Investment Options for NRIs in India
1. Equities
Investing in stocks or equity of listed companies can beat inflation and grow wealth but comes with volatility and risk. NRIs can invest in the Indian stock market by opening a Portfolio Investment Scheme (PIS) Account, which can be linked to a Demat account with any registered stockbroker in India. NRIs can open a trading account but are not allowed to do day trading in stocks. They can only sell the stocks that are already delivered to them.
2. Mutual Funds
NRIs, except for those from the USA and Canada, can invest in Indian Mutual Funds. NRIs from the US and Canada face certain restrictions and can buy only selected Mutual Fund schemes. Depending on their risk profile, NRIs can invest in equity funds, balanced funds, debt funds, liquid funds, and MIPs. Indian mutual funds managed by professionals offer returns that can beat inflation in the long term and are less risky compared to direct stocks. Equity-linked savings schemes (ELSS) are popular tax-saving instruments for NRIs with income in India.
3. Real Estate
NRIs can invest in residential and commercial real estate but are not allowed to invest in farms, agricultural land, or plantations. Investing in reputed properties can lead to significant appreciation, but managing property from afar can be challenging due to documentation and procedural requirements. While property was once a favorite investment option for NRIs, many now consider financial investments like Mutual Funds.
4. Bank Deposit Accounts
Popular bank accounts for NRIs include NRE, NRO, and FCNR, which are low-risk options with relatively low returns:
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NRE Account: A foreign currency account preferred by most NRIs for easy repatriation of money. Interest is tax-free in India.
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NRO Account: A rupee account suitable for income earned in India, such as rental income. Repatriation of money is possible but requires additional documentation. Interest is taxable in India.
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FCNR Account: Fixed deposits that can be opened for 1 to 5 years in any foreign currency. Interest is tax-exempt as long as the person is an NRI or Resident but Not Ordinarily Resident (RNOR). These accounts are not affected by foreign exchange fluctuations.
Other Investments
NRIs also invest in:
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NPS (National Pension Scheme)
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PPF (Public Provident Fund)
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ULIPs (Unit Linked Insurance Products)
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NCDs (Non-Convertible Debentures)
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Corporate FDs (Company Fixed Deposits)
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Government Securities and Treasury Bills
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Bonds
Each option offers a mix of tax benefits, varying investment horizons, and risk-return tradeoffs.