During the past several decades, India’s industrial development has been extraordinary. As a result, the country now attracts foreign direct investment (FDI). This has led Non-Resident Indians (NRIs) to view India as a viable investment and profit-generating alternative.
It’s imperative for NRIs to evaluate their risk appetite profile first, and only then search which is the best investment plan for NRI?
Best Investment Options for NRIs in India
The Indian government is striving to make the country more business-friendly. With so many investment possibilities, NRIs are trying to figure out exactly which ones are best for them. The following investment alternatives are the best for NRIs based on returns:
Fixed Deposit – NRIs can opt from a range of fixed deposit alternatives. Non-Resident Indians can deposit money in India via NRE Fixed Deposit, NRO Fixed Deposits, FCNR Fixed Deposits
Real Estate – NRIs have the option of investing in both residential and commercial real estate. Non-Resident Indians can easily own property in India and rent it out to supplement their income. However, do keep in mind that NRIs are prohibited from investing in farms, agricultural land, or plantations. The sale of a residential property after two years is considered a long-term capital gain and is subject to a 20% TDS.
Mutual funds – Compared to bank FDs, mutual funds can provide substantially better tax-efficient returns. Gains on non-equity funds sold within three years after purchase will be deemed short-term capital gains. It will be taxed at a rate of 30%. Long-term profits are realized when non-equity funds are sold after three years. After indexation, they will be taxed at a rate of 20%.
ELSS (equity-linked savings systems) are now one of the most popular tax-saving strategies for everyone, even NRIs with income in India.
National Pension Scheme – The National Pension Scheme is a government-backed initiative that allows Non-Resident Indians to participate in equity, debt, or a mix of the two.
Individuals between the ages of 18 and 60 can join a National Pension Scheme, and the pension or annuity will be paid in Indian rupees (INR). It is preferable to create an NPS account with the same bank as your NRE/NRO account.
ULIP Plans – NRIs enjoy the same rights as Indian residents to invest in ULIPs (Unit Linked Insurance Plans) under the Foreign Exchange Management Act (FEMA).
It is regarded as one of the most popular and trustworthy investment solutions.
The availability of tax incentives is another factor that attracts NRIs to invest in ULIPs. Under Section 80C and 10(10D) of the Income Tax Act of 1961, the premiums paid for ULIPs are tax-deductible.
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Can NRI invest in Indian startup?
A lot of NRIs often want to know- how can they engage in India’s massive startup surge and invest in startups?
NRIs can invest in Indian Startups in several ways:
- Use their own Social Network to find investment possibilities in Startups.
- Can join Angel investing sites like Angellist, Mumbai Angels, and Let’s Venture. Startups can use these platforms to approach individuals for angel or seed investment. Most platforms now operate entirely online in the aftermath of the epidemic. Entrepreneurs present their business ideas to startup investors using Zoom and other online meeting platforms, and investors decide whether or not to invest.
- Direct Equity- To do so one must first open a PIS (Portfolio Investment Scheme) bank account, which is a form of savings account that will only include secondary market transactions and charges, as well as TDS, in order to make direct equity investments by trading on recognized stock exchanges in India.
There is a provision to make a repatriable or non-repatriable investment in Indian startups for NRI. If the investment is repatriable (i.e., the profits from such financing will be taken beyond India), the investment will be deemed foreign investment, and all regulations governing foreign investment would apply. If an investment is made on a non-repatriable basis, it is classified as domestic investment.
However, when it comes to investing in Indian businesses, you should know how much can an NRI invest in India?
- The RBI has imposed limits for equity investments in Indian startups above which NRIs are not allowed to invest. The limit might range between 10% and 24% of the business’s total paid-up capital.
- If you prefer to transfer sale proceeds or dividend income to your country of residence, investing through an NRE account is a good idea.
- If you sell your investment within one year of buying it, you’ll have to pay a 15% tax. There is a 10% tax if the investment is sold after a year.
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The Bottom Line
As a result of increased globalization, investment prospects are expanding every day. Before investing, one should consider their financial situation and savings. It is also critical to comprehend the investing possibilities before proceeding with the investment. Invest now to ensure your financial security in the future!
FAQs
Q. What is the procedure for non-resident Indians to invest in Indian startups?
A. An NRI must first get a PAN number before opening an NRE, FCNR, or NRO account. The NRI investment framework must be followed while making an investment in a startup in India.
Q. What kind of investments are available to NRIs in India?
A. Under the RBI’s Portfolio Investment Scheme (PINS), NRIs can participate directly in the Indian stock market. To invest in the Indian stock market, NRIs must have an NRE/NRO bank account, a Demat account, and a trading account.
Q. Is it possible for NRIs to invest in Indian real estate?
A. NRIs and PIOs have been granted wide authority by the Reserve Bank of India (RBI) to purchase any residential or commercial property in India. An NRI or PIO can acquire any number of residential or commercial properties under the current general licenses.
Q. Is it possible for NRIs to invest in Indian bonds?
A. NRIs can now invest in Government of India bonds (G-sec) through the Reserve Bank of India. These are long-term investments. The duration of such bonds ranges from 5 to 40 years… Floating Rate Bonds 2020 are not available to non-resident Indians.
Q. Do NRIs have to pay TDS on their property?
A. NRIs selling properties in India are subject to taxation, and TDS is needed to be deducted under Indian income tax legislation. When an NRI sells a property in India, he or she must pay capital gains tax.
