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NRI Investment Options in India : Top Investment for NRIs to Consider

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NRI Investment options in India

Not everyone who travels overseas to study or seek employment ends up staying there for their whole life. Some people prefer to spend their retirement years in India. They want to build a retirement corpus in which they need to decide on the most preferred NRI investment options in India.  

You earn your income in US dollars or UK pounds, and you work in the strongest economy in the world. However, as a Non-Resident Indian (NRI) you must have thought of this questions like, are you eligible to invest in your home country in India? What are the NRI investment options in India? 

Below, we look at the best investments in India for NRIs and what are the advantages of NRI investment options in India. We’ll also give you some tips for choosing the right investments based on individual needs and goals. 

What is a Non-Resident Indian (NRI)?

A Non-Resident Indian (NRI) is an Indian citizen who has spent less than 183 days during a fiscal year (or fiscal year) in India. The tax year starts from April 1 to March 31 of the following year. This means you must have been outside of India between April 1 of last year and March 31 of this year for more than 182 days. 

Even after living abroad in countries, NRIs are still citizens of India, but they don’t pay taxes here. NRIs often find it difficult to invest in their home country i.e. India. So if you are thinking of investing in India, We will provide you with all the basics of NRI investment options in India below, but first let’s read why investing is important.

4 reasons why NRI should invest

Here are four reasons why you should invest and how you can find the best NRI investment options in India for yourself

Preparing to Retire

 If you want to enjoy your retirement life then begin start preparing from today. You need to set aside money for different types of investments to ensure a secure retirement plan. How much you save and invest will determine the standard of living you can afford in retirement.

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As said “Money spent wisely will earn more money”. A perfect example of this quote is investing money. Everything you invest will grow depending on the interest rate or growth rate of your NRI investment in India. An investment’s interest rate often indicates its level of risk. Higher interest rates mean higher risk investments. Invest wisely to ensure good returns without taking risks you cannot bear.

Send Money to Family

Your current salary is probably enough to support you and your immediate family. However, when you invest in NRI investment options  in India you will have more income to spend. You can send some of your extra income to family members back home. Even better, converting dollars into rupees can give your family the help they need.

Create Financial Assets

Investing allows you to increase your financial assets and build your financial assets. For example, buying a property means it can be rented out for rental income. It can also be used as collateral whenever you want to apply for a loan. Secured loans enjoy lower interest rates, resulting in cheaper loans. The best NRI investment options in India will help you grow your financial assets fastest. 

The Best NRI Investment Options in India

India has attracted a lot of foreign direct investment (FDI) with rapid industrial development in recent years. This makes investing in India very valuable for any NRI. With so many investment options, you as an NRI can get confused. But don’t worry! Let us help you find the best investment options in your country.

Fixed Deposits 

Fixed Deposits, or FDs, are among the safer ways to invest in India for an NRI. This investment can help you earn a fixed-interest income.

Here are three different types of NRI Fixed Deposit Accounts.

Non-Resident External (NRE) Fixed Deposit 

You can open an NRE FD account to deposit your earnings in foreign currency converted to Indian rupees. If you wish, the principal and the interest can be fully repatriated later to your country of residence.

Non-Resident Ordinary Fixed Deposit (NRO) 

You can open an NRO fixed deposit account to keep and save your income generated in India in Indian rupees. This income can come from dividends, rental income, pensions and similar sources. However, interest earned above Rs 10 lakh is taxable in India at around 33%, with surcharges and franchises included.

Term deposits in foreign currencies for non-residents (banks)

These are term accounts, allowing early withdrawal after 1 year. Opening an account involves a transfer from an NRE account. Interest earned is tax-free and both principal and interest are fully repatriable. You can also benefit from an overdraft facility.As such, you can choose an FCNR account to deposit in foreign currency.

2. National pension scheme

NPS for NRI is a long-term retirement savings scheme designed for non-resident Indians between the ages of 18 and 60. NRI can open an account with a minimum contribution of ₹500 and contribute a minimum of ₹6,000 per year while meeting KYC standards. The management of the pension fund is selected to invest the fund according to the criteria set by PFRDA.

3. Equity

Non-resident Indians can invest directly in the Indian stock market under the Portfolio Investment Scheme (PIS). NRIs must have the following accounts for equity investments:

  • Non-Resident External Account (NRE)
  • Non-Resident Ordinary Account (NRO)
  • NRI Demat  account
  • NRI trading account with a registered broker

Please note that dividend income and capital gains realised by NRIs on stocks and equity oriented mutual funds are taxed in India.

4. Mutual Funds

Can NRI invest in mutual funds in India?

Yes, as long as the NRI complies with the regulations set forth in the Foreign Exchange Management Act (FEMA), he can invest in mutual funds in India.

Here are some fund houses that allow mutual fund investments for NRIs based in the US and Canada:

  • Aditya Birla Sunlife Mutual Fund
  • L&T Mutual Fund
  • SBI Mutual Fund
  • UTI Mutual Fund
  • Prudential ICICI Mutual Fund
  • Sundaram Mutual Fund

5. Real Estate

Real estate is one of the stable NRI investment options in India with good long-term returns. NRIs can buy and rent residential and commercial properties in India, but not farmland. NRI can use the following bank accounts for real estate transactions in India:

Non-resident external accounts, non-resident regular accounts and non-resident foreign currency accounts.

6. Public Provident Fund

You can continue with the PPF account you opened as an Indian resident. However, if you do not have a PPF account, you cannot register one as an NRI. Please also note that you cannot renew your PPF account beyond the 15-year maturity period.

7. Non-convertible bonds and debentures

As an NRI, you can invest in bonds and NCDs in India, including government securities in the form of NRI bonds. The three main types of bonds are:  

Public Sector Units or PSU Bonds:

You lend money to a PSU corporation and receive interest when the bond matures. The interest rate is determined by the creditworthiness of the PSU issuer. Interest earned on PSU bonds is tax-exempt U/S 10 (15)(IV) (h).

Perpetual Bonds:

There is no fixed maturity date and offers a fixed annual return. NRIs can also claim a tax deduction by investing in REC and NHAI bull bonds under Article 54 EC.  

Conclusion

There are multiple NRI investment options in India including Fixed Deposits, National Pension Scheme (NPS), Stocks, Mutual Funds, Real Estate, Public Provident Funds (PPF), Bonds, non-convertible bonds etc. 

It is important for the NRIs to understand applicable laws and restrictions before making investment decisions. With a wide range of options available, NRIs can diversify their investment portfolio and make informed financial decisions to secure their future.  

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