investors than any market forecast. Budget 2026 announced that an individual person resident outside India can hold up to 10% of a listed Indian company under the Portfolio Investment Scheme, double the earlier 5%. And from 1 October 2026, a resident individual buying your flat can deposit TDS using their PAN instead of first getting a TAN.

Here is what NRIs are actually choosing, and what each option costs in tax.

1. NRE and FCNR Deposits: Still the Base

RBI data shows NRE inflows held up through 2025-26 even as FCNR(B) inflows fell.

  • Tax: NRE account interest is exempt from Indian income tax while the account holder satisfies the applicable statutory conditions. Interest on qualifying FCNR(B) deposits is also exempt. The exemption depends on the applicable non-resident and account-maintenance conditions.
  • Repatriation: full.
  • Catch: FCNR deposits protect against INR exchange-rate fluctuations, although returns depend on the foreign currency and deposit tenure.

2. Mutual Funds and Listed Shares: The Growth Choice

A 2026 Equirus Wealth survey of over 8,300 Gulf-based NRIs found about 73% increasing exposure to Indian equities and mutual funds. You can invest through NRE (repatriable) or NRO (within the USD 1 million yearly limit); direct shares need a PIS-linked account. *The USD 1 million facility relates to eligible remittances from NRO balances, subject to applicable conditions and documentation. It is not an investment limit.

  • Tax: equity gains held over 12 months are taxed at 12.5% above ₹1.25 lakh a year; short-term gains at 20%. TDS applies on redemption for NRIs.
  • Catch for US and Canada residents: many fund houses don’t accept your money because of FATCA, and US tax law usually treats Indian mutual funds as PFICs, which is punishing. For US-based NRIs, I’d usually prefer direct shares, after checking with a US tax adviser.

3. Property: Still Popular, Often Over-Weighted

NRIs can buy residential and commercial property freely. Under the FEMA (Non-Debt Instruments) Rules, 2019, they cannot buy agricultural land, plantation property or farmhouses. Payment must come through NRE, NRO or FCNR accounts or inward remittance.

  • Tax on sale: long-term gains (over 24 months) are taxed at 12.5% without indexation. The option of 20% with indexation for property bought before 23 July 2024 is available only to resident individuals and HUFs, not NRIs.
  • TDS: the buyer must deduct TDS on your sale, usually on the full price unless you get a lower deduction certificate. Say you sell for ₹90 lakh with a gain of ₹25 lakh. Tax on the gain is about ₹3.25 lakh (12.5% plus 4% cess). If the buyer deducts on the whole ₹90 lakh, about ₹12.9 lakh is withheld (12.5% plus 10% surcharge and cess), and the excess of roughly ₹9.6 lakh waits for your ITR refund. Our guide to the lower TDS certificate for NRIs explains how to avoid that.
  • Repatriation: sale proceeds of up to two residential properties can go abroad, limited to the foreign exchange you paid in.

At Tax Vic, we apply for lower TDS certificates on NRI property sales and file the return that claims back any excess TDS.

4. GIFT City: The Dollar Option

Banks and funds in GIFT City let you hold USD deposits and invest in dollar-denominated funds, including India-focused ones, without converting into rupees. Several IFSC income streams are concessionally taxed or exempt for non-residents. It suits NRIs who want India exposure but will spend the money abroad.

  • Catch: higher minimums and a still-growing product range.

5. Government Securities and Bonds

Under RBI’s Fully Accessible Route, NRIs can buy specified central government bonds without limit. Interest is taxable, with TDS, but the credit risk is sovereign.

What I’d Suggest

For most NRIs I meet, the order is: an NRE or FCNR layer for emergencies and family needs, then equity funds or shares through the NRE route for long-term goals, and property only if you will use it or have a clear rental case. A flat bought from abroad as a pure investment often sits vacant or under-rented, and you pay 12.5% on exit after the TDS wait.

Common Mistakes

  • Investing from an old resident account instead of NRE or NRO
  • Buying through NRO when the money could have gone through NRE, which limits later repatriation
  • Not filing an ITR to claim back excess TDS on redemptions or property
  • Not checking the tax implications in the country of residence before investing in Indian financial products. This is particularly relevant for NRIs in the US, Canada, UK and Australia.

For the buyer’s side of a property sale, see our guide to TDS on sale of property by NRIs.

Key Takeaways

  • Budget 2026: The individual investment limit for Persons Resident Outside India (PROIs) in listed Indian companies under PIS was proposed to increase from 5% to 10%.
  • Property TDS: From 1 October 2026, resident individual and HUF buyers can use their PAN instead of obtaining a TAN for TDS compliance when purchasing property from NRIs.
  • Equity taxation: Eligible long-term equity gains exceeding ₹1.25 lakh annually are taxed at 12.5%, while eligible short-term gains are taxed at 20%.
  • NRI property sales: Long-term capital gains are generally taxed at 12.5% without indexation, subject to applicable provisions. NRIs can apply for a lower TDS certificate before the sale to avoid excessive withholding.
  • Property restrictions: NRIs generally cannot purchase agricultural land, plantation property or farmhouses in India under FEMA regulations.

Deciding where your next ₹50 lakh goes in India? Tax Vic works out the post-tax return and repatriation position for each option you’re considering, and handles lower TDS certificates and your NRI return when you exit. Write to info@taxvic.com or WhatsApp +91-9311070842.

Author: CA Reetu Bhandari

Published: 14 November 2026

Last Reviewed: 10 November 2026