For overseas Indians, India offers a tremendous opportunity for investment and wealth building as India is slated to grow at the rate of 8%-10% for the next few decades.
Options available for NRIs:
As per the Government of India, NRIs are given the following facilities as far as investment is concerned.
1. Bank accounts in India
2. Investment in securities and debts
3. Investment in immovable properties such as real estate
Types of Accounts
NRE Account: This is rupee denominated account. The interest earned is tax free. The amount in the account is repatriable.
NRO Account: This is also a rupee denominated account. The interest earned is taxable. The repatriation limit is 1 million USD in a year.
NRNR Account: This is a term deposit account with 6 months to 3 years term which can be extended. Only the interest can be repatriated. The interest is not taxable.
FCNR Account: This is a term deposit accounts for maximum of 3 years in foreign currency denominated form. The foreign currencies allowed are US, Australian, Canadian dollar, Euro, Pound, and Japanese Yen.
Investment in securities and debt:
Indian market has been a darling for foreign investors for quite a few years. The market will keep its momentum as India is expected to grow with a respectable rate for a few decades. NRIs can invest in securities and debt instruments to exploit the opportunities presented by Indian stock market. NRIs can invest in stocks and debt funds directly or in mutual fund.
Government of India has allowed NRIs to invest in Indian market directly or through portfolio investment scheme. It has allowed the following types of investment.
Investment in stocks (especially secondary market) through portfolio investment scheme (PIS)
This allows NRIs to invest in Indian security market without obtaining any permission from the RBI or the Government. In some cases, however, they need permission from FIPB (Foreign Investment Promotion Board) in case of investment in agriculture or planation activities. Investing in securities is done through portfolio investment scheme. As per this scheme, NRIs can select one branch designated by RBI for transaction related to investment. The transaction then can happen through the specified branch for stocks and convertible debentures. This can be repatriable or non-repatriable depending upon the situation.
Investment with Repatriation clause:
Investment in domestic mutual fund, bonds, term deposit with companies for at least 3 years, and Government securities are allowed with repatriation benefits.
Investment without repatriation benefit:
Investment in the form of capital contribution in any proprietary or partnership firm is allowed but it is not repatriable. NRIs can also invest in new issues through this route.
Other investment such as money market mutual funds, deposit, non-convertible debentures, and commercial paper are allowed but without any repatriation benefit.
Investment in immovable assets:
NRIs can invest in real estate. They do not need any permission to invest in real estate except in cases where they want to acquire farm land, plantation, and agriculture land. The repatriation clause needs to be looked at in individual cases. The Government allows up to 100% investment in real estate development (including housing societies and commercial space) as well as financing of housing and commercial development.
There are facilities available returning NRIs so that their investment in foreign countries are not disturbed. They can also open resident foreign currency account to freely move money between NRE/FCNR accounts.
NRIs can invest in stocks by directly buying stocks of specific company or through mutual fund. Indian market offers variety of mutual funds such as sectoral fund that invests in a specific sector, mid-cap fund that invests in mid cap firms, growth fund that invests in emerging companies, value fund that invests in stable and old companies that give consistent results. There are India specific funds available for investment.
It is important to ascertain the credentials of advisor for any investment requirement. NRIs are considered easy source of money and there is no dearth of quakes to exploit the situation.
You should apply for a PAN card and then open demat and trading account linked to your NRE/NRO account which can be used for trading purposes.
If you are concerned about repatriation clauses, make sure you understand the types of accounts and policies where repatriation is allowed. Open the appropriate account and invest in right instruments to avail repatriation benefits. In most if the cases, repatriation is allowed after a lock in period of 3 years.
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