FEMA and RBI Changes for NRIs, 2025 to 2026: What Actually Moved on Accounts, Repatriation, Reporting and Compounding, and What Did Not

Every few months a headline lands in an NRI WhatsApp group announcing that the rules have changed, and within a day half the group is convinced their NRO account is about to be frozen or their repatriation limit has been scrapped. Most of it is noise. Some of it is real. In the eighteen months from January 2025 to mid-2026 the RBI and the Ministry of Finance did make a clutch of genuine changes that touch how NRIs hold money, move it, invest it and report it. They also left the things that matter most to a salaried expat, the NRE account, the NRO cap, the FCNR deposit, almost exactly where they were. The job of this piece is to separate the two honestly, theme by theme, so you know what to act on and what to ignore.

The 30-second answer: The big NRI account rules held steady through 2025 and 2026. NRE stays fully repatriable and tax-free on interest; NRO stays taxable with the USD 1 million per financial year repatriation cap intact; FCNR(B) stays a foreign-currency deposit free of Indian interest tax. The real changes are around the edges. From 16 January 2025 the RBI amended FEMA regulations to let non-residents route foreign investment through repatriable rupee accounts including SNRR and Special Rupee Vostro accounts, not just NRE, NRO, FCNR(B) or escrow. The Foreign Exchange (Compounding Proceedings) Rules, 2024, notified 12 September 2024, capped penalties for non-quantifiable contraventions at Rs 2 lakh and digitised the process. Property and reporting duties, Form 15CA, 15CB, IPI and the FIRMS Single Master Form, are unchanged. Act on the reporting, ignore the panic.

This round-up groups the 2025 to 2026 movement by theme so you can scan to what affects you: the account rules and what the January 2025 INR amendments actually did, the repatriation position and why the USD 1 million cap is stable, the LRS and TCS interplay that hits your resident family rather than you, the property and reporting duties that did not change but that NRIs routinely miss, and the new compounding regime that decides what happens when you get one of those duties wrong. Each section ends with what it means in practice, and the piece closes with a single consolidated action list. Where the law is genuinely stable I will say so plainly rather than manufacture drama, because the most expensive mistake in this space is acting on a change that did not happen.

Theme one: the account rules barely moved, and that is the real headline

Start with what did not change, because it is what most NRIs actually care about and the reassurance is worth more than any breathless update.

An NRE (Non-Resident External) account is for income earned abroad. Both the principal you remit and the interest it earns are fully repatriable, with no cap, and the interest is exempt from Indian income tax under Section 10(4)(ii) of the Income Tax Act. None of that changed in 2025 or 2026.

An NRO (Non-Resident Ordinary) account is for income that arises in India: rent, dividends, a pension, the proceeds of a sale. The interest is taxable in India and subject to TDS, and repatriation is capped at USD 1 million per financial year for the balance of accumulated income and asset sale proceeds. That cap and that taxability are exactly where they were.

An FCNR(B) (Foreign Currency Non-Resident Bank) deposit is a term deposit held in a foreign currency such as USD, GBP, EUR or others the bank offers. It carries no exchange risk on the principal because it stays in the foreign currency, the interest is free of Indian tax, and it is fully repatriable. Stable.

So if the architecture held, what did the RBI actually amend? On 16 January 2025 it issued amendments to several regulations under the Foreign Exchange Management Act, 1999, with the stated aim of promoting the use of the Indian rupee in cross-border transactions. The change that touches NRIs is about the plumbing of investment, not the deposit accounts you live off. Previously a person resident outside India who wanted to invest in Indian equity instruments, contribute to or withdraw from an LLP, or buy units of an investment vehicle, had to route the money through specified modes: an NRE, NRO, FCNR(B) or escrow account. The amendments broaden the permitted channels so that investment can also flow through a repatriable rupee account, expressly including the Special Non-Resident Rupee (SNRR) account and Special Rupee Vostro accounts, and the RBI explicitly permitted transfers between repatriable INR accounts for bona fide transactions. The SNRR account itself was opened up to all permissible current and capital account transactions, and its balances were confirmed as eligible for repatriation, subject to the applicable taxes.

What it means in practice. For the salaried NRI with an NRE account, a couple of FDs and an NRO account collecting rent, this changes nothing about your daily banking. You do not need an SNRR account and you should not open one because a headline told you to. The amendments matter if you are a more institutional investor, an NRI running money through a fund structure, an offshore entity, or a business settling Indian trade in rupees, where the wider set of permitted accounts genuinely reduces friction. The honest framing: this is rupee-internationalisation policy that happens to sweep NRIs into its definitions, not a consumer banking reform aimed at you.

Theme two: repatriation, and why the USD 1 million cap is stable

This is the question that generates the most false alarms, so let me be categorical. The USD 1 million per financial year limit on repatriating balances out of an NRO account, the bucket that holds accumulated income and the proceeds of selling Indian assets such as property, shares or inherited money, remains the standing position in 2026. The January 2025 amendments were about which accounts can receive inbound investment. They did not touch the outbound NRO cap, in either direction. Nobody raised it and nobody cut it.

Two distinctions inside that cap are worth holding onto, because confusing them is where NRIs either over-restrict themselves or trip a compliance flag:

First, current income is outside the USD 1 million cap. Rent, dividend, interest and similar income earned in the current period is freely repatriable on top of the cap, provided the tax has been paid or provided for. The USD 1 million ceiling bites on the capital bucket, the accumulated balances and asset sale proceeds, not on this year's rent.

Second, NRE and FCNR repatriation has no cap at all. Money in those accounts is yours to move out freely. The cap is an NRO phenomenon, born of the fact that NRO money is India-sourced and the system wants to see that tax has been settled before it leaves.

To actually move NRO money out you need Form 15CA, your own declaration filed online, and in most cases Form 15CB, a certificate from a chartered accountant confirming the nature of the remittance and that the appropriate tax has been deducted or paid. The bank, acting as the authorised dealer, will not release the funds without them. None of this paperwork changed in 2025 or 2026; it is the same regime, and the deeper mechanics are walked through in the NRO repatriation process guide and, for investment proceeds specifically, the NRI NRO repatriation cap on investments guide.

What it means in practice. If you sold a Bengaluru flat and want to send the proceeds to your UK account, you can, up to USD 1 million this financial year, with 15CA and 15CB and clean documentation of the source. If the proceeds exceed USD 1 million in a single year, you split the repatriation across financial years or seek specific RBI approval. The cap did not move, so plan around it as you always have.

Theme three: LRS and TCS, the change that hits your family, not you

Here is the cleanest example of a real change that most NRIs misread as their own. The Liberalised Remittance Scheme (LRS), under which money leaves India in retail quantities, and the Tax Collected at Source (TCS) under Section 206C(1G) that rides on it, apply only to residents of India. As an NRI you are outside the scheme. You pay no TCS moving your own NRE or NRO money out within your limits.

The changes are real, but they land on your resident family:

• Effective 1 April 2025, the TCS-free threshold rose from Rs 7 lakh to Rs 10 lakh per financial year across LRS purposes, and education funded by a loan from a specified financial institution went to 0% TCS regardless of amount.
• Effective 1 April 2026, the rate above the threshold was cut to a flat 2%, down from the old 5% on most remittances and the punishing 20% on overseas tour packages, with the separate minimum on tour packages removed. The LRS annual cap itself stays at USD 250,000.

What it means in practice. When your father in Pune wires your tuition, or your sister gifts into your overseas account, the bank collects TCS against their PAN above the Rs 10 lakh threshold. They reclaim it in full as a credit on their Indian return, exactly like TDS, because TCS is a prepayment of tax, not a tax. The saving the 2026 cut delivers is real money for them; the bigger win is teaching them the deduction is recoverable. The full mechanics, including who pays and how to reclaim, sit in the Budget 2026 LRS and TCS changes round-up and the focused TCS on LRS cut to 2% in 2026 piece. The honest read: this is one of the few 2025-2026 changes that is unambiguously good news, just not for the person who usually thinks it is about them.

Theme four: property acquisition and the reporting that did not change but that you still owe

The headline-grabbing prohibitions on NRI property are old and stable. An NRI cannot buy agricultural land, a farmhouse or plantation property in India; you can buy residential and commercial property freely. That rule did not move in 2025 or 2026, and the panic that surfaces every year about NRIs being barred from property is wrong.

What deserves attention is the reporting that attaches to property and investment, because it did not get easier and NRIs routinely skip it. Acquisition or transfer of certain immovable property by a non-resident is reportable to the RBI, historically through forms in the IPI series filed via the authorised dealer bank, generally within ninety days of the transaction. On the investment side, foreign investment into Indian companies and LLPs is reported through the Single Master Form (SMF) on the RBI's FIRMS (Foreign Investment Reporting and Management System) portal, the modernised, fully online reporting layer that has replaced the older paper filings. The forms have been digitised; the duty to file them has not gone away.

What it means in practice. If you bought property in India and your only thought was the registration and the home loan, check whether your bank filed, or asked you to file, the relevant reporting. If you invested into an Indian private company or LLP, the SMF filing on FIRMS is not optional, and the company you invested into usually carries the obligation, but as the foreign investor you want to confirm it was done. The deeper buying and selling mechanics are in the buying property in India as an NRI guide. The honest framing: the modernisation made the forms easier to file, which removes your last excuse for not filing them.

Theme five: the new compounding regime, which decides what a mistake costs

If theme four is the duty, theme five is the consequence of getting it wrong. The Foreign Exchange (Compounding Proceedings) Rules, 2024, were notified on 12 September 2024, in supersession of the 2000 rules, and they reset how a FEMA contravention gets regularised. Compounding is the mechanism by which you voluntarily admit a contravention, pay a settlement amount, and close it without prosecution.

The changes that matter:

• For a quantifiable contravention, where the amount involved can be measured, the compounding amount can still run up to three times the sum involved.
• For a contravention where the amount is not quantifiable, the penalty is now capped at Rs 2 lakh, with up to Rs 5,000 per day for a continuing contravention after the first day. This is the change most relevant to ordinary NRIs, because many procedural lapses, a wrong purpose code, a delayed filing, are not quantifiable in rupee terms.
• The rules widened the monetary limits within which RBI officers of different seniority can compound, which in practice speeds up smaller cases, and they digitised the payment of compounding fees.

A 2025 follow-on round of amendments continued to refine the procedure. The thread running through all of it is administrative tidiness, not leniency on the underlying breach: compounding closes the contravention, but you still have to regularise the position that caused it.

What it means in practice. If you discover you missed a reporting requirement or used the wrong channel, the realistic downside for a small, non-quantifiable, genuine procedural slip is now a capped Rs 2 lakh rather than an open-ended fear, and the route to fix it, voluntary disclosure and compounding, is more predictable. That is a reason to come forward, not to stay quiet. The honest read: the 2024 rules make self-correction cheaper and more certain, which is exactly the behaviour the system wants to reward.

A compliance checklist with a worked example

Abstract rules are easy to nod at and hard to act on, so here is the concrete version. Take a representative case: an NRI in the UK who, in the financial year 2025-26, earned Rs 6,00,000 in rent on a Mumbai flat, sold inherited shares for Rs 40,00,000, and wants to repatriate.

1. Tax on the income first. The rent and the capital gain on the shares are India-sourced and taxable. TDS will have been deducted; reconcile it against the actual liability when filing the Indian return. Repatriation cannot happen cleanly until the tax position is settled or provided for.

2. Separate current income from capital. The Rs 6,00,000 rent is current income, freely repatriable outside the USD 1 million cap once tax is provided for. The Rs 40,00,000 of sale proceeds sits in the capital bucket, inside the USD 1 million per financial year cap.

3. Do the cap arithmetic. At an illustrative rate of Rs 86 to the US dollar, USD 1 million is roughly Rs 86,00,000. The Rs 40,00,000 of share proceeds sits comfortably inside one year's cap, so it can all go in 2025-26. Had the figure been, say, Rs 1,20,00,000, you would repatriate up to the cap this year and the balance after 1 April in the next financial year.

4. File the forms. For the NRO repatriation you file Form 15CA online yourself and obtain Form 15CB from a chartered accountant. The bank releases the funds against them.

5. Check the property and investment reporting. If any of these transactions involved a reportable acquisition or transfer, confirm the IPI-series or FIRMS Single Master Form filing was made through your authorised dealer bank within the required window.

6. If something was missed, consider compounding. A non-quantifiable procedural lapse now carries a capped Rs 2 lakh exposure under the 2024 rules, so voluntary disclosure is the rational move, not silence.

The arithmetic to internalise: current income repatriates outside the cap, capital proceeds inside it, and USD 1 million is your annual capital ceiling. Everything else is documentation.

Edge cases

You hold an SNRR account because a headline said to. Unless you are running investment or business flows that genuinely need it, you do not. The January 2025 amendments widened who may use repatriable rupee accounts; they did not make the SNRR a retail product for salaried NRIs. Close the loop with your bank before opening accounts you will not use.

Your repatriation exceeds USD 1 million in one year. The cap is per financial year. Split a large repatriation across years, or for a genuinely time-sensitive case seek specific RBI approval through your authorised dealer. Do not attempt to structure around the cap through multiple accounts; the limit is per individual.

You became a resident again during the year. Once you return to India and your status flips to resident, you re-enter the LRS world and step out of the NRO repatriation framework, and your accounts need redesignation. The transition rules are their own subject; do not assume the NRI treatment continues by inertia.

Inheritance and gifts. Money you inherit or receive as a gift in India is reportable and repatriable within the same USD 1 million NRO framework once the tax and source-of-funds position is clean. The compounding cap on non-quantifiable lapses applies here too if reporting was missed.

Agricultural land you inherited. You cannot buy agricultural land, but you can hold what you lawfully inherited. Selling it has its own restrictions on who you may sell to. This did not change in 2025-2026, but it is the single most common property misconception, so verify before you transact.

The closing read

The most useful thing I can tell you about FEMA and RBI changes across 2025 and 2026 is that the foundations under a salaried NRI's financial life, the NRE account, the NRO account, the FCNR deposit, and the USD 1 million repatriation cap, did not move. The genuine changes were around the edges and mostly in your favour: the January 2025 amendments widened the investment plumbing, the LRS and TCS cuts lightened the load on your resident family, and the 2024 compounding rules capped the cost of an honest procedural mistake at Rs 2 lakh and made self-correction more predictable. The duties that did not change, repatriation paperwork, property and investment reporting through 15CA, 15CB, IPI and the FIRMS Single Master Form, are the ones NRIs actually neglect, and now that the forms are digitised there is no excuse left. So the action list is short: keep your tax position clean before you repatriate, file the reports you owe, ignore the headlines that claim your account is about to be frozen, and if you find an old lapse, come forward and compound it rather than hope it disappears. Rules that are stable are a gift. Treat them as one.

Related guides

• The NRO repatriation process
• NRE, NRO and FCNR accounts compared
• The NRI NRO repatriation cap on investment proceeds
• Budget 2026 LRS and TCS changes for NRIs
• TCS on LRS cut to 2% in 2026
• Buying property in India as an NRI
• Selling property in India as an NRI
• NRI gifting money to resident relatives under FEMA
• Sending money out of India: NRO versus LRS
• NRIs receiving inheritance funds in India
• Reducing NRO TDS using the DTAA
• Repatriable versus non-repatriable demat accounts
• Why NRIs cannot buy agricultural land
• The FIRC and inward remittance documentation

This guide is general information, not legal, tax or financial advice, and it reflects the position as understood in mid-2026. FEMA regulations, RBI master directions, repatriation limits, reporting forms and compounding rules change, and the application to your situation depends on your residential status and the specifics of each transaction. Verify the current position against the relevant RBI master direction and the latest notifications, and consult a qualified chartered accountant or FEMA practitioner before repatriating funds, reporting a transaction, or compounding a contravention.