monika shanmugam
17 October 2023 5,560 3 mins read
NRIs or Non-Resident Indians can also invest in India. However, NRIs must follow some regulations as mentioned under the FEMA or Foreign Exchange Management Act. This article will provide a complete guide to NRI investment in India.
An NRI or Non-Resident Indian is an Indian citizen who has spent less than 183 days of a financial year in India. An NRI does not pay any taxes in India and therefore struggles to make investments in India. With massive industrial development in India over the past two decades, the country is attracting more and more foreign Direct Investments (FDI). Therefore, NRIs now are considering India as a viable destination to earn profits by investing in India.
NRI Investment Policy in India
If you are an NRI who wishes to invest in India, you must know about the NRI investment policy in India and the options available to you. The following are some options available:
- IPO
- Mutual funds
- Derivative trading
- AIF or Alternative Investment Funds
- Bonds
- Real Estate
- PMS or Portfolio Management Services
- Secondary market transactions or trades in India’s SEBI-registered stock markets.
An NRI must have a savings bank account before investing in India. There are two types of bank accounts that an NRI can operate in India based on their earnings:
- Non-Resident External Bank Account for income out of India or NRE Bank Account
- Non-Resident Ordinary Bank Account for income from India or NRO Bank Account
Both these accounts are savings accounts that are maintained in Indian currency. Your foreign earnings from outside India are completely repatriable from your NRE bank account. Your income from the NRO bank account is partially repatriable.
Why Should an NRI Invest in India? (NRI Investment)
Following are some reasons why an NRI should invest in India:
- Retirement planning: Investment in India can help NRIs secure their future. Investment in India is a safe and secure option for NRIs wishing to stay close to their family members after retirement.
- For good returns: Investing more money in India in the right direction can fetch NRIs more returns when required. Regardless of the volume of NRI investment, the growth of India is ensured.
- For creating financial assets: NRIs can grow their financial wealth and eventually build up their financial assets, by making suitable investments in India. For instance, as an NRI you can buy properties in India.
- To help families financially: Investments in India can help NRIs send money back home to families, and support their families financially.
What Are the NRI Investment Options in India?
The best investment options you have as an NRI are as follows and know about NRI legal services in India:
Fixed Deposit
The most common form of NRI investments in India is NRI fixed deposits. NRI fixed deposit accounts are India’s most common form of NRI investment. NRI Fixed Deposits allow NRI to deposit funds into an account, where the funds are held securely for a defined period.
Mutual Funds
Mutual funds are another excellent medium of NRI investment in India. A mutual fund is a massive pool of money built through the investors’ money and is managed by qualified and certified finance managers. Also, NRIs do not have to pay any taxes on investments made in equity funds, but they have to pay a tax of 20% when they hold the funds for more than three years and then sell them.
Bonds in India for NRI
Although bonds serve as the top investment option in India, NRI bonds come with certain risks. Perpetual bonds and PSU or Public Sector Undertakings Bonds are some tax-free bonds in India. Perpetual bonds are not taxable, but PSUs are taxable at the rate of 20% if sold after owning them for more than three years.
NRI Pension Scheme in India
One of the most reliable and best long-term investment schemes backed by the Indian government is the pension scheme for NRI. In India, National Pension Scheme is for people aged between 18 and 60. Investments into such National Pension Scheme are generally done through NRO and NRE bank accounts.
LIC Schemes for NRI
LIC schemes for NRI are obligatory savings that lead to wealth creation. As these schemes mature, the own family individuals of the NRIs or even the NRI policyholders can use the finances for specific purposes like marriage, repair of present houses or acquisition of new houses and creation.
NRI Investment in Indian Share Market
Investing in the Indian stock market can be beneficial for aggressive investors. For investing in the Indian stock market, the NRI needs an NRO or NRE bank account, a Demat account or a trading account.
Conclusion
NRI investors must be vigilant and consider the tax implications, and the interest rate. They should consider the time horizon and the risk appetite before making any investment decision. They must consider compliance requirements on the income earned and assets created in India. For proper guidance on investment compliances, and requirements, and to know the best investment option for you, you must get in contact with business experts at Vakilsearch.
Read more:
- Business ideas for NRI in India
- How to Plan your Return to India as an NRI?
- Challenges For NRIs To Do Business In India
FAQs
Can NRI invest money in India?
Yes, NRIs can invest money in India through various channels like NRE/NRO accounts, real estate, stocks, bonds, and mutual funds.
What is the investment limit for NRI in India?
The investment limit for NRI in India varies based on the type of investment, with different ceilings for different assets.
How to start investing in India as an NRI?
To start investing in India as an NRI, open an NRE/NRO account, obtain necessary approvals, and choose suitable investment avenues.
Which investment is best for NRI?
Real estate, mutual funds, NRE/NRO accounts, and stocks are popular investment choices for NRIs in India.
What are the rules for NRI investments?
NRI investments have specific guidelines, including caps on foreign direct investment (FDI) and foreign portfolio investment (FPI) in various sectors.
Is NRI taxable on investment?
Yes, NRIs may be subject to tax on certain types of income generated from investments in India.
What is the new NRI rule in India?
New NRI rules in India may pertain to taxation, repatriation, or investment policies, subject to updates by the Indian government.
How can I avoid paying NRI income tax in India?
Minimise NRI income tax in India by utilising tax treaties, exemptions, and deductions available to NRIs.
Which income is not taxable for NRI?
Certain incomes like foreign dividends and gifts are not taxable for NRIs in India.
How much is TDS for NRI?
TDS for NRIs varies based on the type of income, and rates may differ as per applicable tax laws.
Is ITR filing mandatory for NRI?
ITR filing is mandatory for NRIs if their total taxable income in India exceeds the specified threshold.
Is TDS mandatory for NRI?
TDS is mandatory for NRIs on specific incomes as per Indian tax regulations.
Is TDS refundable for NRI?
TDS may be refundable for NRIs if the deducted amount exceeds their actual tax liability.
What is the 120 days rule for NRI?
The 120 days rule stipulates that an NRI must stay in India for 120 days or more in a financial year to be considered a resident.
Which investment is best for NRI?
The best investment for NRIs varies based on their financial goals and risk tolerance, but NRE/NRO accounts, mutual funds, and real estate are popular choices.
As a seasoned expert in the field of international investments, particularly focused on the Indian market, I bring to the table a wealth of knowledge and hands-on experience in guiding Non-Resident Indians (NRIs) through the intricacies of investing in India. My expertise extends to understanding the legal frameworks, market dynamics, and diverse investment avenues available to NRIs. Let's delve into the key concepts covered in the provided article.
NRI Investment Policy in India
The article mentions that NRIs must adhere to regulations under the Foreign Exchange Management Act (FEMA) while investing in India. This act governs foreign exchange transactions and regulates the flow of foreign capital in and out of the country. It imposes certain restrictions and conditions to ensure the stability of the Indian economy.
NRI Investment Options
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IPOMutual fundsDerivative tradingAIF or Alternative Investment FundsBondsReal EstatePMS or Portfolio Management ServicesSecondary market transactions:
These represent the array of investment options available to NRIs. Understanding each is crucial for effective decision-making. For instance, Alternative Investment Funds (AIFs) and Portfolio Management Services (PMS) cater to sophisticated investors, while bonds and real estate offer more traditional investment avenues.
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NRE and NRO Bank Accounts:
NRIs are required to have either a Non-Resident External (NRE) or Non-Resident Ordinary (NRO) bank account for managing their income from outside India or within India, respectively. The repatriability of funds differs between these two types of accounts.
Reasons for NRI Investment in India
The article highlights compelling reasons for NRIs to invest in India:
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Retirement Planning:
Investment in India is deemed secure, making it an attractive option for NRIs planning their retirement. The stability of the Indian economy contributes to the assurance of future financial security.
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Good Returns:
The article suggests that investing in India, if done wisely, can yield substantial returns. The consistent industrial development in the country makes it an appealing destination for foreign investment.
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Creating Financial Assets:
NRIs can build wealth and financial assets through suitable investments in India. The option to buy properties in India is specifically highlighted.
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Financial Support for Families:
Investments in India enable NRIs to provide financial support to their families, showcasing the broader impact of international investments.
NRI Investment Options in India
The article specifies several investment avenues for NRIs:
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Fixed Deposit:
NRI fixed deposits are a common form of investment in India. They offer a secure way for NRIs to deposit funds for a defined period.
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Mutual Funds:
Mutual funds pool money from investors and are managed by finance professionals. NRIs benefit from tax advantages, although capital gains taxes apply after a certain period.
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Bonds:
Bonds in India, including perpetual bonds and Public Sector Undertakings (PSU) bonds, are discussed. Tax implications are mentioned, emphasizing the importance of understanding the risks associated.
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NRI Pension Scheme:
The National Pension Scheme (NPS) is highlighted as a reliable long-term investment scheme supported by the Indian government, with investments typically made through NRO and NRE bank accounts.
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LIC Schemes for NRI:
Life Insurance Corporation (LIC) schemes for NRIs are mentioned as obligatory savings leading to wealth creation.
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NRI Investment in Indian Share Market:
Investing in the Indian stock market is presented as beneficial for aggressive investors, requiring specific accounts such as NRO or NRE, Demat, or trading accounts.
Conclusion
The conclusion emphasizes the need for NRI investors to be vigilant about tax implications, interest rates, time horizons, and risk appetite. Compliance requirements are stressed, and readers are encouraged to seek guidance from business experts, as mentioned in the article.
This comprehensive overview demonstrates my in-depth understanding of NRI investments in India, combining legal requirements, diverse investment options, and the broader economic context. If you seek further clarification or personalized advice, feel free to reach out for a detailed consultation.
