Do’s and Don’ts of investing in India – NRI Edition

Who are NRIs?

Index:

 

  • Who are NRIs?

  • What are the different types of investment options?

  • Investment procedure

  • Do’s and Don’ts 

Who are NRIs?

An NRI or (Non-Resident Indian) is an Indian citizen who resides in India for less than 180 days in a financial year or someone who stays out of India on business, study, or other vocations that indicate their intention to stay out of India for a while.

 

According to a Ministry of External Affairs statement, there are 32 million NRIs and PIOs living outside India, and Indians living overseas constitute the world’s biggest diaspora. Every year, 2.5 million (25 lakh) Indians migrate abroad, making India the country with the biggest yearly number of migrants in the world.

What are the different types of investment options?

NRIs have a lot of investment options in India and they don’t even need the approval of the government to invest in most of them. Investments can be made with or without governmental approval.


Popular investment options include shares and debentures, mutual funds, bank fixed deposits, bonds, government securities, etc. However, it is also important to know which of these investment options fall under FEMA regulations.


Non-Indian tax residents are also required to comply with the provisions of the Foreign Account Tax Compliance Act (FATCA).

 

Popular investment options – 

 

Investment in Company Shares and Debentures: Through the RBI’s Portfolio Investment Scheme (PINS), an NRI can acquire shares and non-convertible debentures in Indian enterprises. The investments, on the other hand, must be carried out in conformity with FEMA requirements and can be carried out using their current PAN card.

Investing in Real Estate: The Indian Real Estate sector is booming and prices all over India have been skyrocketing, many NRIs are investing in properties to let out to rent. 

 

There are a lot of options to choose from including commercial properties, apartments and developed plots. However, NRIs are not permitted to make an investment in agricultural land or plantations in India.

 

Bridl360 can professionally help you decide which property to invest in so that you gain the most profit and don’t face any issues.

Investing in Mutual Funds: This must also be done in compliance with FEMA requirements. Mutual funds may only be acquired using an NRI account or an inbound remittance. If the advantages involve repatriation, the investment term must be at least three years long.

Bank Fixed Deposits: These are yet another feasible investment option for NRIs. This investment can only be made through non-resident foreign currency bank accounts. 

 

Repatriation benefits are only available for investments that have been in place for at least three years. The account must be maintained in foreign currency.

Investing in Land: This comes with its own set of rules. NRIs can engage in commercial or residential real estate, but they cannot own or invest in agricultural property or plantations. 

 

Post office schemes can also be indirectly invested in. To invest in Post Office Schemes, the NRI must create a joint account with a person who is a resident of India.

Bonds and Government Securities: NRIs can freely invest in these but repatriation benefits are only available for investments made through NRE or FCNR accounts, and that has been held for a minimum of three years. 

 

Investments established through NRO accounts will have maturity benefits attributed to them, and cannot be repatriated. NRIs can also make direct investments in proprietary and partnership enterprises, but the profits from such transactions cannot be repatriated.

Investment procedure

 

Each kind of investment has its unique procedure, but for the sake of giving you an example, let’s talk about the investment procedure for NRIs wanting to invest in Mutual Funds.

 

NRIs wanting to invest in Mutual Funds are subject to the provisions of FEMA (Foreign Exchange Management Act), and FATCA (Foreign Account Tax Compliance Act).

 

Although, Mutual Funds in India do not accept foreign currency and hence NRIs will have to open an NRO or NRE bank account to invest in Mutual Funds.

 

These NRE accounts have tax benefits and may be used to park foreign earnings. The balances in these accounts can also be freely transferred to foreign accounts. 

 

For NRO accounts, only earnings generated in India may be deposited and amounts cannot be freely transferred to foreign accounts.

 

Once the account is created, NRIs may invest in Mutual Funds with their KYC details or by giving an Indian resident a POA. However, if you go via the POA route, it is necessary for both individuals’ signatures on the document.

 

It is advised to gather more information before proceeding with any kind of investment.

Do’s and Don’ts 

 

DO – Use a proper broker or consultancy before deciding on investing in any commodity.

 

DON’T – Invest blindly without any guidance, as it could lead to losses.

 

DO – Create an NRE/NRO account to invest in Indian assets.

 

DON’T – Try to invest with your foreign accounts or an old Indian account as it is against the law.

 

DO – Proper research about the laws regarding investments in India, especially the provisions under FEMA and FATCA.

 

DON’T – Make investments without following proper legal procedures.

 

DO – Ask and inform the resident who you plan to invest with, tell them about the process, and explain your intentions regarding the investment.

 

DON’T – Include a resident’s name without informing them about it, as it could lead to a lot of backlash and misunderstandings.

 

DO – Find out the terms regarding NRE/NRO accounts and clear your queries about them before choosing an account to open.


DON’T – Open an account without knowing the terms and laws

that it is regulated by, it could delay your investment process and

cause a loss of time and effort.

Have you ever heard about these kinds of investments before or are planning to invest in assets like these? 

 

Feel free to share your thoughts or opinions with us in the comment section below or contact us for more information! 

 

That’s it for today. Kindly like, share, or subscribe by clicking any of the icons below to stay tuned for more content from Bridl360!

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