India is fast emerging investment destination for NRIs. Indian economy is shining like anything. Every now and then we hear in the news that FII (foreign Institutional investor organizations that pool large sums of money and invest those sums) invested so much amount in the Indian stock market. Similarly to FII, so many NRI individuals might be looking for good Investment options in India.
From real estate to mutual funds, the investment landscape in India is vast and varied. In this comprehensive guide, we delve into the top investment options available for NRIs in India, helping you make informed decisions to maximize returns and achieve your financial goals.
Definition of NRI
An NRI, as per the Indian government’s definition, is an individual of Indian nationality or origin who resides outside India for employment, business, or any other purpose indicating an indefinite stay abroad.
Investment options available for NRIs in INDIA
Real Estate Investments
Investing in real estate in India has long been a favored choice among NRIs. With rapid urbanization and infrastructural developments, Indian cities offer lucrative opportunities for property investment. From residential apartments to commercial spaces, NRIs can explore various options based on their budget and investment goals. Additionally, rental income and capital appreciation make real estate an attractive long-term investment avenue.
Investment in real estate can be further diversified by exploring emerging markets, such as tier-II cities and suburban areas, offering higher growth potential and competitive pricing.
Stock Market Investments
The Indian stock market, known for its dynamic nature, provides ample opportunities for NRIs to invest in equities, mutual funds, and exchange-traded funds (ETFs). With the advent of online trading platforms, NRIs can easily participate in India’s stock market from anywhere in the world. Diversifying your portfolio across different sectors and industries can mitigate risks and maximize returns in the long run.
Fixed Deposits and Bonds
Fixed deposits (FDs) and bonds remain popular investment avenues for NRIs seeking stability and assured returns. Indian banks offer competitive interest rates on NRI fixed deposits, providing a safe haven for parking surplus funds. Government bonds and corporate bonds are also viable options for NRIs looking to earn steady income while preserving capital.
Mutual Funds and SIPs
Systematic Investment Plans (SIPs) offered by mutual funds have gained traction among NRIs as a disciplined approach to investing in the Indian market. SIPs allow NRIs to invest small amounts regularly, thereby averaging out market volatility and benefiting from rupee cost averaging. Moreover, mutual funds offer diversification across asset classes, including equity, debt, and hybrid funds, catering to varying risk appetites.
Public Provident Fund (PPF)
The Public Provident Fund (PPF) remains a preferred investment avenue for NRIs seeking tax benefits and long-term wealth accumulation. NRIs are not eligible to open a new PPF account; however, those who held accounts before becoming NRIs can continue investing until maturity. PPF offers tax-free returns and enjoys the sovereign guarantee, making it a secure investment option for NRIs.
National Pension System (NPS)
The National Pension System (NPS) provides NRIs with an opportunity to build a retirement corpus while enjoying tax benefits. NRIs can open an NPS account and contribute towards retirement savings, with the flexibility to choose between equity, corporate bonds, and government securities. Contributions to NPS qualify for tax deductions under Section 80C of the Income Tax Act, enhancing its appeal among NRIs.
How NRI can get benefits of DTAA agreement?
Investment in Startups and Ventures
With India emerging as a global hub for innovation and entrepreneurship, NRIs can explore investment opportunities in startups and ventures across various sectors. Platforms like AngelList and SeedInvest facilitate investments in early-stage startups, offering potential high returns on investment. NRIs can leverage their expertise and network to identify promising startups and participate in India’s burgeoning startup ecosystem.
Gold and Precious Metals
Investing in gold and precious metals has been ingrained in Indian culture for centuries. NRIs can diversify their investment portfolio by allocating a portion towards gold in the form of jewelry, coins, or gold exchange-traded funds (ETFs). Gold serves as a hedge against inflation and geopolitical uncertainties, making it a valuable asset for wealth preservation over the long term.
Cryptocurrency Investments
The burgeoning popularity of cryptocurrencies has piqued the interest of NRIs looking to explore alternative investment avenues. While regulations surrounding cryptocurrency investments in India are evolving, NRIs can participate in global cryptocurrency markets through international exchanges. However, it’s essential to conduct thorough research and exercise caution due to the volatile nature of cryptocurrencies.
NRI requires one of the following accounts to make these Investments:-
NRE Account (Non-Resident External Rupee Account)
A Non-Resident External (NRE) account is a bank account that’s opened by depositing foreign currency at the time of opening a bank account. An NRE (Non-resident External Accounts) account is a Rupee-denominated account. Funds in the NRE account are maintained in Indian rupees only. The source of funds into NRE accounts must be from your earnings abroad or from another NRE. Interest earned on this account is not taxable.
NRO Account (Non-Resident Ordinary Rupee Account)
A Non-Resident Ordinary (NRO) account is the normal bank account opened by an Indian going abroad with the intention of becoming an NRI. This account is also Rupee Rupee-denominated account. Current income earned in India, such as rent, dividend, pension, or interest can be deposited in the NRO account. Interest earned on an NRO account is taxable.
FCNR Account (Foreign Currency Non Resident Account)
The account can be opened with funds remitted from abroad, or transferred from an existing NRE/FCNR account. FCNR accounts can be opened with designated currencies, which are: GBP, USD, Deutsche Mark, Japanese Yen, and the Euro. Only term deposits can be maintained in FCNR accounts, in a time range of 6 months to 5 years.
Tax Impact on NRI Investments
- All income earned by NRIs in India is taxable and returns are to be filed every year.
- Long-term and short-term capital gain liability is the same on the sale of shares, redemption of mutual funds, or in real estate.
- Bank deposits investments in shares, units of mutual funds, etc. are exempt from wealth tax in India.
- Interest earned on NRE and FCNR accounts is completely tax-free.
A non-resident Indian making any investment in India would have to quote his PAN for every transaction and to file returns on his Indian income.
India has signed DTAA treaties with several countries to avoid double taxation for NRIs. These agreements provide relief by allowing NRIs to claim tax credits or exemptions in their home country for taxes paid in India.
NRIs can repatriate funds from India subject to certain conditions and limits prescribed by the Reserve Bank of India (RBI). Repatriation can be done for various purposes, including investment, maintenance, or gifts.NRIs must follow the prescribed procedures and submit the necessary documentation to repatriate funds from India.
FAQs
Are NRIs allowed to invest in Indian real estate?
NRIs are permitted to invest in residential and commercial properties in India, subject to certain regulations and guidelines set by the Reserve Bank of India (RBI).
Can NRIs invest in Indian mutual funds?
Yes, NRIs can invest in Indian mutual funds, subject to compliance with KYC (Know Your Customer) norms and FEMA (Foreign Exchange Management Act) regulations.
What are the tax implications for NRIs investing in India?
NRIs are liable to pay taxes on income earned in India, including capital gains from investments. However, certain investment avenues, such as NPS and PPF, offer tax benefits to NRIs.
Is it advisable for NRIs to invest in cryptocurrency?
Cryptocurrency investments involve high risk due to price volatility and regulatory uncertainties. NRIs should exercise caution and conduct thorough research before venturing into cryptocurrency investments.
Can NRIs open a PPF account in India?
NRIs cannot open a new PPF account after becoming non-residents. However, they can continue to contribute to existing PPF accounts opened before their NRI status.
Are there any restrictions on NRIs investing in Indian startups?
NRIs can invest in Indian startups and ventures, either directly or through platforms like AngelList and SeedInvest. However, they must adhere to regulations governing foreign investments in startups.
Conclusion:
Investment options for NRIs in India are diverse and abundant, catering to varying risk profiles and investment objectives. From traditional avenues like real estate and fixed deposits to emerging opportunities in startups and cryptocurrencies, NRIs have ample choices to grow their wealth and achieve financial prosperity in India’s thriving economy. By understanding the intricacies of each investment option and seeking expert advice, NRIs can make informed decisions to capitalize on the lucrative opportunities available in the Indian market.
