NRI Investment Plans

Considered by many a potentially lucrative long-term investment option, mutual funds are popular among Indian residents and NRIs alike. You can explore the various types of mutual funds such as hybrid funds, debt funds, and equity funds basis your goal and requirement. To start investing in mutual funds, NRIs must make sure that their residency status as well as their NRE/NRO account details are up-to-date and shared with the concerned Asset Management Company (AMC) or the broker. That said, NRIs residing in USA or Canada must ensure that the mutual fund house they are investing with are FATCA* or CRS* compliant to minimize potential future hassles related to repatriation/taxation of investment profits.

* Foreign Account Tax Compliance Act; *Common Reporting Standard

Fixed deposits (FDs) at banks are quite popular in India for earning assured returns and a higher interest than what savings accounts offer. Since FD offers fixed rates of interest, it is an investment that offers predictable returns. NRIs holding an NRO, NRE or FCNR account can open a fixed deposit account in India.

• Fixed deposit via NRO account

NRO accounts allow NRIs to receive their income in India, such as rental income or dividends from shares and mutual funds (if any) with a bank account in India. If they can produce supporting documents, NRIs are allowed to open a FD linked to a NRO account and receive fixed deposit interest in the same NRO account.

• Fixed deposit via NRE account

NRIs can open a FD linked to an NRE account in Indian currency and earn interest based on the tenure and amount of the FD principal. The interest earned on such an account is tax-free in India but may be taxable in the NRIs country of residence.

• Fixed deposit via FCNR account

Another option is opening an FCNR (or Foreign currency non-resident) account, with a tenure of up to 5 years, where the interest earned is freely repatriable. The unique future about this account is that there is no impact of forex fluctuations on FCNR deposits.

NRIs between the age of 18 to 60 years are allowed to open an NPS account in India via the offline route i.e. through a point of presence (pop) in India or an e-NPS account via the online route. An existing NRE/NRO account can be used to make investments in an NPS account.

NPS offer the option of diversified investments via 4 different asset classes – Equities, Corporate Bonds, Government Bonds and Alternative investments. Plus, NRI investors with income in India can also claim tax benefits as per current tax laws. However, NRIs should keep in mind that the pension payable from the NPS account is in Indian National Rupee only.

Real estate investments have been popular among NRIs in the past too. In recent years, property purchased in major cities such as New Delhi, Mumbai, Bengaluru, Pune, etc. have witnessed significant growth in value. In fact, many NRIs have purchased multiple properties in these cities and let them out on rent to create a source of passive income.

In India, real-estate investments are a great option, as the growth story gains further momentum. However, NRIs are not allowed to purchase agricultural land in India. Therefore, NRIs should consider all potential option and analyze the associated risks beforehand.

Just like Indian residents, NRIs can invest in gold in India via various ways, such as physical gold, gold mutual funds, and gold ETFs. That said, NRIs cannot currently invest in sovereign gold bonds**. Further, to invest in gold instruments such as gold ETFs and gold funds in India, NRIs must have a depository Demat account where all your securities and units will be held in electronic format. Alongside this, make sure to have a working NRE/NRO bank account as well to make and receive benefits of these gold investments.

As far as the taxation is concerned, for the selling of physical gold, it is subject to short-term or long-term capital gain tax. If the gold is sold within 3 years of purchase, it will attract short term capital gain. For gold Exchange Traded Funds or ETFs, no TDS (or Tax Deducted at Source) is applicable if the NRI is investing directly via the country’s stock exchanges. However capital gains tax as per current tax laws.

**If you attained NRI status after applying for SGB or if you already have SGB and later became an NRI, then you are eligible of holding these bonds till maturity. However, further investments in SGB are not allowed post attaining NRI status.

AIFs or Alternative Investment Funds are a type of investment funds that are different from the traditional investment vehicles such as shares, bonds, and mutual funds. Private Equity, Venture Capital (start-up companies), Hedge Funds, Real Estate, and Private Debt etc. are the different asset classes that are included in AIFs. AIFs have been categorised by the SEBI basis the investment objective, strategy and risk profile, as follows:

NRIs should take the help of an investment advisor in order to ensure that they comply with all relevant regulations when making such

Indian residents can open a public provident fund (PPF) account and keep investing in it over time to earn good returns. While NRIs are not allowed to open a PPF account in India, they can operate their existing PPF accounts that were opened while they were resident Indians. However, on maturity NRIs are not allowed to extend the tenure of their PPF accounts.

National Savings Certificate or NSC is a potentially low-risk government-backed investment option in India. While this option is freely available to resident Indians, there are restrictions applicable to NRIs planning to make this investment. If the concerned NRI already invested in a NSC before attaining the NRI status, they can continue with their existing Investment. But additional investments in the NSC cannot be made by NRIs post attaining NRI status.

Fixed Deposit, commonly popular as FD, is undoubtedly one of the sought-after investment tools in India. The prime reason behind its popularity is its low-risk feature. The interest rate is fixed at the time of account-opening and the tenure is also fixed. This same reason applies when we name FD as a low-risk investment option for NRIs in India.

Debt mutual funds such as liquid funds, ultra-short duration funds, money market funds, etc. are considered potentially low risk investments as they invest in debt instruments with short residual maturity. While NRIs can make such potentially low risk mutual fund investments in India, they need to ensure that they are compliant with all applicable regulations such as FATCA, etc.

Benefitting by being a part of the India’s growing economy allows the NRIs to gain portfolio diversification that reduces geographic concentration risk. While they are tapping the geographical expanse, they also get to benefit from government-backed schemes and investment options that can further solidify their investment portfolio. Additionally, the insurance plans, especially the ULIPs and other life insurance-cum-retirement pans come at lower premiums than what NRIs get abroad.

As per the India Development Update (IDU) report, India is the fastest growing major economy, having experienced a rapid clip of 8.2% in FY23-24. This definitely stirs the conversation in the high-growth direction. NRIs making investments in India can benefit from the potentially rapid growth as the Indian growth story scales new heights.