As an NRI are you thinking to explore some good investment options? If yes, you are at the right place. Here, you shall get to know details on the Best Investments for NRIs looking to invest in India. You shall also get familiar with popular investment alternatives to support you in your long term financial planning.
NRI Investments in India: A Glimpse
Every year thousands of people migrate from India. Some for the purpose of education and some for doing their business. While many go just for doing offshore jobs and earn in foreign currency. With passage of time, a number of them tend to settle in foreign countries, later on followed by their families as well.
Such people of Indian origin or the ones who become Non Resident Indians or NRIs over the period of time are the direct source of cash inflow in India. Over the past few decades, NRIs have shown great interest in parking their funds in Indian Investments. The government has also simplified the rules and regulations to encourage NRI Investments in order to boost the economic growth of the country.
Further, the falling Indian rupee means you as an NRI will get more returns from your Investments in India. Also, the money that Indians working abroad send to their families in India will fetch more rupees on conversion due to the depreciating Indian currency. This in itself attracts more NRIs to put their funds in India depending upon their savings and risk appetite.
But, before discussing about the various investment options for NRIs, you should firstly be clear about the exact meaning of a Non Resident Indian or NRI.
NRI or Non Resident Indian – Meaning
As per Foreign Exchange Management Act, a person is a Resident of India if he stays for 183 days or more in India during the preceding financial year starting from 1st April to 31st March. But, if he does not fulfil this condition i.e. he is in India for less than 183 days, he shall be considered as a Non Resident.
As per the Income Tax act 1961, a person is a Resident of India if :
- He has stayed 182 days or more in India in the current financial year or
- He stayed in India for 60 days or more in the previous financial year and 365 days or more in the preceding 4 years (The 4 years shall be counted from the year before the financial year which is into consideration).
So, if you satisfy any of the above conditions, then you become an Ordinary Resident. In case you don’t satisfy them, then you shall be considered as a Non Resident Indian.
Just check for the above conditions to confirm whether you are an NRI or not.
If yes, now you wonder how to invest your money in India. Firstly, you need to be clear about your financial goals as to why you want to invest:
- For building a corpus for retirement and having financial security.
- Utilise your savings to invest and get the best possible returns.
- To flow the money back to your relatives in your own country.
- For establishing financial assets in your home country.
In fact, there are numerous opportunities available for NRIs wherein you can convert foreign currency into Indian assets and long term investments.
7 Best NRI Investment Options in India:
1. Bank Fixed Deposits:
This is the most common and one of the favourite mode of investing by NRIs. Being an NRI, you can open a Fixed deposit account in an Indian bank authorised to deal in foreign exchange. In simple words, an NRI can open a term deposit through 3 different types of accounts in India i.e. NRE, NRO and FCNR accounts. Banks usually provide attractive and high interest rates on NRI Fixed Deposits.
Following are the 3 accounts that can be opened by an NRI:
(i) NRE or Non Resident External Accounts:
This can be in the form of savings, current, recurring or fixed deposits and can be maintained in Indian rupees. So, in order to have NRI deposits you need to have a NRE account first. NRI Deposits can earn an interest ranging from 7 to 9% per annum.
Moreover,the principal and interest earned on NRE Deposits is not taxable in India. This is best suited for NRIs who want to transfer their foreign income to Indian accounts. Both principal and accrued interest can be easily repatriated easily anytime.
(ii) NRO or Non Resident Ordinary Accounts:
NRO Account is mainly to manage the Indian income of NRIs that can be in any form like rent, dividend or pension received in India. But, NRO accounts offer a limited repatriation per year i.e. presently capped at $1 million. NRO Fixed deposits are taxable as per Indian laws @30% approximately. In case of NRO FD only interest accrued can be repatriated.
(iii) FCNR or Foreign Currency Non Resident:
NRIs can maintain the account in foreign currency in FCNR Fixed Deposit. It helps you to avoid the fluctuations in the exchange rate since the deposit is in foreign currency. Interest earned is tax free and fully repatriable.
If you are a newly landed immigrant, you can have a look at Newcomers Bank Accounts in Canada.
2. Mutual funds:
To invest in Mutual funds, an NRI needs to have any of the 3 bank accounts i.e. NRE/NRO or FCNR amount. The investment has to be made in Indian currency and not in foreign currency. Further, the investment amount can be directly debited from NRE or NRO accounts.
Also, NRI has to give a rupee cheque or draft from his NRE/NRO Account. At redemption, the amount shall be paid in Indian currency either through cheque or directly credited to investor account.
However, some countries don’t allow NRIs to invest in mutual funds in India.
To have detailed analysis, you can refer: How can NRI invest in Mutual Funds in India? US/Canada based and Other NRIs
The tax liabilities for NRIs are the same as that of a Resident, the only difference being that in case of NRIs, tax is deducted at source(TDS).
| Equity Mutual funds | Debt Funds | |
|---|---|---|
| Short Term Capital Gain (STCG) | Taxable @ 15% | Taxable as per Income tax slab rate |
| Long Term Capital Gain (LTCG) | Taxable @ 10% where LTCG>1 lakh (No indexation benefit) | Taxable @ 10% without indexation or 20% with indexation |
3. Direct Equity:
NRIs are also eligible to invest directly in the stock market under the Portfolio Investment scheme(PINS) of RBI. An NRI has to take permission under PINS scheme for purchasing and selling shares in India. However, the maximum NRI Investment cannot go beyond 10% of paid up capital of the Indian company.
NRIs need to open a Demat account and brokerage account with SEBI registered brokerage firm. An NRI can transact through a stock broker only.
So,being an NRI if you want to trade in equity market, you need to have:
- A bank account – NRE or NRO Account.
- A trading account – with a SEBI authrorised broker.
- A Demat account – To hold shares.
An approval under the PIS is required for trading in the stock market. Only one PIS Account per individual is allowed. Also, NRIs cannot trade in all the Indian stocks. RBI publishes the list of stocks that are eligible for NRIs.
But, NRIs are not allowed to:
- Do intraday trading or
- Short selling in India.
Hence, NRIs can only trade on delivery basis. NRIs need to own the stocks before they want to sell it.
You may also like: Best Demat and Trading Account in India!
4. Real estate sector:
Investing in the real estate sector is a traditional and an all time favourite investment method for most of the NRIs. Indians leave their country and become NRIs. But, having a home or property back in your own country is considered as a valuable possession. In addition to financial appreciation, it gives you a sense of emotional security as well. Real estate sector is considered as a lucrative investment option for NRIs.
As an NRI, you can purchase both residential and commercial properties. There is no restriction on the no. of properties owned. But, you cannot buy agricultural lands, farm house or plantations. Although, you can have ownership of agricultural land through inheritance or gift.
However, selling of property comes with some restrictions by FEMA (Foreign Exchange Management Act), especially in case of repatriation transactions. So, you need to plan things well in advance by hiring a professional who will guide you with all the legal documentation and procedures at the time of purchase/sale.
If you are planning to invest in a home just have a look at our popular blog post: 5 Smart tips for Home Buyers!
5. Investment in Bonds/Government Securities:
The Government and companies require money from time to time for various projects or their expansion. Hence, bonds are issued for borrowing money. If you invest in bonds, you will be considered as a lender unlike equity where you have an equity stake in the company.
Being an NRI, you have the freedom to invest in bonds and government securities. Investors get fixed returns on such bonds issued by companies or government institutions. If purchase is done through NRE/FCNR accounts, the proceeds are easily repatriable to the country where you live.
6. Certificate of Deposits:
NRIs also have the option to subscribe to Certificate of Deposits but on a repatriable basis. Certificate of Deposits are non negotiable money market instruments issued in demat form or in the form of promissory notes. CDs yield higher rate of interest as compared to bank deposits. There maturity period ranges from 7 days to 1 year and are best suited for people having short term financial goals.
7. National Pension scheme (NPS):
This is also a good investment alternative. But, NRIs who are Indian citizens can contribute to NPS. Once you give up your Indian citizenship, the account is closed. NRI who are Indian citizens between the age of 18 to 65 years can contribute by fund transfers from their NRE/NRO accounts.
So, Investment in NPS can be made by :
- Citizen of India living in India or
- NRI who holds an Indian citizenship.
PIO and OCI are not eligible for opening NPS account.
You get to choose from a variety of funds like fixed income options, government securities or equity related investments.
Under NPS or National Pension Scheme 2 types of Pension Accounts are there :
(i) Tier I Account:
You contribute to NPS account with certain restrictions on withdrawal. So, this is basically a non-withdrawable account till retirement.
(ii) Tier II Account:
You can withdraw from Pension account any time without any restriction. Kindly note that Tier II account may not be available to NRIs.
Deposit in NPS yields fair amount of returns and enables you to build a good post retirement corpus. But, you can withdraw only 60% at maturity and the rest 40% has to be converted to annuity.
A Tax deduction Under Section 80C is available upto a maximum of Rs.1.5 lakhs. Also, an additional deduction of Rs.50000 is available under section 80 CCD(1B) for contribution towards NPS.
NRI Investing in India: Important Points to Consider
If you are an NRI investing in India, here is a list of crucial points to be considered while investing:
- Being an NRI, you are liable to pay taxes on the income you have earned in India.
- Taxable income can be in the form of salary earned in India, capital gain on sale of investments like property, shares, securities etc.
- Tax is deducted at source or TDS on payments to Non resident Indians or NRIs. e.g. If NRI sells property in India, the buyer shall deduct tax at source while making payment. Similarly, banks also deduct tax wherever applicable like Interest earned in NRO Account.
- Certain mutual fund houses may not accept deposits from NRIs based in USA/Canada. You should check with respective fund houses/asset management companies before investing.
- NRIs can avoid double taxation i.e. same income shall not be taxed in two different countries. For this, you need to check for the DTAA or Double Taxation Avoidance Agreement in between the countries.
- NRIs are not allowed to make certain investments like Investment in PPF, NSC, Post office Saving scheme, Senior citizen scheme.
As an NRI, you may also like to know Which income of NRI is taxable in India and How?
Go ahead and evaluate the various Investment opportunities available and select the one that best suits you. Before investing, do check the Investment rules and tax regulations of the country where you live.
Feel free to leave your valuable comments and any other suggestions that might be helpful to someone.
Happy Investing!
This was for the NRIs…For the Resident Indian Investors out there, you can follow our 7 Best Short term Investments and 7 Best Long term Investments in India blogs.
People choose an investment product based on many factors. They are extra cautious when it comes to putting in money. Such tips and ideas really help.
Hi, I am NRI and I deposit my money in liquid fund/short term bonds, debt funds. Is there any limit for depositing money into it? Also, this month I took a big bank loan in Dubai (work place). Now, I want to transfer this amount into my NRE A/c. I am thinking to transfer this big amount in one time. Is it ok to do so?
I think you can deploy funds directly into NCD’s for which NRIs are eligible. NCDs make great investment options for yields between 11-14% p.a. as compared to Bank Fixed Deposits.
What is the procedure to convert a bank account as NRO/NRE one? Which is better NRO/NRE account? Any views.
Investment is real estate in India is not so attractive these days. Its better for NRIs to select from other investing options.
Dear Sir/madam,
I am an NRI and have an NRE and PIS account in Indusind bank. These accounts are linked to my DEMAT account in Karvy. My DEMAT is NRE with repatriable.
I would like to buy “11.95% karur Vysya Bank LTD Tier2 Basel3 debt bonds”.
Can you please let me know if the interest that I earn on these investment is taxed/ TDS. I heard that the interest will be credited to my NRE account each year on 12 March. If it is taxed, what is the tax slab applicable?
Looking forward to hearing from you
Thanks for sharing the valuable information about safe investing tips for NRIs looking to invest in India. Nice information!
Which is best share broker (SEBI registered) who can offer all 3 services + platform to purchase stock online from any part of the world? Any suggestion.
The Stock Brokers in India are only allowed to purchase shares from Indian Stock Exchanges like NSE, BSE and MCX.
Too many restrictions on NRIs to invest in India like in mutual funds and stock trading. I think a bit relaxation should be given. This way more funds can flow into the country easily.
The restrictions in investing in MF is only for USA and Canada based NRI’s. There is no restriction for NRI’s from other parts of the world.
Nice details! I have invested in real estate since that seems to be a good option.
Appreciate the post. As NRI’s, we have booked a flat from Nest Habitation. However, we aren’t able to buy 3 acres of agricultural land on the outskirts of Coimbatore easily. Any suggestion is highly appreciated.
I think NRIs can’t buy agricultural land in India. You need to take RBI approval which is not easy and is based on individual circumstances. You can acquire agricultural land only by inheritance.
NRI’s can only buy Residential land/flat or Commercial property. As per FEMA guidelines they are not allowed to purchase agricultural land. But, they can hold such Agricultural land if they get it through Inheritance.
Really a good article, as all options are explained in detail. Thank you very much.
I did share this site with my friends as well.
Managing their finances in the home country is one of the primary concerns of most Indians as soon as their tag changes to an NRI (Non-Resident Indian). Knowing the right account services based on the interest rate, purpose, repatriation requirement, tax obligation etc makes their money management so much easier. But, where can someone find about these topics? Well, you’ve reached the right spot. Thanks for sharing the useful information.
Good information. Thanks for discussing it.
Can NRI living in UAE invest in Indian business sector in INR or USD. Please guide.
Helpful article !
This is really a comprehensive article and addresses all the NRI investment opportunities in a neat format. Kuddos to the author! I feel out of all the investment options, real estate seems to be of my interest.Thanks for the info.Great post once again!
Thanks for the detailed explanation on the PPF account for Resident to NRI’s, but recently the government has announced that the contributions made by NRI’s will no longer get the same interest rate from the date of which their residential status changed to NRI and PPF account would deemed closed. In this context, can the Government impose a rule retrospectively? If the rule says from this year onwards the NRI should not contribute to PPF accounts that makes sense, but as an investor I had been contributing to PPF account as per the old rules? Is there a legal recourse to this new rule. Based on the revised rule can I withdraw the balance in PPF account immediately before the actual maturity of 15 years as it doesn’t yield the same interest rate as per earlier rule.
Hi, I have also been investing in PPF account.I don’t think there shall be any retrospective rule. The interest that you have already earned in the previous years may not be affected.Yes, but now your account shall not earn interest rate applicable on PPF as it used to be earlier. Further,this may be for the new investors who subsequently become NRIs after opening PPF account( after the amendment date). Hoping to see some relaxation and clarification on it.
Logically also the reduced rate of interest should apply from the date of notification.Really hope this has no affect on existing accumulated deposits of NRIs who were continuing their PPF accounts as per previous rules. Otherwise it shall be a big hit on their savings.
You will have to check with the respective bank where you have your PPF account for the withdrawal procedure and other details.We need to wait for further clarification on this matter. Hope for the best !
Hi,I am NRI and there are many others like me who look for feasible investing options in India.Thanks for such an informative article.
Yes, this is indeed a good info shared for NRIs. A nice platform to learn on different topics.Thanks a lot.
Hi Thanks you for the nice article, which is very helpful. I have a PPF account opened in 2006 in SBI. Now I converted as NRI.
Can I continue invest in existing PPF account?
Also can I extend PPF account further 5 years once the 15 years term is over?
Thank you for helping.
Thanks for your appreciation. If you opened a PPF account while you were a Resident Indian, you are allowed to maintain it further and contribute to it till maturity. But,An NRI cannot extend the PPF account with contribution after maturity. So,this means you can not make any contributions after completion of 15 years i.e. you won’t get an extension of further 5 years with contribution .This facility is available to Resident Indians only. Also,NRIs are not eligible for opening fresh PPF accounts. Do check with your bank if they need any additional requirement/documents as you are an NRI now.
Hi, Thanks for sharing such a detailed post on NRI Investments.Its really a great help for NRIs like me who are looking for different ways to invest their money in the correct manner.
Hi,
My friend has invested some money in demat account of sbi few years back before he left to USA. Now he is planning to settle in US itself and may not come back to India. How can he repatriate the investment in Indian stocks which are linked to Indian savings account. Now he has both NRE and NRO account but not linked to earlier investments.
Appreciate if you could guide.
Hi,
At the time of redemption, the money comes back to the account from which you’ve invested.
I think your friend will be able to take it to his NRE account & repatriate outside only to that extent that money was contributed from an overseas bank account or through an NRE account.
Money invested from NRE is freely repatriable outside India whereas money invested from NRO has some restrictions.Moreover,if one becomes an NRI, I don’t think he is allowed to maintain an Indian savings account.Please check for the same.
Nice post.Thanks for the info !
National pension scheme (NPS) for NRI if I am starting NPS and in in Dubai now. The account from attached is NRE account. Want to know if I am coming back to India and start working, what will happen to nps. Can I continue the same PRAN no and same nps account
PRAN is a unique identification no.that remains same.You can have only 1 PRAN. But,once you are back in India,you will have change your status to Resident Indian and your bank account status also.You will have to submit a declaration form for shifting your NPS account.
There are mainly two ways :
1.Cash or Receipt basis: Here interest income is offered to tax on receipt basis at maturity.You will be eligible to claim TDS credit in the year in which interest income is offered to tax.
2.Mercantile or accrual basis: When you follow accrual basis for disclosing your interest income,you can claim credit of TDS in the same financial year.Bank has already deducted TDS on accrual basis.
Therefore,the wise thing to do would be to calculate the interest income that pertains to the financial year,and add it to your Income(though you may not have received any thing) under Income from Other Sources.
In this way not only will the income that belongs to that financial year will become part of ITR for that year,but you can claim the credit of TDS on it.
Suppose you wait until the maturity of your FD when interest is actually received,your total interest income(or overall income) may push you up a tax slab and you may end up paying higher taxes.
This is a generalised opinion and not any professional advice.Do take help of your professional consultant if need arises.
Hi,
My bank in India (ICICI Bank) has deducted TDS on accrued interest on my NRO Fixed Deposits with them, even though they have not paid any interest on these into my Savings account. They say these FDs are Cumulative Fixed Deposits (Reinvestment) and interest remains in my FD, and will be paid to me upon maturity together with the principal amount. The maturity of these FDs is staggered to mature every year for next 9 years.
As I haven’t received any interest income in my Savings Banks Account, do I need to still show this accrued interest (on these FDs) as my income in my Indian Income Tax returns?
Or do I need to show this interest income as income only when this interest is credited to my Savings Bank account?
Will highly appreciate a quick response, as my Income tax return of this assessment year is held up due to this?
Thanks.
I am NRI and was wondering where to invest my money.Thanks for the info on various investment alternatives.
For NRIs, Investing in mutual funds is not so easy. There are a lot of formalities. Wish the process gets a bit simpler in the coming years. The real estate market seems down these days, but still it is an attractive option.
Check out apps like ET Money or FISDOM which makes investing in MF pretty easy.
A good post with nice information for NRIs. Thanks for sharing these useful details.
Thanks a lot for your appreciation! Keep visiting for latest posts.
I want to invest in any business in good faith. I have equity capital for profitable investment.