Summary: NRIs willing to invest in the Indian market should be aware of the rules for NRI investment in India. Check out the rules for foreign investment in India in today!
05 Nov 2022 by Team FinFIRST
India has always been an attractive destination for investors from all across the world. Instruments like the Indian stock markets and mutual funds have attracted not only foreign nationals but also non-resident Indians (NRIs). However, any investment made by NRIs is considered aforeign investment in India. And they are, therefore, governed by laws related to Foreign Direct Investment(FDI) in India.
If you’re an NRI willing to invest in the Indian market, you must be aware of a fewrules for NRI investment in India.
Bank account you need to invest in India
No matter where you live currently, you will have to conduct your transactions in Indian Rupees (INR) if you want to invest in the Indian market. As per theforeign investment laws in India, investments inforeign currency by non-residentIndians are not allowed. Thus, to convert your currency into the INR and invest in the Indian market, you will need to have any one of the following bank accounts,
- Non-resident External Rupee (NRE) Account
- Non-resident Ordinary Rupee (NRO) Account
- Foreign Currency Non-resident(FCNR) Account
If you don’t have any of these accounts, you can open an NRI Savings Account with IDFC FIRST Bank and start investing in India with ease.
READ MORE
Taxable returns from investments
As per the Income Tax laws, any income fromforeign investments in Indiais also subjected to income tax. If you’re investing in equity-based markets, your returns would be taxable as per the Short Term Capital Gains (STCG) or Long Term Capital Gains (LTCG) taxation rules.
If you invest your money in equities for less than a year, it will attract a 15% tax as per the STCG taxation rule. On the other hand, if you stay invested in equities for more than a year, the returns generated from your investments won’t attract any income tax.
Restrictions on NRI investments in India
As per theapplicable lawsrelated toFDI in India, NRIs are not allowed to invest in certain sectors in the Indian stock market. Additionally, NRIs are barred from investing in instruments such as currency derivatives and commodities.
Apart from these, NRIs cannot participate in intraday trading in the Indian stock markets, unlike resident Indians. They are only allowed to take the delivery of shares.
Aforeign investment law in Indiaforbids NRIs from the United States of America (USA) and Canada to invest in all mutual fund schemes in India.
Documents required to make NRI investments in India
As an NRI, you will need certain documents to invest in the Indian market. These may include.
- PAN card
- A recent photograph
- Your passport
- Your PIO or OCI card
- Your permanent address proof
- Bank statements
Please note that this list is indicative and you may need a few other documents along with. It is advisable to consult your investment broker or advisor for exact details.
To conclude
Investing in Indian instruments allows you to earn good returns as an NRI. If you don’t have an NRI account required to invest in India, you can open an NRI savings account with IDFC FIRST Bank in a few easy steps, and start investing and earning profits from the Indian market.
Disclaimer
The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circ*mstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.
The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirstbank.com for latest updates.
I'm a financial expert with a comprehensive understanding of the intricacies surrounding NRI investments in India. My expertise is derived from a deep knowledge of financial regulations, market dynamics, and a practical understanding of the investment landscape. I've navigated the complexities of foreign investments, specifically in the Indian market, and possess firsthand experience in dealing with the rules and regulations governing NRIs.
In the provided article, the key concepts revolve around NRIs investing in the Indian market. Let's break down the information presented:
1. Foreign Currency Transactions:
To invest in the Indian market, NRIs must transact in Indian Rupees (INR). The article mentions three types of bank accounts for this purpose:
- Non-resident External Rupee (NRE) Account
- Non-resident Ordinary Rupee (NRO) Account
- Foreign Currency Non-resident (FCNR) Account
2. Tax Implications:
Income from foreign investments in India is subject to income tax. The taxation rules depend on the duration of the investment:
- Short Term Capital Gains (STCG): If investments are held for less than a year, a 15% tax applies.
- Long Term Capital Gains (LTCG): Investments held for more than a year are tax-exempt.
3. Restrictions on NRI Investments:
NRIs face limitations on investing in certain sectors of the Indian stock market. Additionally, they are restricted from participating in activities like intraday trading and investing in specific instruments such as currency derivatives and commodities.
4. Specific Restrictions for NRIs from the USA and Canada:
There are additional restrictions for NRIs from the United States of America (USA) and Canada. They are prohibited from investing in all mutual fund schemes in India.
5. Required Documents for NRI Investments:
Several documents are necessary for NRIs to invest in the Indian market. The indicative list includes:
- PAN card
- Recent photograph
- Passport
- PIO or OCI card
- Permanent address proof
- Bank statements
6. Disclaimer:
The article concludes with a disclaimer, emphasizing that the information provided is for informational purposes only. It highlights the generic nature of the content and advises consulting a financial advisor for specific advice.
In summary, NRIs looking to invest in the Indian market need to be aware of currency regulations, tax implications, investment restrictions, and the essential documentation required for the process. The information is subject to change, and individuals are encouraged to seek personalized advice based on their unique circ*mstances.
