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There are several investment options for NRIs. While NRIs who have a high risk appetite can opt for equities and real estate, risk-averse NRIs can look at investing in Savings accounts, FCNR (B) account, fixed deposits, Treasury bills, mutual funds, PSU bonds, non-convertible debentures, Public Provident Fund, National Savings Certificate and Post Office Savings Schemes. As an NRI, you must assess your risk-taking ability and investment time horizon before choosing your investment options in India. Let’s look at some important investment options:
Equities: NRIs can invest directly in Indian stocks by opting for the Portfolio Investment Scheme of RBI, wherein NRIs can purchase and sell shares on a recognized stock exchange. This can be both on a repatriable as well as non-repatriable basis, and should be routed through his NRI Savings account. Contact your bank where you maintain your NRI Savings account for more details.
Mutual Funds: As direct investment in stocks is more risky, NRIs can also opt to invest in mutual fund schemes. You must simply mention your residential status in the application form and submit your KYC documents. Investments can also be made in debt mutual funds. If you are a short term investor, you can invest in liquid funds (upto 90 days) or liquid plus funds (upto 1 year). Floating rate funds offer returns in line with the interest rate movement in the economy. Long term debt mutual funds can either be income funds, dynamic bond funds or G-sec funds, depending on your investment time horizon. These funds are subject to dividend distribution tax (for dividend schemes) and capital gains. The regulations in the country of residence must be checked before investing.
Real Estate: As an NRI, you can invest in properties, either for self-use or for receiving rental income. You can either use your own funds or take a home loan for this purpose. Rental income and sale proceeds of real estate can be repatriated by NRIs, subject to foreign exchange regulations applicable in India. NRIs will be subject to tax on the income earned from real estate in India.
Savings Accounts: Savings accounts can be NRO (Non-Resident Ordinary) savings account or NRE (Non-Resident External Rupee) savings account. These are rupee denominated accounts. Interest earned on NRO accounts are liable to tax while the same earned in a NRE account is not taxable. Repatriation is easy in a NRE account, but you must report any repatriation done from a NRO account to RBI.
Foreign Currency Non Resident (Bank) Account - FCNR (B) Account: This is a term deposit account and you can invest both for the short term and long term (upto 5 years). Maintained in any freely convertible currency, this account earns interest depending on the currency. Funds from here are repatriable.
Fixed Deposits (FDs): NRO FD and NRE FD can be opened depending on your repatriation preference, for both the short term as well as long term,. Banks are free to determine the FD interest rates. Interest earned on NRE FDs is exempt from tax, whereas the interest on NRO FD is subject to tax. You can also take a loan against your FD.
PSU bonds: NRIs are allowed to subscribe to bond issuances by public sector companies only on a repatriable basis. The investment earns a fixed interest which is subject to tax, and you will also have to pay capital gains tax, as applicable.
T-Bills: NRIs are permitted to invest in treasury bills issued by the Government for varying maturities (maturities range from 1 month to 364 days) and for a minimum investment amount of Rs. 25,000. Absolutely safe in nature, these investments can be both on a repatriable as well as non-repatriable basis.
Non-convertible debentures (NCD): Investing in NCD issues by Indian companies is allowed provided the issuer allows NRI investment. Similar to PSU bond issuances, a fixed interest is paid, which is subject to tax.
Investments made while you were a resident in India: Some investments like Public Provident Fund, National Savings Certificate and Post Office Savings Schemes, which are completely safe instruments may have been made by you while you were a resident. These can be continued till the time of maturity.
While equities and real estate give you higher returns compared to other investments discussed here, the returns are highly risky, uncertain and irregular for these two investment types. You must therefore choose your investments depending on your risk-return preferences
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