India Just Loosened the Rules on NRI Market Access: The Budget 2026 Equity Caps, F&O Without a Custodian, and What It Actually Changes for You

The headlines in early 2026 read like a structural shift. India "doubled" the limits on what an NRI can own in a listed company, SEBI quietly dropped the custodial-code requirement that had made derivatives trading a chore for non-residents, and the Portfolio Investment Scheme was opened to foreign individuals at par with NRIs. Read together, the message looked like the gates had swung open. A salaried NRI in Dubai or London reading those headlines could be forgiven for thinking they had been missing out on something, and that they now needed to act.

For most of them, the honest answer is that almost nothing changed in what they can actually do with their money. The reforms are real, but they were aimed at a different reader: the high-net-worth investor taking concentrated positions, the family office, the foreign individual who was previously locked out, and the derivatives trader who had been deterred by paperwork. If you are putting Rs 50,000 a month into index funds and holding a handful of large-cap stocks, this is mostly noise. It is worth understanding precisely why, because the gap between the headline and your situation is exactly the kind of thing that gets exploited by someone selling you a product you do not need.

The 30-second answer: Budget 2026 raised the individual NRI ownership cap in a listed Indian company from 5% to 10% of paid-up capital, and the aggregate cap for all non-residents from 10% to 24%. SEBI separately removed the mandatory Custodial Participant (CP) code in July 2025, so NRIs can now trade futures and options through a single non-PIS account, with brokerage cut to Rs 50 per order or 0.5% from 1 September 2025. PMS and PIS rules were eased and the foreign-individual category merged with NRIs. For a salaried SIP investor, these ownership ceilings and derivatives changes are largely irrelevant, because retail positions never approached 5% of any company. The reform is real for HNIs, family offices and active traders, and the tax treatment of F&O (slab-rate business income, not capital gains) is unchanged.

This guide breaks down what each piece of the loosening actually is, separates the parts that matter for a high-net-worth investor from the parts that matter for nobody you know, and is honest about the two places where the official picture is still settling. If you want the full Budget round-up across tax and property as well, read Budget 2026: what changed for NRIs. This piece goes deep on the market-access angle alone.

What the cap actually caps, and why you were never near it

Start with the change that generated the loudest headlines: the equity ownership limits. The individual cap on what a single NRI can hold in one listed Indian company rose from 5% to 10% of that company's paid-up capital. The aggregate cap, the combined holding of all non-residents in a single company, rose from 10% to 24%.

Here is the thing the headlines bury: these are ownership ceilings on a single company, not limits on how much you can invest in the market overall. There has never been a rule stopping an NRI from putting crores into a diversified portfolio of Indian equities. The 5% cap only ever bit when a single investor tried to own more than 5% of one specific company, and the 10% aggregate cap only bit when non-residents collectively crowded into the same name.

Put a number on what 5% of a company means. A mid-cap company with a market capitalisation of Rs 10,000 crore has roughly Rs 10,000 crore of equity by value. Five percent of that is Rs 500 crore. To bump into the old individual cap, you needed to be trying to deploy Rs 500 crore into one mid-cap name. A salaried NRI running a SIP of Rs 50,000 a month accumulates Rs 6 lakh a year. Even after twenty years of disciplined investing and strong compounding, a portfolio of a few crore spread across thirty companies puts you at a fraction of a percent in any single one. The cap was never the thing standing between you and your goals.

So who was hitting it? Promoter-adjacent NRIs holding founder stock, ultra-high-net-worth individuals taking deliberate concentrated bets, and, in aggregate, the situation where a popular small-cap or a freshly listed company saw enough non-resident demand that the collective 10% ceiling triggered a freeze on further NRI buying. Raising the aggregate to 24% mostly removes the risk that you get blocked from buying a name simply because other non-residents got there first. That is a genuine improvement, but it is an edge-case improvement.

Consider Arjun, a software director in Seattle with an Indian portfolio worth Rs 3 crore built over fifteen years, spread across an index fund and twelve large-cap stocks. His single largest position is Rs 40 lakh in one bluechip with a market cap above Rs 5,00,000 crore. That is 0.0008% of the company. The cap moving from 5% to 10% is, for Arjun, a rounding error on a rounding error. Nothing about his strategy, his access, or his returns shifts by one rupee. Had the cap instead been slashed to 1%, he still would not have noticed.

Now contrast Vikram, a Dubai-based entrepreneur who sold a business and wants to take a Rs 200 crore concentrated position in a single Indian small-cap he knows well, with a market cap of Rs 3,000 crore. The old 5% individual cap (Rs 150 crore) would have blocked the last Rs 50 crore of that trade. The new 10% cap (Rs 300 crore) clears it. For Vikram the reform is the difference between executing his thesis and not. He is the reader this change was written for, and there are far fewer Vikrams than Arjuns.

The registration-free route got roomier, which matters more than the cap

Underneath the headline cap number sits a more useful change. NRIs and OCIs have long been able to invest in Indian equities through routes that do not require registering as a Foreign Portfolio Investor (FPI) with SEBI. FPI registration is the heavy machinery used by overseas institutions: due diligence, a designated depository participant, ongoing compliance. NRIs were spared it, investing instead through the Portfolio Investment Scheme (PIS) linked to an NRE or NRO account, or more recently through the simpler non-PIS route on the NRO side.

Budget 2026 raised the investment limits available within this registration-free framework. In plain terms, an NRI or OCI can now hold a larger position in a listed company without being pushed into the FPI registration regime. Previously, an NRI taking a large enough stake could find themselves bumping against limits that effectively forced a more onerous structure. Lifting those limits keeps more of the genuinely large non-resident investors inside the simple lane.

For the ordinary investor this is, again, structurally irrelevant, you were never going to be forced into FPI registration on a Rs 3 crore diversified book. But it is worth naming because it is the part of the reform most likely to actually move money. The investors who were deterred were not the retail SIP crowd; they were people with eight-figure rupee ambitions who looked at the registration overhead and decided to keep their money in their country of residence. This change lowers that specific barrier.

Foreign individuals now ride the same rails as NRIs

The structural shift that got the least retail attention is arguably the most consequential for the market as a whole: the merging of NRIs and other non-resident individuals into a single category, with foreign individuals now permitted to invest directly through the PIS route at par with NRIs.

Until now, a foreign individual with no Indian connection, say a German or Japanese retail investor wanting direct exposure to Indian stocks, had no clean retail route. They were neither an NRI nor, in practice, able to register as an FPI as a lone individual. The Indian market was effectively closed to them at the retail level. Treating them at par with NRIs opens a door that was previously shut entirely.

For you, the existing NRI, this changes nothing about your own access. What it might change, over years, is the depth and liquidity of the market you invest in, and the competition for the same stocks. The explicit motivation behind the whole package was to attract non-resident capital after foreign institutional investors pulled out heavily from Indian equities through 2025 and into early 2026. India wanted to broaden the base of buyers. Whether foreign individuals show up in size is an open question, and I would not bet a portfolio on it, but the intent is to make Indian equities a deeper pool. A deeper pool is mildly good for you as a long-term holder. It is not a reason to change a single line of your investment plan.

F&O without a custodian: the friction is gone, the danger is not

This is the change that touches the most NRIs in a tangible way, and it predates the Budget. In July 2025, SEBI removed the mandatory Custodial Participant (CP) code that NRIs needed to trade derivatives.

Understand what that requirement used to cost. Before July 2025, an NRI who wanted to trade futures and options had to appoint a custodian, obtain a unique CP code so the exchange could monitor non-resident derivatives positions separately, and live with the extra fees, the paperwork, and the delay of setting it all up. Most NRIs simply did not bother. The result was that F&O, for the non-resident, was theoretically permitted but practically walled off.

That wall is down. An NRI can now trade through a single non-PIS account on the NRO route that handles equity delivery, mutual funds, intraday, BTST (Buy Today, Sell Tomorrow) and F&O, with no custodial code. Zerodha, to take the most visible example, let existing NRI clients opt out of CP codes by 27 October 2025 and cut brokerage on NRI non-PIS accounts to Rs 50 per executed order or 0.5%, whichever is lower, from 1 September 2025, down from the earlier Rs 100 or 0.5%. The non-PIS route also now allows pledging of eligible holdings, stocks, ETFs, mutual funds, bonds and T-Bills, to receive instant collateral margin for derivatives. The plumbing, in short, has been made as easy for an NRI as it is for a resident.

Here is where I get blunt, because the ease of access is precisely the trap. The removal of the CP code lowered the friction to trade F&O. It did nothing to change the fact that the overwhelming majority of retail derivatives traders lose money. SEBI's own studies on resident retail traders have repeatedly shown the large majority of individual F&O traders run net losses over a year, which is why SEBI has separately been exploring investor-suitability rules for derivatives. The friction that the CP code imposed was, for many NRIs, accidentally protective. Stripping it out is the right regulatory call, but it hands a loaded tool to people who were previously kept away from it by paperwork.

And the tax treatment is genuinely worse than most NRIs assume, in a way that is unique to derivatives. F&O gains are not capital gains. They are business income. Profits from trading futures and options on a recognised exchange are classified as non-speculative business income and taxed at your slab rate, not at the gentle 12.5% or 20% capital-gains rates under Section 115AD that apply to your equity holdings. Intraday equity trades are worse still: those are speculative business income, and speculative losses can only be set off against speculative gains, with a carry-forward of just four years versus eight years for non-speculative and capital losses. For an NRI, broker TDS is withheld at source on the payout, and reconciling that against a business-income computation at slab rates is a materially more complex return than the SIP investor's. For the full mechanics of how your normal equity and fund gains are taxed, which is a different and softer regime entirely, see capital gains tax for NRIs on shares and mutual funds.

Put the gap in numbers. Suppose Priya, a UK-resident NRI in the 30% Indian slab on her Indian income, makes Rs 5,00,000 trading Nifty options in a year. As non-speculative business income, that is taxed at her slab rate. At 30% plus 4% cess, the tax is roughly Rs 1,56,000. Now imagine she had instead made the same Rs 5,00,000 as a long-term gain on equity mutual funds. The first Rs 1.25 lakh is exempt, the remaining Rs 3,75,000 is taxed at 12.5%, for a tax of about Rs 46,875 plus cess, near Rs 48,750. Identical headline profit, and the F&O route costs her roughly Rs 1,07,000 more in tax, before you even account for the trading losses that the statistics say are the more likely outcome. The newly easy access does not change this arithmetic. It just makes it easier to walk into.

The PMS angle: real for the HNI, a distraction for everyone else

The Budget's easing of Portfolio Management Service and ownership rules sits alongside the cap changes and is, again, an HNI story. PMS in India carries a regulatory minimum investment of Rs 50 lakh. That floor alone tells you who the audience is. A salaried NRI deciding between an index fund and a few direct stocks is not the PMS customer.

What the easing does is make the discretionary-PMS and concentrated-position route smoother for the non-resident with serious capital, by raising the ownership limits a PMS can run on an NRI's behalf and by simplifying the category framework so a non-resident is not treated as a second-class participant. If you are an NRI with, say, Rs 2 crore-plus that you want professionally and actively managed in Indian equities, the reforms make that cleaner. Whether you should is a separate question, and the honest answer for most is no: PMS fees and the tax drag of an actively churned portfolio rarely beat a low-cost index approach after costs. The deeper comparison of when concentrated or managed strategies make sense lives in NRI PMS and AIF and in direct equity versus mutual funds for NRIs.

The temptation the reform creates is the marketing that follows it. Expect a wave of "now NRIs can finally access X" pitches through 2026, for PMS products, for AIFs, for derivatives-based strategies, all leaning on the genuine regulatory loosening to sell products with fee structures that quietly transfer your returns to the manager. The loosening is real. The implication that you, the salaried investor, now need any of these products is not.

Who this actually helps, in one view

Investor type	Cap rise (5% to 10%)	F&O without CP code	PMS / PIS easing	Net effect
Salaried NRI, SIP plus a few stocks	No effect, never near 5%	Access opens, but tax and odds are against it	Below the Rs 50 lakh PMS floor	Largely noise
NRI with Rs 2 crore-plus, active	Minor headroom	Genuine new tool, use with caution	Cleaner managed-money route	Moderately useful
HNI taking concentrated single-stock bets	Real, unblocks large positions	Useful for hedging or leverage	Material	The intended beneficiary
Family office / foreign individual	Real, plus new PIS access	Real	Real	The structural target of the reform

The pattern is consistent down the column on the left. The more capital you are deploying and the more concentrated or active your strategy, the more the reforms matter. At the retail SIP end, they round to zero.

Edge cases

The aggregate-cap freeze can still catch a popular name. Even at 24%, a heavily NRI-favoured stock, often a recently listed company with strong diaspora sentiment, can hit the collective non-resident ceiling and freeze further NRI buying until someone sells. The cap is higher now, so this is rarer, but if you are ever told you "cannot buy" a specific Indian stock as an NRI, the aggregate ceiling is the likely reason, not a problem with your account.

Non-PIS F&O on the NRO route, and the NRE question. The newly easy derivatives access runs through the NRO non-PIS route. NRE-routed investing, which keeps your money fully repatriable, follows different mechanics, and the repatriation profile of money used and earned in F&O on the NRO side is not the same as an NRE equity book. If repatriability matters to you, do not assume F&O profits move out as freely as your NRE funds. Map this against your overall structure using NRI portfolio and asset allocation.

The reform is partly still settling. As of mid-2026, the broad direction, doubled caps, merged categories, no CP code, is clear and in effect, but the precise operating circulars for some pieces, particularly the foreign-individual PIS onboarding and the exact registration-free thresholds, are the kind of detail that gets refined in subsequent RBI and SEBI notifications. Where a banker or broker tells you a specific number, ask for the circular it comes from. The headline is firm; some of the fine print is genuinely still being written, and anyone claiming total certainty on every operational detail this early is overselling.

Country-of-residence reporting does not relax because India relaxed. None of this touches your obligations at home. A US person still reports these holdings and faces PFIC complications on Indian funds; a UK resident still reports under the arising or remittance basis; the easier Indian access does not make the foreign-side compliance any lighter. The door India opened is on the Indian side only.

The closing read

The honest read is that this is a reform aimed over the head of the ordinary NRI. The Budget 2026 cap rise from 5% to 10%, the aggregate jump to 24%, the easier PMS rules and the admission of foreign individuals through the PIS route are real and sensible moves to deepen a market that bled foreign-institutional money through 2025. But they operate at a level of capital and concentration that the salaried SIP investor will never reach. If your Indian investing is an index fund, a few large-caps, and a monthly transfer, the correct response to these headlines is to keep doing exactly what you were doing and ignore the noise.

For most NRIs, then: do not change your plan, and treat the inevitable product pitches built on these changes with suspicion, because "the rules just loosened" is not a reason to buy a PMS, an AIF, or a derivatives strategy you did not need yesterday. The one piece that genuinely affects retail behaviour is the removal of the CP code on F&O, and there my recommendation is plain: the easier access is a trap for most people, the odds favour the house, and the slab-rate business-income tax treatment makes even your wins worth far less than the same money earned as a long-term equity gain. If you are an HNI with serious capital, a concentrated thesis, or a real hedging need, these reforms are useful and you should map them with an advisor who works from the actual circulars. For everyone else, the most valuable thing this loosening offers is the discipline to recognise that it was not written for you.

Related guides

• Budget 2026: what changed for NRIs
• Buying Indian stocks as an NRI: the PIS route
• NRI PMS and AIF: when professional management makes sense
• NRI portfolio and asset allocation
• Direct equity versus mutual funds for NRIs
• Capital gains tax for NRIs on shares and mutual funds
• All News and analysis
• All Investments guides

This guide is educational and general in nature. It is not individual investment or tax advice. Market-access rules, ownership limits and the operating detail of the Budget 2026 and SEBI 2025 changes are being implemented through ongoing RBI and SEBI notifications and may be refined after this was written, and the tax treatment of derivatives as business income depends on your specific circumstances and residency, so confirm your position with a qualified adviser and against the current circulars before acting.