There are certainly attractive avenues in India, where NRIs obtain the freedom of investing into diversified asset allocation and significantly build up their investment portfolio. India is emerging as being fastest growing investment destinations for NRIs. NRIs can now invest into investment vehicles by saving into: 

Mutual Funds:

Mutual funds are known for its simplest ways of investing in increasingly complex financial markets. The reason why mutual funds are so popular is that it comes with flexibility, affordability, diversification, liquidity, low costs and regulated investor protection facilities. 

Bonds & G-Sec (NRI):

An NRI is eligible subscribe to corporate deposits, NCDs and PSU bonds issued in India. However, repatriation benefits are applicable for NRE accounts which have completed 3 yrs, while benefits of maturity credited to the NRO account cannot be repatriated. 

Real Estate:

Reserve Bank has granted general permissions to financial institutions to provide housing finance loans to NRIs. 

Shares:

Either directly subscribing to shares and debentures on a repatriable or non- repatriable basis, or through portfolio investment scheme NRIs are allowed to invest in both shares and stock. 

Taxation Planning:

If you reside and work abroad, the NRI income tax you pay will depend on your residential status for the year. If you fit the Resident Indian criteria, your total global income is taxable under Indian tax laws. But if your status for the year is ‘NRI’, only the income earned or accrued in India is taxable. 

Before understanding taxation, let’s get to know who primarily qualifies as an NRI. The Foreign Exchange Management Act (FEMA) has laid down clear rules to determine if a citizen of Indian origin is a Resident Indian or a Non-Resident Indian. 

Rules For NRIs To Invest:

As per the Section 2(V) of Foreign Exchange Management Act 1999, NRI is a person 

• Who resides outside india or has taken up employment outside india.
• Conducting business activities outside india
• Staying outside india for an indefinite or uncertain time period
• Has been in possession of his indian passport (provided he is not a citizen of pakistan or bangladesh)
• Either of his parents or grandparents were indian citizen (as per the indian constitution/ citizenship act of 1955)

Faq's

Frequently asked questions!

How can NRI invest in Mutual Funds?

All NRI’s (other than from USA/Canada), can invest in most of the Mutual fund schemes, available in the market. NRI from USA/Canada are also allowed, but in selective Mutual Fund schemes, due to different compliance requirement of USA/ Canada regulators. To invest in Mutual Funds, investor must first complete the KYC (know your client) documentation, as per SEBI guideline, which involves copy & details of:

• Overseas address proof 
• Pan card proof 
• Merchant Navy employee - copy of CDC proof

How to shortlist Mutual Funds?

Shortlisting a Mutual Fund for NRI is very similar to a resident, especially if NRI is not from USA/Canada. For NRI from USA/Canada, the basket of fund is limited, and one has to cherry pick funds from what is available. It’s always recommended to consult (speak/ video-chat) with an advisor to shortlist funds, based on your preference, risk, charges & various other parameters. Regular reviews with your advisors, will give you the extra comfort & confidence, due to ever changing equity markets.

Can NRI repatriate redeemption?

If the investment is made from a NRE Account, and during the redemption phase the investor is still an NRI, then one can take the credit back to the NRE account. Redemption proceeds (after deduction of taxes) are paid in rupees by cheque to the account number provided. Some banks also offer direct credit of redemption proceeds to the NRE/NRO account. Investments made via a NRO account, can’t be redeemed in NRE account. The investments carry the right of repatriation of capital invested and capital appreciation, only till the investor remains an NRI.

What are the tax applicability for NRI?

TDS is deducted at source on the redemption proceeds for any short-term gain. A TDS certificate is also issued digitally for every redemption made by the respective Mutual Fund Company. Short-term Investments in Debt Fund are taxed as per slab rates, whereas in Equity funds it’s at flat 15% p.a. currently. The definition of a short-term fund is holding it for less than 3 years for debt fund, and 1 year for equity and balanced funds (equity oriented).