Where Should NRIs Invest In India?
Since last two decades, India has been rapidly developing as an industrial hub. Day after day, our country is attracting more and more foreign direct investment (FDI). Moreover, these days we can see more and more investments coming from the NRIs to the Indian markets. And this is all happening because the Indian economy and government are offering adequate stability and flexibility to the investors. Not only India is conducive for business growth but our economy is also equipped with an extremely profitable financial market.
The year 2018 was not an immeasurable year for investing in the stocks as it witnessed significant bleeding throughout the year. Nonetheless, a similar situation was observed in any other country across the world. However, if you have a look at the year previous to that i.e. 2017, you would find that India’s stock market yielded around 29% return which was relatively higher than any other economy in the world.
Any investments you make, it should always depend on your financial goals, liquidity requirement, risk appetite and expected returns.
Let us look at what investment options are available for you:
– Fixed Deposits and Demand Deposits:
The Reserve Bank of India allows Non-Resident Indians to hold accounts in Indian banks. There are different types of deposit schemes based on the type of account. Investing in Fixed Deposit is not only popular among the residents in India but also an attractive investment scheme for the NRIs. Being an NRI, you can open your FD with your NRE, NRO, or FCNR Account. All three of these are the types of bank accounts that an NRI can open in India. The interest rates being offered by the Banks depend on tenure and nature such as NRE and NRO to offer higher interest rate whereas FCNR (maintained in overseas currency) to offer a lower return.
If you want to be part owner of the companies listed on Indian stock exchange for eg. SBI, LNT, Reliance, then you can invest directly by opening a Demat and Trading account. Alternatively, you can invest in quality companies through equity mutual funds wherein a professional fund manager puts his expertise to use and generate returns above Fixed Deposit and Inflation over a period of time.
- Direct Equity: If you are an NRI, you can directly invest in the Indian stock market under the Portfolio Investment Scheme (PINS) of the RBI. As an NRI, in order to invest in the stock market in India, you are required to have a bank account (NRE or NRO Account), a trading Account (with a SEBI registered Stock Broker), and a demat account. However, the maximum amount of your investment in the stocks of an Indian company cannot exceed 10% of its paid-up capital. Further, this is to be noted that, as an NRI, you are not at all permitted to carry out intraday trading and short selling in India. This implies that you need to own the stocks before you can sell them.
- Mutual Funds: Mutual Funds offer you the same benefit of creating a long term wealth as it offers to a resident Indian. Mutual Fund organizations pool money from their investors and then invest the same in the different financial assets. Mutual Funds have moderate risks as they are neither as risky as direct trading in stocks, nor they are as risk-averse as FDs. There are a plethora of schemes available for Mutual Fund which can choose depending on your risk appetite and financial aspirations. You are required to have an NRE or NRO Account for investing in the Indian Mutual Fund industry. Furthermore, you also have to invest in Indian rupees and not in any foreign currency.
– Public Provident Fund
An NRI can no longer invest in PPF as the Government has changed the regulation in February 2018. The old PPF account shall continue till any further notifications from the Government.
– National Pension Scheme
National Pension Scheme is an Indian Government sponsored pension system. If you invest in this instrument, your entire capital during maturity is treated as tax-free. Apart from that, you are not required to pay even a penny to the government as a tax on the amount that you withdraw as a pension. If you are an NRI aged between 18 and 60 years, you can open an NPS Account to start investing in this scheme.
– Real Estate
It’s a fact that there are a lot of NRIs who stay abroad but look to buy their own house in India. Indian population is ever-growing and this is itself paving way for the advancement of Real Estate business in the nation. Being an NRI you can invest in a house property in India from where you can earn by letting it out to a third party.
However, this is to be noted that, you have to make any such purchases only in Indian rupee. Furthermore, you can’t buy agricultural lands, farmhouses, and plantations in India. Nonetheless, there is no restriction on you to inherit any such property or accepting them as gifts.
Overall, on the basis of your priorities, budget and expected returns, you can make a choice of any investment scheme that suits you in the most effective manner. While making any investment in a financial instrument, ensure that you have gone through the relevant documents and understood the salient features of the same.
Our best wishes on your investment journey. Happy investing!