A.P. (DIR) Circular No. 14 of 2026: Schedule III stock-market route, once reserved for NRIs and OCIs, opens to all non-resident individuals

On 15 June 2026 the Reserve Bank of India issued A.P. (DIR Series) Circular No. 14 (reference RBI/2026-27/114), titled "Liberalisation of Foreign Portfolio Investment under Schedule III of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019". The circular, signed by Dr. Aditya Gaiha, Chief General Manager-in-Charge, took effect immediately. Its core message is short: the Schedule III route for buying listed Indian shares on a recognised stock exchange, which until June 2026 was open only to Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs), is now open to all individual persons resident outside India.

For a family spread across two countries, that one sentence changes a lot. A US-citizen spouse with no Indian origin, a British-born child who never applied for an OCI card, or a foreign national colleague who simply wants exposure to Indian equities could, before 12 June 2026, not use the route that an NRI uses every day. This piece walks through what the June 2026 package says, what it does not say, and how the tax and repatriation rules apply to the newly eligible investors and to the NRIs and OCIs who already used the route.

The circular is regulatory, not a tax notification. Nothing in it amends the Income-tax Act, 1961, so the tax position described below rests on the existing provisions as they stood in October 2026.

FEMA / DTAA Position

The three instruments behind the change

The liberalisation came in three legal steps over four days in June 2026. The table below sets them out in sequence.

The NDI Rules themselves were notified by the Central Government on 17 October 2019, according to paragraph 1 of the circular. The directions in Circular No. 14 were issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999, which empower the RBI to direct authorised persons and require their compliance.

Who is now eligible

Paragraph 1 of the circular states that investment in equity instruments of a listed Indian company on a recognised stock exchange is now open to "all individual person(s) resident outside India", a route "hitherto permitted only to Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs)". The circular also refers to "enhanced investment limits".

One point needs stating clearly: Circular No. 14 does not itself print the numeric investment limits. Those sit in the amended NDI Rules under S.O. 3030(E) dated 12 June 2026. Any investor or adviser quoting a per-individual or aggregate percentage should read it from the gazetted rules, not from secondary summaries. We have not reproduced a figure here because the circular does not state one.

For background on how FEMA separates current-account and capital-account transactions, note that the site's statute brief for Section 6 of FEMA records the baseline rule: capital-account transactions need RBI permission unless specifically permitted. The June 2026 amendment is exactly such a specific permission.

Reclassification from FPI to FDI

Paragraph 2 of the circular adds that if an individual person resident outside India breaches the prescribed limits "or otherwise", the holding is reclassified from Foreign Portfolio Investment to Foreign Direct Investment under the framework the RBI set for Foreign Portfolio Investors in A.P. (DIR Series) Circular No. 19 dated 11 November 2024. In practice, an investor who crosses the limit does not simply get a warning; the character of the investment changes, and FDI conditions follow.

Where the DTAA fits in

FEMA governs whether money may move; a Double Taxation Avoidance Agreement governs which country taxes the income it earns. The DTAA position for capital gains on shares of an Indian company is the same for the newly eligible foreign nationals as for NRIs: India retains its right to tax. The site's treaty data records India's long-term capital gains rate at 12.5% across all six treaties it tracks (USA, UK, UAE, Canada, Singapore and Australia). For Singapore, the 2017 Protocol makes gains taxable in India on shares acquired after 1 April 2017; for Canada, Article 13 keeps India's taxing rights on gains from shares of an Indian-resident company.

Tax Treatment in India

Capital gains on listed equity

A foreign national investing under Schedule III is taxed in India the same way an NRI is taxed on the same shares, because the Income-tax Act taxes non-residents on income that accrues or arises in India. The rates in force since Budget 2024, effective 23 July 2024, are below.

Before Budget 2024, Section 112A charged 10% above Rs 1 lakh and Section 111A charged 15%; both moved on 23 July 2024. Surcharge on Section 111A and 112A gains follows its own rules in the Finance Act, so an investor with large gains should confirm the rate that applies to capital gains specifically rather than read across from the general slab table above. You can model the full liability in the NRI tax calculator, and file the return on the Income Tax e-filing portal. For definitions, see the glossary entries on LTCG and STCG.

A worked example

Suppose a UK-resident foreign national (not of Indian origin) buys listed shares in July 2026 for Rs 20 lakh and sells them in August 2027 for Rs 25 lakh. The holding exceeds 12 months, the period Section 2(42A) sets for listed shares, so the Rs 5 lakh gain is long-term under Section 112A. The first Rs 1.25 lakh falls under the threshold, leaving Rs 3.75 lakh taxable at 12.5%, which is Rs 46,875. Adding 4% cess of Rs 1,875 gives Rs 48,750 before any surcharge. Had the same shares been sold in May 2027, within 12 months, the full Rs 5 lakh would be taxed at 20% under Section 111A, giving Rs 1,00,000 plus Rs 4,000 cess, a total of Rs 1,04,000.

TDS under Section 195

Non-residents do not pay capital gains tax only at year-end. Under Section 195, the payer withholds tax at source, and the site's statute brief records the governing principle: withholding applies at the DTAA rate or the Income-tax Act rate, whichever is lower. Because India retains taxing rights over capital gains under every treaty tracked here at 12.5%, the treaty rarely reduces withholding on equity gains. It matters more for dividends, covered in the next section. See the glossary entry on TDS for how withholding interacts with the final return.

Dividends

Dividends from Indian companies received by a non-resident are taxable in India. The treaty rate caps how much India may withhold. The site's treaty data records the following portfolio-dividend rates: USA 25%, Canada 25%, UK 15%, Singapore 15%, Australia 15% and UAE 10%. For the USA and Canada, Article 10 of each treaty allows 15% only where the recipient holds or controls 10% or more of the voting stock or power; a Schedule III retail investor will almost always fall in the 25% portfolio band.

To claim the treaty rate, an investor typically needs a Tax Residency Certificate from their country of residence. For the UAE, the site's treaty note records that a TRC requires proof of UAE establishment.

Tax Treatment Abroad

Foreign tax credit is the hinge

Most residence countries tax their residents on worldwide income, so the Indian gain or dividend usually appears on two returns. The treaty mechanism to avoid paying twice is a foreign tax credit in the country of residence. The site's treaty notes record the relevant articles as follows.

Why the credit matters for a foreign-national spouse

Consider a US-citizen spouse investing under Schedule III for the first time in 2026. India withholds and taxes the gain at 12.5% under Section 112A. The US also taxes the same gain under its own rules, and Article 24 of the India-US treaty provides the credit for Indian tax paid. You can test scenarios in the foreign tax credit calculator and the DTAA benefit calculator.

Record-keeping

The circular's paragraph 3 allows banks to "obtain required documents/disclosures from the investor concerned". Those same records, especially contract notes, TDS certificates and bank statements dated to each trade, are what a foreign tax authority will ask for when a credit is claimed. Keeping them in one place from the first trade in 2026 avoids reconstruction work at filing time.

Repatriation Mechanics

A new repatriable INR account

Paragraph 2 of Circular No. 14 authorises AD Category-I banks to open "a repatriable INR account of an individual person resident outside India in accordance with Foreign Exchange Management (Deposit) Regulations, 2016" to facilitate Schedule III investment. The circular does not label this account as NRE, and NRE accounts are designed for NRIs and OCIs. A foreign national without Indian origin should therefore ask the bank which account category under the 2016 Deposit Regulations it will open, rather than assume it is an NRE account.

Same reporting machinery as NRIs and OCIs

The circular says the reporting of these transactions and monitoring of investment limits "shall be undertaken in the same manner as is presently followed for investments by NRIs/OCIs". For NRIs, that machinery runs through a designated bank account linked to the broker, described in our PIS account glossary entry. NRIs and OCIs who already invest therefore face no new process from 15 June 2026; the change is that foreign-national family members can now join the same system.

Moving money out

For NRIs, the site's account comparison records that NRE balances are fully repatriable (principal and interest), while NRO balances are repatriable up to USD 1 million per financial year after tax. Proceeds of a Schedule III sale credited to a repatriable account follow the repatriable track. For any outward remittance from an NRO account, banks typically require Form 15CA and 15CB to evidence that tax has been paid. The NRO to NRE transfer calculator shows how tax deducted on NRO income affects the net sum available to move.

Bank compliance burden

Paragraph 3 obliges AD Category-I banks to "put in place appropriate systems and procedures" and to ensure compliance with the Rules, the Regulations and applicable SEBI regulations. Paragraph 4 says banks may bring the circular to the notice of their customers. In practice, expect banks to roll out onboarding for foreign-national individuals at different speeds after 15 June 2026; the circular is permissive ("may open"), not mandatory.

FAQ

Does Circular No. 14 of 2026 change anything for an existing NRI investor?

The route stays open and the reporting process is the same as before 15 June 2026. The amended NDI Rules under S.O. 3030(E) carry "enhanced investment limits", so the ceiling that applies to an NRI may now be higher. Read the gazetted rules dated 12 June 2026 for the exact figure.

Can my foreign-national spouse now open an NRE account?

The circular does not say so. It allows banks to open "a repatriable INR account" under the FEMA (Deposit) Regulations, 2016 for an individual person resident outside India. Ask the bank which category applies.

What are the new investment limits?

Circular No. 14 does not state numeric limits. They are in the FEM (Non-debt Instruments) (Third Amendment) Rules, 2026, S.O. 3030(E) dated 12 June 2026.

What happens if a foreign investor exceeds the limit?

The holding is reclassified from Foreign Portfolio Investment to FDI under the framework in A.P. (DIR Series) Circular No. 19 dated 11 November 2024, per paragraph 2 of Circular No. 14.

Is capital gains tax in India lower for a foreign national than for an NRI?

No. Both pay 12.5% on long-term gains above Rs 1.25 lakh under Section 112A and 20% on short-term gains under Section 111A, plus 4% cess. India retains taxing rights at 12.5% under all six treaties tracked here.

Which dividend rate applies to a US-resident Schedule III investor?

The India-US treaty caps India's tax at 25% for portfolio holdings, per Article 10. The 15% rate applies only where the recipient holds 10% or more of the voting stock.

When did the change take effect?

The RBI directions took effect immediately on 15 June 2026. The underlying rules were notified on 12 June 2026 and the payment and reporting regulations on 13 June 2026.

This article explains regulatory and tax provisions as published on rbi.org.in and in Oquilia's verified rate data as of 22 October 2026. It is general information, not tax or legal advice; confirm your position with a qualified adviser before investing.