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NRI Investment

Investment Options for NRIs in India

1. Bank Fixed Deposits

NRIs can invest in Fixed Deposits (FDs) through NRE, NRO, and FCNR accounts. Banks offer high interest rates on these deposits.

  • NRE Accounts: Fully repatriable, tax-free interest, ideal for foreign income transfers.
  • NRO Accounts: Used to manage Indian income, limited repatriation, interest taxed at ~30%.
  • FCNR Accounts: Held in foreign currency, avoids exchange rate fluctuations, tax-free interest.

2. Mutual Funds

NRIs can invest in Indian mutual funds via NRE/NRO accounts. Investments are made in INR, and redemption proceeds are also paid in INR.

Note: Some countries restrict NRIs from investing in Indian mutual funds.

3. Direct Equity

NRIs can trade in the Indian stock market under RBI’s Portfolio Investment Scheme (PIS) but require:

  • NRE or NRO bank account
  • Trading account with a SEBI-registered broker
  • Demat account for holding shares
  • Approval under PIS (Only one PIS account per NRI is allowed)

NRIs cannot do intraday trading or short selling and must trade on a delivery basis.

4. Real Estate Sector

NRIs can invest in residential and commercial properties but cannot buy agricultural land, farmhouses, or plantations. However, ownership of agricultural land is allowed via inheritance or gift.

Repatriation of property sale proceeds is subject to FEMA regulations. Hiring a professional for legal procedures is advised.

5. Bonds & Government Securities

NRIs can invest in bonds issued by companies and the government, earning fixed returns. Purchases made through NRE/FCNR accounts allow easy repatriation.

6. Certificate of Deposits (CDs)

NRIs can subscribe to Certificate of Deposits (CDs) on a repatriable basis. CDs offer higher interest rates than bank deposits and have maturity periods ranging from 7 days to 1 year, making them ideal for short-term goals.

7. National Pension Scheme (NPS)

NRIs holding Indian citizenship can invest in NPS but must close their account upon acquiring foreign citizenship.

Two types of pension accounts:

  • Tier I Account: Restricted withdrawals, primarily for retirement savings.
  • Tier II Account: Flexible withdrawals without restrictions.

NRIs get tax benefits under Section 80C (₹1.5L) & Section 80CCD(1B) (₹50,000 additional deduction).

Important Considerations for NRIs

  • NRIs are taxed on income earned in India (salary, capital gains, etc.).
  • Tax Deducted at Source (TDS) applies to certain NRI transactions like property sales and NRO account interest.
  • Some mutual funds may not accept NRIs from the USA/Canada due to regulations.
  • NRIs can avoid double taxation by checking the Double Taxation Avoidance Agreement (DTAA) between countries.
  • NRIs cannot invest in PPF, NSC, Post Office Savings, or Senior Citizen Schemes.

Conclusion

NRIs have multiple investment avenues in India, each with distinct benefits. Understanding tax implications, repatriation rules, and eligibility criteria is crucial before making investment decisions.

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