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:
- Mutual funds
- Derivative trading
- AIF or Alternative Investment Funds
- 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?
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:
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 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.
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. Click here to start your investment journey with Vakilsearch now!
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