POSTED BY: NRI Legal World | 28 November - 2018
Being an NRI, have you been trying to explore some good investment options? You’ve come to the correct place. Here in this blog, we have discussed some of the best investment choices for NRIs who are planning to invest in India. We have covered some of the most preferred and outstanding options to assist you in your long-term financial planning.
Being an NRI, you may be wondering how to invest your money in India rightfully. Before getting started, you must keep in mind your overall financial goal:
• Are you planning to create a corpus for your retirement and financially secure yourself?
• Are you planning to use your savings to get the ideal return on your investment?
• Are you seeking to send the money back to your loved ones in your native country?
• Are you planning to increase your financial assets in your native country?
There are many choices available for NRIs who are planning to cover their foreign currency into assets in India.
6 Best Investment Options in India:
This is the most preferred and common type of investment made by NRIs. As an NRI, you can easily open a fixed deposit account in any Bank in India that is authorized to handle foreign exchange transactions. To put across simply, an NRI is allowed to open a term deposit using any three of the following accounts in India – NRO, NRE, and FCNR. The interest rates offered by banks on Fixed Deposits are generally high and attractive.
• NRO Account: This account is primarily used for managing the income earned by NRIs in India, in the form of pension, rent or dividend received in India. However, NRO account provides you restricted repatriation annually, which is currently capped at 1 million USD. NRO fixed deposits are taxable in accordance with the Indian rules and regulations – 30% approximately.
• NRE Account: This account can be in the form of current, recurring, savings or fixed deposits in INR. Thus, in order to make any NRI deposit, it is mandatory for you to have an NRE bank account in the first place. The interest rate earned, ranges from 7% to 9% annually. Furthermore, the interest and principal gained on NRE deposit are not taxable. This is ideal for NRIs who wish to transfer their foreign-earned money to an Indian account.
• FCNR: NRIs are allowed to maintain a bank account in international currency when it comes to an FCNR Fixed Deposit. This helps them to steer clear of any fluctuations in the exchange rate. The interest gained in FCNR account is free from tax and 100% repatriable.
For investing in mutual funds, an NRI must have any of the accounts mentioned above. It is mandatory to invest in INR and not in any foreign currency. The amount to be invested can directly be debited from the NRO/NRE account. It is mandatory for the NRI to give a cheque in Indian amount or a draft from the NRO/NRE account. Post redemption, the invested amount would be directly credited in the account of the investor or via cheque in INR.
Nevertheless, it must be noted that there are a few countries that do not permit NRIs to invest in Indian mutual funds. The tax obligations for NRIs are the same as that of an Indian citizen with the only difference being that when it comes to an NRI, the amount is deducted in the form of TDS.
NRIs, furthermore, are entitled to make investments in the equity market under the RBIs Portfolio Investment Scheme. An NRI needs to obtain authorization under the PINS scheme for buying and selling Indian stock and shares. NRIs must open a Demat account, as well as brokerage account with SEBI, authorized broker firm. An NRI is only allowed to transact with the help of a stockbroker.
Therefore, as an NRI, in order to invest in the equity sector, you must have:
• A banking account – NRE or NRO bank account
• A forex account – with the SEBI-authorized agent
• A Demat account – To keep shares
Moreover, NRIs are not permitted to deal in all the Indian stocks and shares. RBI posts the list of stocks which are qualified for NRIs. Also, note that the NRIs are not permitted to perform short selling or perhaps intraday trading in India. Therefore, NRIs are only able to trade on a delivery basis.
Investing in the real estate industry continues to be a conventional and an all-time favorite approach for NRIs. Having a house or land in your own country is treated as a precious possession. Besides monetary appreciation, it provides you with emotional security also. Real estate industry is a profitable investment choice for the NRIs.
Being an NRI, you can buy both residential as well as commercial properties. There is no limitation on the number of properties you can acquire. However, an NRI is not allowed to purchase agricultural land, farmhouse or even plantations. Please note that the only way an NRI can get an agricultural land is by means of inheritance.
The sale process of property carries a few restrictions or guidelines by FEMA, particularly in the cases of repatriation deals. As a result, you must plan adequately in advance by seeking the help of an NRI legal service provider that will assist you with all kinds of legal paperwork and processes during sale/purchase.
The businesses, as well as the Indian government, need money now and then to invest in diverse projects or for expansion purposes. Therefore, bonds are issued with the purpose of borrowing money. In case you invest in the bonds, you would be treated as a money lender as opposed to equity, wherein you get a stake in the firm.
As an NRI, you have got the freedom for investing in the bonds as well as government securities. NRIs that invest, obtains a fixed amount as a return on such bonds. In case the bonds are purchased via the FCNR/NRE bank account, the earnings can be conveniently repatriable to the foreign country residence.
This is also a great investment option. However, NRIs who happen to be Indian nationals may contribute to NPS. When you surrender your Indian citizenship, the account is suspended. NRIs who are Indian nationals between the age bracket of 18 and 65 years are permitted to invest by fund transfer from their NRE/NRO account.
As a result, Investment in NPS can be made by:
• Citizen of India residing in India or
• NRI holding an Indian citizenship
Note: PIO and OCI cannot open an NPS account.
You can pick from a number of funds such as fixed income choices, government securities or perhaps investments related to equity.
Under National Pension Scheme (NPS), there are two kinds of Pension Accounts:
• Tier I Account: You will be asked to deposit money into your NPS account with a couple of restriction of withdrawing. Thus, it can be considered as a non-withdrawal NPS account until the time of retirement.
• Tier II Account: You are allowed to withdraw the money from your pension account at any time without any restrictions. Please keep in mind that this type of account may not be available to NRI citizens.
Depositing in the NPS account provides a right amount of return to the NRIs and also helps them create a reliable post-retirement corpus. However, you are allowed to withdraw just the 60% at the time of maturity, and the remaining 40% must be converted to an annuity.
Under Section 80C, a tax deduction of maximum Rs. 1.5 lakh is available. Furthermore, an extra deduction of Rs. 50000 is available to people under Section 80 CCD (B) for contributing in NPS account.
If you happen to be an NRI investing in India, the following are some of the crucial points that should be taken into consideration:
• As an NRI, you are obligated to pay income tax on the income you have made in India.
• Taxable earnings could be salary received in India, capital gain on selling assets like real estate, stocks, securities, and so on.
• Tax is deducted at source on payments to NRIs.
• There would be a few mutual fund companies that might not acknowledge deposits from NRIs located in Canada or USA. You must consult with corresponding fund houses before making any kind of investment.
• NRIs can easily prevent double taxation, i.e., the same income would not be taxed in 2 distinct nations. To do so, you must look for the Double Taxation Avoidance Agreement (DTAA) between the countries.
• NRIs are not permitted to make investments in PPF, NSC, Post office Saving schemes, Senior citizen schemes, etc.
Go on and assess the numerous investment options available in the market and choose the one which perfectly matches your needs you.