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Investment Options For NRI

Post 2000 A.D, taxation policies have become favorable for NRI investment in India. Provisions are being made to favour investments from NRIs, but the only drawback is, unlike resident Indians, they can’t invest in just any type of instrument they desire to.

If An NRI Wants To Invest In India, They Must Choose Between One Of Three Kinds Of Savings Accounts:

Non-Resident (External) Rupee Account (Nre Account):Should be in INR. NRI’s can keep their earnings and savings managed in their country of residence in INR in this account. There is no income tax generated on such accounts.

Non-Resident Ordinary Rupee Account (Nro Account): Should be in INR. In this account, NRI’s can keep any sort of income through rent, dividends, etc. in this account. Income tax is generated on such accounts.

Foreign Currency Non Resident (Bank) Account- Fcnr (B) Account: Can be in any defined currency, used for keeping fixed deposits (in FCY) for a period of up to five years or less. There is no income tax generated on such accounts.

While Choosing From A Host Of Options For NRI Investment In India, It Is Important To Remember To A Couple Of Points:

Choose an investment that can be repatriated should an emergency arise in his country of residence.Ensure tax avoidance.The country of residence could have certain prohibitions on different instruments. For instance, in the US, there is a restriction that only funds registered in the US Securities market can accept a US based NRI’s money.

Keeping In Mind The Above Factors, Below Are Investment Options For An NRI

NRE Fixed Deposits

These can easily be repatriated and any income from interest on these deposits in tax exempted. They are flexible and can be broken easily and transferred the NRE Savings account to be repatriated as and when needed.

Government Securities And Bonds

Such investments can be purchased with a lock-in period of at least three years. Should these investments be made from the FCNR/NRE account of the NRI, the sale proceeds on sale of these instruments would be credited to the same accounts so that the proceeds could be repatriated if needed.

1. Mutual Funds

These investments can be made only from the NRE/NRO/FCNR account of the NRI. Another way is through “inward remittance”. Should the NRI seek to repatriate the earnings or money invested in mutual funds, a lock-in period of three years would be needed.

2. Nro Fixed Deposits

Another option for NRI investmest in India is to invest in NRO fixed deposits. But it would be illogical to do so because such FDs carry the same interest rates as NRE accounts, and while the latter is tax free, income tax is generated on NRO accounts.

3. Equity Market.

Shares can either be purchased directly or through equity based mutual funds. This can be done through the NRI/NRE account of India.