NRI investment options
There are 36 million NRIs in the world and they are always looking to invest in India. To help with this we list down Best NRI Investment Options In India along with some High Return Investments.
There are mainly 3 reasons why NRIs are looking to invest in India.
Fixed deposits are quite popular investment option not only for Indians but also for NRIs. This is because of the guaranteed return offered by fixed deposits along with the safety and convenience it offers. Once you have any relationship with the bank, opening FD accounts is very easy and require minimum documentation as the bank already has all of the required details.
In the present scenario, interest in FDs ranges between 4%-7% for Indian rupee account and 0.5% to 3% on foreign currency accounts. An NRI can invest in FDs in an Indian Bank in 3 ways.
NRO is an account to manage income earned in India by an NRI. It provides a good rate of interest and also has a low risk. The added advantage to an NRO account is that you can also use it to receive incomes from direct equity, mutual funds, dividends or rental. Interest earned on an NRO account is taxable in India at marginal income tax rates. Also banks deducted TDS at the rate of 31.2% (including cess) on the interest earned. If you have to pay taxes in both countries for the same income, you may apply for a refund of tax in accordance with the Double Taxation Avoiding Agreement (DTAA).
Most banks today pay interest in the range of 2% to 3% on their savings account. However there are banks who can pay up to 6%. We have compared the interest rate offered by all banks in India across different balances here.
NRE is an account to transfer earnings from foreign to India. Expected interest on FDs in NRE account ranges from 4% to 7%. Interest earned on it is non-taxable in India. But you may have to pay in your countries. If you live in a country like UAE, Saudi Arabia, and Kuwait you do not have to pay in these countries, and on another hand, if you live in a country like the USA or Canada you may have to pay taxes.
NRE Fixed Deposit scheme is a very popular investment option for NRIs. The interest earned is tax free. To help you choose the best NRE FD, we compare the interest rates on fixed deposit across all major 48 banks in India including government, private, foreign and small financial banks in India every month.
You can open an FCRN account through which you can invest in fixed deposits with major banks in India in your foreign currency. Almost all banks have FCNR accounts for following currencies – USD, GBP, EUR, YEN. However for less popular ones like HKD, SGD, etc you can open account in ICICI bank. FCNR deposits are opened for a period of 1-5 years. Interest earned on deposits is tax-free for NRI and RNOR(Resident but not ordinary resident). The best thing about this account is that it is free from foreign exchange fluctuations.
FCNR is a great investment as its safe and offers higher returns that the country you live in. Also interest earned on FCNR deposits is tax free in India. FCNR deposits also do away from the currency fluctuation risk. You can get the latest rate on FCNR interest rates here.
The table below gives a comparison of NRE Vs NRO Account. You can choose which one suits you.
| Particulars | NRE (Non-Resident External) | NRO (Non–Resident Ordinary) |
| Who can Open Account? | NRIs/PIOs/OCIs | Any person resident outside India |
| When can one open Account? | After becoming NRI | While leaving India (even before becoming NRI) |
| Deposit Allowed | Only overseas income in foreign currency | Income originating in India and overseas income |
| Joint Account | In the names of two or more NRIs. With a resident close relative on ‘former or survivor basis’ | In the names of two or more NRIs or Resident Indian |
| Repatriation | Freely repatriable | Repatriated up to USD 1 Million in a financial Year with some restictions |
| Transfer-ability of Funds | NRE to other NRE & NRO accounts | NRO to NRO account only. NRO to NRE accounts requires documentation. |
| Tax on Interest | No Tax in India | Taxable as per Income Tax Slab |
| TDS on Interest | No TDS | TDS @ 31.2% |
As you become NRI, you can no longer use the regular savings account. You need to open NRE or NRO account. We have a detailed post on NRE VS NRO account and which one is the right choice for you?
You can also do direct investment in the stock market to earn higher returns in the long term but you have to note that high return comes with high risk. You can invest in the Indian stock market through the PNS (Portfolio investment scheme) of RBI. For this, you have to open a Demat account with an Indian broker and should have an NRE/NRO account and also can have a trading account. This is high risk high reward investment – so do not invest before any fundamental analysis and research because it may lead to loss of your capital.
Things to know before investing in the Indian stock market
Mutual Funds are one of the Best NRI Investment Options In India. You can invest in both stocks or fixed income using equity and debt mutual funds respectively. NRIs can invest in Indian mutual funds but they have to follow the rules and regulations of the Foreign Exchange Management Act (FEMA). Some Mutual Fund Companies do not allow investments from NRIs especially based out of USA and Canada – mainly because of extensive compliance and paper work required by these countries.
As per Economic Times following 8 fund houses are accepting investment from Canada & USA.
Tips to pick mutual funds for Investment
The Mutual Fund taxation depends on the type of mutual fund. MFs investing more than their asset in 65% is termed as equity MFs while all others are called non-equity funds.
Equity Mutual Funds are one of the best investments to generate wealth in the long run while Debt mutual funds are more suited to park money for the short term (as an alternative to fixed deposits). But as in case of any investment, the final returns are determined on the way these Mutual Funds are taxed. We discusses tax on mutual funds for FY 2021-22 [AY 2022-23] in all details.
NPS (National Pension System) is a pension scheme managed by PFRDA. Both residents as well as NRIs are eligible to invest in the same. NRI having age between 18-70 years can open an NPS account. To open an NPS account online you may be required an Aadhar card and Pan Card. You can also open the account by using your NRO or NRE bank account.
This scheme is developed for savings and investment so that one can take care of his retirement. You can also choose how much funds you want to invest in equity, corporate bonds and government securities. If you want high return (& high risk) you can allocate as high as 75% to equity. For conservative investors, you could invest 100% in bonds.
As this is a pension fund, there are some withdrawal limitations
Real estate in India has shown massive growth in the last 15 years and also shows the future scope of growth. Therefore real estate is one of the Best NRI Investment Options In India. You can buy property by taking care of some factors like price, type of land, future growth of the nearby area, the risk involved in it and etc. Many NRIs acquired flats, villa and give them for rent.
An important point to note is this an NRI cannot invest in agricultural land in India.
Tax on Rental Income for NRIs
Tax on Sale of Property for NRIs
Certificate of deposit is a short investment and works like FD with an advantage to endorse it to someone. But an NRI cannot sell the certificate of deposit to another NRI in the secondary market.
It gives a fixed return and has a low risk. It is generally issued for a period of 7 days to 1 year.
A CD has a maturity date and on that holder will receive the amount plus interest on the principal amount.
NRI can invest in ULIP plans and other traditional insurance plans under the Foreign Exchange Management Act (FEMA). Among the insurance products – ULIP is the most popular one. This is because it offers both insurance & investment option in stock market. However we do not recommend investing in ULIPs. You would be better off investing in relevant Mutual Funds instead.
From April 2020 an NRI can invest in government securities like bonds without any limit in specific instruments. An NRI can invest in plans of 5 years, 10 years, and 20 years plans. The G-SEC could be one of the Best NRI Investment Options In India in fixed income because
An NRI can invest in Portfolio Management Services (PMS) through their NRO/NRE account. PMS can turn to be a good investment option because of following reasons:
Non-convertible debentures (NCD) are instruments issued by companies to the public for long-term appreciation of capital. NCD has a fixed rate of return which will be paid for the number of years as decided. At the end of maturity holder of NCD will get the maturity amount. The risk and the rewards (interest rate) varies based on the company credit ratings. It offers higher interest rates than normal bank fixed deposits albeit with higher risk. If an NRI invest in NCDs, those NCDs cannot be redeemable before the period of 3 years.
NCDs or non-convertible debentures or more popularly known as Bonds are a bit complex investment products. You must understand the product, risk involved, the taxation on interest received and when you sale it. We have done a separate post regarding this titled – Know all about NCDs.
Also you can keep track of upcoming NCD issues here.
NRIs are not allowed to invest in small saving scheme like PPF or Sukanya Samriddhi Account. This is because these small saving schemes are paid higher interest rate and is subsidised by the Government of India. However if you had already opened your account before becoming NRI, you can continue investing in the same till maturity.
It totally depends on your requirements whether you want to go for higher returns or stable returns. If you want higher returns you can go with direct equity and if you want stable returns you can go with debentures, mutual funds, and less equity.
If you want to-
• Increase your returns
• Decrease the country risk
• And diversify your portfolio
You can invest in Indian markets in options like equity, debentures, mutual funds, and FDs.
Yes,an NRI can invest in Indian stock market through PNS (Portfolio investment scheme) of RBI.
The part of income that is earned in India is taxable but there are options like interest earned on NRE accounts that are non-taxable. If you pay double tax for an income in two different countries you can apply for a refund of tax in accordance with the Double Taxation avoiding Agreement (DTTA).
You cannot invest directly into the post office schemes but you can invest in them indirectly by opening a joint account with an Indian citizen to become qualified to invest in post office schemes.
You can open two PIS accounts with any of the designated banks one with NRE status and another with NRO status. But you cannot have more than 2 trading and investment account.
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An NRI can invest in the Indian stock market. To do this, he needs to open a Portfolio Investment Scheme - commonly know as a PIS Account. This can be linked to a Demat account which can be opened with any registered stockbroker in India.