Introduction

There are over three crore Non-Resident Indians (NRIs), and most of them have some sort of emotional ties with their homeland. This emotional bond sometimes transcends and forms a financial connect, giving NRI’s an opportunity to become a part of India’s growing economy. NRIs can invest in India but their investments are regulated by Foreign Exchange Management Act (FEMA) and RBI guidelines. Both these regulatory bodies specify the avenues and methods available for NRIs to invest.

In this article you will get a thorough analysis of the investing options accessible to NRIs.

Your NRI Demat Account is Just a Step Away

Types of Bank Accounts NRIs Can Have

Building a solid base for NRI investments begins with choosing the right bank account for them.

NRE (Non-Resident External) Account

Perfect for holding foreign income in India. All funds and interest can be fully transferred back, and the interest accrued is exempt from taxes.

NRO (Non-Resident Ordinary) Account

Ideal for managing income sourced from India, including rent, pension, and dividends. Income generated from interest is taxable, with limitations on repatriation.

FCNR (Foreign Currency Non-Resident) Account

This is a term deposit account held in foreign currency, offering you a safeguard against the ups and downs of exchange rates.

Investment Avenues for NRIs

Fixed Deposits (FDs)

NRIs can invest in an FD using their FCNR, NRO, or NRE accounts.

• NRE FD: Repatriable and tax-free interest.

• NRO FD: Can be repatriated, but has some restrictions. Interest earned is subject to taxation.

• FCNR FD: Held in foreign currency, providing a safeguard against foreign exchange risks.

FDs attract conservative investors because of their safety and guaranteed returns.

Stock Market

NRIs can invest directly in Indian equities via the Portfolio Investment Scheme (PIS) route, through your NRO or NRE account. You will need:

• A Demat account with a SEBI-registered broker.

• Approval for equity trading through PIS.

Although there are limitations on derivatives trading, equity delivery trades present NRIs with an opportunity to capitalise on the growth of India's markets.

Mutual Funds

NRIs can make investments in the Indian equity market through Mutual funds.

• They can invest in mutual funds through their NRE or NRO accounts.

• Repatriation rules depend on the account they invest through

It's important to note that NRIs from the USA and Canada might encounter limitations with certain fund houses because of compliance regulations.

Government Securities and Bonds

NRIs can invest in

• Government securities, commonly referred to as G-Secs.

• Treasury bills.

• Specific corporate bonds and NCDs (debt instruments that can’t be converted to equity).

• Infrastructure and PSU bonds.

NRIs can directly invest in specified government bonds via the RBI’s Fully Accessible Route (FAR). These are viewed as safe choices with consistent returns.

National Pension Scheme (NPS)

Another government-supported option for NRIs, which helps to plan for retirement.

• Open to NRIs aged 18 to 60 who possess an NRE or NRO account.

• Investments are secured until retirement.

• Tax advantages under Section 80C.

Real Estate

Real estate continues to be a popular option for NRIs, particularly for building wealth over the long haul.

• NRIs are only allowed to invest in residential and commercial properties.

• NRIs cannot invest in agricultural land, plantation properties, and farmhouses, unless they get them as a gift or inheritance.

• Income from rentals and proceeds from sales can be brought back, provided that tax regulations are followed.

Gold

As most other Indian’s, gold still remains a popular choice with NRI investors too.

• You can buy gold ETFs, mutual funds, digital gold, and actual gold.

• You cannot invest in Sovereign Gold Bonds (SGBs) as per RBI and FEMA restrictions.

• If you had invested in SGB as a resident Indian, you can hold them until maturity or redeem them early.

Other Investments

Public Provident Fund (PPF)

NRIs can keep their existing PPF account and continue to contribute towards it until maturity. However, they cannot make new PPF investments after becoming an NRI.

National Saving Certificate (NSC)

NRIs can hold their existing investments in NSC and make contributions towards it until maturity. However, after maturity, these accounts cannot be renewed or invested in.

Conclusion

There are several investment asset classes you can choose to invest in as an NRI. The idea is to choose investment options that meet your goals, risk tolerance, and repatriation needs. As long as you comply with FEMA and RBI regulations, and follow tax rules you can grow your wealth and become a part of India’s growth story.

If managing your investments from overseas is difficult for you, then you can give someone you trust power of attorney (PoA) to make financial decisions on your behalf. If still in doubt, you can reach out to a financial professional who can guide you.

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