For the first time, foreigners will now be allowed to invest in the Indian equity market thanks to the Budget 2026. Budget 2026 has proposed to allow individual ‘Persons Resident Outside India’ (PROI) to invest in equity instruments of listed Indian companies through the Portfolio Investment Scheme (PIS).
“One of the major developments of the Union Budget 2026 is the announcement to permit Individual Persons Resident Outside India (PROI) to invest in Indian capital markets through the Portfolio Investment Scheme,” says CA (Dr) Suresh Surana.
Under the PIS, NRIs and Foreign Portfolio Investors (FPIs) are currently permitted to purchase shares in Indian companies that are listed on Indian stock exchanges.
“At present, investment is largely restricted to registered Foreign Portfolio Investors (FPIs) and Non-Resident Indians (NRIs).
The proposed change will permit foreign citizens, including those from the US, European Union, and the Middle East, to directly invest in equity instruments of listed Indian companies,” adds Dr. Surana.
A person resident outside India (PROI) includes not only the non-resident Indians (NRI) but also any individual or entity that does not meet India’s residency criteria under FEMA. This, in addition to NRIs, broadly covers foreign nationals and overseas entities who live or operate outside India for employment, business, or any long-term purpose.
“New rule removes the differentiation between individual NRI investors and foreign individual investors, with individual foreign investors to be treated at par with individual NRIs.
Now, foreign individuals can also invest directly in the Indian market through the PIS route, which is expected to improve the liquidity and inflows into the market with improvement in price discovery and market efficiency,” says Karan Aggarwal, Co-founder & CIO, Ametra PMS; SEBI registered portfolio manager.
It also includes offices or branches located outside India, even if they are owned or controlled by an Indian resident. In simple terms, if a person or entity is based outside India and does not qualify as a resident, they are treated as a PROI.
Increase in Limits
The Budget 2026 has also proposed to increase the investment limit for an individual PROI under this scheme from 5% to 10%, with an overall investment limit for all individual PROIs to 24%, from the current 10%. “Non-resident individual investors, including NRIs, are clubbed into a single category PROI (Persons resident outside India) for ownership restrictions, with a single investor cap in a company raised from 5% to 10% and aggregate PROI ownership limit raised from 10% to 25%. These changes allow foreign individual investors to build sizable positions in Indian firms without relying on complex institutional routes such as FII/FDI, which is positive for equities, especially in segments outside the top 500 market cap,” adds Aggarwal.
NRIs Investing in India
Currently, NRIs are allowed to invest in shares of listed Indian companies in recognised Stock Exchanges under the PIS. NRIs are also allowed to invest in Exchange Traded Derivative Contracts approved by SEBI from time to time out of Rupee funds held in India on a non-repatriation basis, subject to the limits prescribed by SEBI. Such investments will not be eligible for repatriation benefits.
However, the NRI investor has to take delivery of the shares purchased and give delivery of shares sold, as short selling is not permitted.
Shares purchased by NRIs and FIIs on the stock exchange under PIS cannot be transferred by way of sale under private arrangement or by way of gift to a person resident in India or outside India without prior approval of the Reserve Bank.