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Tata Capital > Blog > Wealth Services > Where should NRIs invest their money in India?

Wealth Services

Where should NRIs invest their money in India?

Where should NRIs invest their money in India?

India has always remained an attractive investment destination for Non-Resident Indians (NRIs). There are investment options across different sectors. You can choose from risk-free investment avenues to market-linked growth options. Additionally, NRIs enjoy several tax benefits and flexible account options. 

So, whether an NRI wants to grow wealth in the long term or build retirement savings, there is an investment opportunity for everyone.

What are the investment options in India?

The top options for NRI investment in India are discussed below:

Fixed Deposits (FDs)

Bank fixed deposits are among the most popular investment choices for NRIs. They are low-risk, provide guaranteed returns, and offer convenient tenure flexibility. NRIs can invest in:

  • Non-Resident External (NRE) Fixed Deposit: These are fully repatriable, and the interest is tax-free in India.
  • Non-Resident Ordinary (NRO) Fixed Deposit: The interest income is taxable, yet useful for managing income earned in India.
  • Foreign Currency Non-Resident (FCNR) Deposit: Held in foreign currency, the investment helps to protect against exchange rate fluctuations.

FDs are ideal for conservative investors who desire stable returns or plan for short to medium-term goals.

Mutual funds

Mutual funds are professionally managed market-linked investment instruments. As an NRI, you can invest in equity, debt, or hybrid funds depending on your risk appetite and investment horizon. If you want long-term growth, you should opt for equity funds. If you want to preserve capital and generate a regular income, go for debt funds. Systematic Investment Plans (SIPs) offer the benefit of rupee-cost averaging, especially for NRIs earning in stronger currencies.

Equity investments in the stock market

NRIs can invest directly in Indian equities through a Portfolio Investment Scheme (PIS) account, linked to an NRE or NRO account. The Indian stock market offers high growth opportunities and the potential for significant wealth appreciation over time.

NRIs can invest in listed stocks, equity derivatives, and IPOs. The investment in equity derivatives is subject to the guidelines of the Reserve Bank of India. However, equity investments carry higher risk due to market volatility. To manage risk effectively, develop a well-diversified portfolio and focus on a long-term strategy. 

Real estate

Real estate has remained a preferred investment option for NRIs who want their roots to remain in India. You can purchase residential and commercial properties. However, you cannot invest in agricultural land, farmhouses, and plantation properties. 

Investing in real estate has several benefits for NRIs. These include capital appreciation in high-growth cities, rental income potential, and tangible asset ownership. The real estate sector is attractive for NRIs and promises lucrative returns as India’s infrastructure rapidly expands and smart city projects develop.  

Insurance

Life insurance policies such as Unit-Linked Insurance Plans (ULIPs) and guaranteed savings plans allow NRIs to secure their family’s future while also building wealth. The benefits of investing in insurance include long-term savings discipline and tax benefits on maturity and premiums. It also helps to financially protect your dependents in India. NRIs must comply with KYC and premium payment norms specified by the insurer and Indian regulators.

Alternative Investment Funds (AIFs)

AIFs offer exposure to private equity, venture capital, real estate, and hedge strategies. These are regulated by the Securities and Exchange Board of India (SEBI). You can earn significant returns with AIFs. However, you must be careful as the associated risks are also higher. They are best suited for experienced investors with a higher risk appetite.

National Pension System (NPS)

NRIs between the ages of 18 and 70 can invest in NPS to build a disciplined retirement corpus. NPS invests in a mix of equity, corporate bonds, and government securities, offering market-linked growth with comparatively lower costs. The key benefits of investing in NPS are tax deductions available under Section 80CCD and regular annuity payout after retirement.

Public Provident Fund (PPF)

NRIs are not allowed to open new PPF accounts in India. But if you opened one before becoming a non-resident, you can continue contributing until maturity. PPF offers government-backed safety, attractive tax-free returns, and a 15-year lock-in, making it suitable for conservative investors.

Conclusion

There are numerous NRI investment options in India. To choose the right investment mix, consider factors such as your risk tolerance, investment horizon, residential status, taxation rules, repatriation requirements, and financial goals. Besides, focus on the source of income and the currency of investment. To strike a balance between stability and growth, your NRI investment in India should be spread across fixed income, equity, and real estate options. You must also ensure compliance with FEMA and taxation regulations to avoid complications regarding tax liability or repatriation.

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FAQs

Can NRIs open a fixed deposit in India?

Yes, NRIs can open NRE, NRO, and FCNR fixed deposits in India. Each type offers different tax and repatriation benefits suitable for various income and investment goals.

Can NRIs invest in mutual funds in India?

 

Yes, NRIs can invest in equity and debt mutual funds in India. However, there are certain restrictions for individuals residing in the USA and Canada. Always check with the specific fund house before proceeding.

Can NRIs buy property in India?

 

Yes, NRIs can purchase residential and commercial property in India. However, they are not permitted to buy agricultural land, plantation properties, or farmhouses.

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