My friend, Mukesh, is planning to shift to US next month. His first question – Can NRIs invest in India? Second question-Can US and Canada based NRIs invest in India? 3rd Question- What if I shift to some other countries like Australia or Middle East Countries. I asked him to calm down first and started answering his questions one by one:
- Yes, NRI can invest in India.
- US and Canada based NRIs can also invest in India.
- You would be able to invest even if you shift to other countries like Australia or Middle East Countries. Only difference will come in terms of taxation.
Now, he wants to know- which are the financial products he can invest in, as an NRI? He definitely wants to come back to India after 10-15 years. Without getting into emotional part of it, whether he will come back or would settle there, let us see which are the financial products an NRI can invest in India?
Can NRI Invest in India?
Can NRI invest in India in
- Mutual Funds SIP
- Sukanya Samriddhi
- Fixed Deposits
- Post Office Schemes
I will write a detailed article on each topic one by one, at some other time. But here is the summary:
Can NRI Invest in PPF Account?
Yes, NRIs can invest in PPF account, provided PPF account was opened while they were Indian Residents. New PPF account can not be opened by an NRI. So, NRI can only invest in existing PPF account. Also, PPF account cannot be extended after 15 years for NRIs.
The maturity is tax free after 15 years for PPF account in India.
Also Read: PPF Rules for NRIs
Can NRI invest in Sukanya Samriddhi Scheme/Yojana?
No, NRIs can not invest in Sukanya Samriddhi Scheme/Yojana. Only Indian Residents can invest in Sukanya Samriddhi Account. As soon as the residential status of girl child is changed to NRI, you need to intimate the bank within 1 month and close the account.
Can Sukanya Samriddhi account be opened for NRI?
The only feasibility of opening or continuing the Sukanya Samriddhi Account for NRI is- If you are an NRI and your spouse and daughter still have Indian Residential Status, you can open, continue and keep investing in Sukanya Samriddhi account.
Can NRI buy property in India?
Yes, NRIs can buy property in India. There are certain limitations here- NRIs can only invest in residential and commercial property. NRIs can not invest in agricultural property, farm house and plantation property. However, the payment has to be in Indian Rupees and not in any foreign currency. Also, the payment should be through normal banking channels.
Can NRI invest in fixed deposit in India?
Yes, NRI can invest in fixed deposit in India and it is very much advisable to invest in Fixed deposit/ Recurring deposit in India.
Is interest earned on NRE fixed deposit taxable in India?
No, interest earned on NRE fixed deposit is not taxable in India. But if you are living in countries like USA and Canada, you need to pay tax on the interest earned/accrued, according to your tax slab in that country.
Let us take an example:
If you are staying in US, you will have to pay tax on interest earned on NRE fixed deposits in US, according to your tax slab in US
But If you are staying in countries like Dubai/Singapore where there are no tax liabilities on your indian income, you will not have to pay tax on interest earned on NRE fixed deposits in India as well as in that country.
This is the reason, financial planners suggest NRIs to invest in FDs and not in Debt mutual Funds.
Also Read: Retirement Planning in India
Can NRI invest in NPS – National Pension Scheme?
Yes, an NRI can invest in NPS account. Contributions made by NRI are subject to regulatory requirements as prescribed by RBI and FEMA from time to time. If the subscriber’s citizenship status changes, his/ her NPS account would be closed.
The maturity is tax free in India. You can withdraw 60% tax free at age 60 and rest 40% has to be invested to buy annuity. Annuity is taxable.
Also Read : NPS Rules Tier 1 and Tier 2
Can NRI buy life insurance in India?
Yes, NRI can buy life insurance in India. You have to show that you are in India while purchasing the policy. That is the reason passport with entry stamp is necessary for NRIs to buy life life insurance in India.
Can NRI invest in ULIP?
Yes, NRI can invest in ULIP
If you are buying any life insurance product (be it ULIPs, Traditional policies or term plan), you have to be physically present in India. So, you will have to submit passport copy with entry stamp in India. Though insurance as an investment is bad idea.
Also Read: ULIP charges for ICICI and HDFC
Is LIC policy valid for NRI?
Yes, LIC policy is very much valid like other life insurance policies.
Also Read: Jeevan Anand Policy review
Can NRI invest in post office schemes in India?
No, NRI can not invest in post office schemes in India.
Can NRI invest NSC?
No, NRI can not invest in NSC as NSC comes under post office schemes.
Can NRI invest in sovereign gold bond scheme?
No, NRI can not invest in sovereign gold bond scheme. Please click the below link to check
Can NRIs invest in mutual funds?
Yes, NRIs can invest in mutual funds. Some fund houses do not allow NRIs from US & Canada to invest in mutual funds due to hassles of reporting. Currently 8-9 fund houses allow NRIs to invest in mutual funds in India. You can only invest through a rupee designated NRE/NRO account. NRIs cannot invest in mutual funds through foreign currency
From Taxation point of view, let us see how mutual funds are different:
TDS is deducted for the capital gains on mutual funds for NRIs.
Equity Mutual Funds– Long term capital gains are taxed at 10% and short-term capital gains are taxed at 15%.
For equity mutual funds – long term is 1 year and short term is less than 1 year.
Non Equity Schemes -Short term capital gains are taxed at 30%. Long term capital gains are taxed at 20% for listed securities (with indexation) and 10% for non listed securities (without indexation)
For Non Equity Schemes- long term is 3 years and short term is less than 3 years.
Also Read: Best ELSS mutual Funds for 2018-2019
Can I invest in mutual funds through NRE account?
Yes, you can invest in mutual funds through NRE account and it is always advisable to use NRE account for investment in mutual funds.
Can NRI invest in SIP in India?
Yes, NRI can invest through SIP as well as lumpsum in India.
Can NRI from USA/Canada can invest in mutual funds?
Yes, NRI from USA/Canada can invest in mutual funds. Though, few fund houses don’t allow NRIs from US/Canada. NRI from any part of world can invest in mutual funds in India subject to the above restrictions for US/ Canada based NRIs.
Can NRI buy tax free bonds?
Yes, NRI can buy tax free bonds like corporate deposits, NCDs and PSU bonds, provided the issuer has given the `NRI Window` for the bond.
Interest is tax free while the capital gain is taxable in India.
.Can NRI invest in stocks in India?
Yes, NRIs can invest in stocks in India. First you have to open an NRI demat account. Then, there are 2 ways
For NRE Account, NRI can invest in secondary capital market through portfolio investment scheme (PINS).
For NRO Account, NRI can invest without having portfolio investment scheme.
Can NRI invest in PMS in India?
Yes, NRI can invest in PMS in India like the way they invest in stocks.
How much NRI can invest in India?
There is no limit on how much NRI can invest in India. NRIs can invest as much as they want, showing the source of income.
Can NRI continue with resident savings account?
No, NRI can not continue with resident saving account. It has to be converted to NRO account.
Is PAN card mandatory for NRI?
Yes and No. If you are doing any financial transaction in India, you will require a PAN Card. Financial transaction like filing returns, TDS, investing in mutual funds, stocks etc.
So, it is always better to have PAN Card.
Can NRI get 80c benefits?
Yes, NRI can get tax benefits under section 80c. Most of the deductions under 80c are also available for NRIs.
Now Mukesh knew the products where he can invest as an NRI. Also, he wanted to know which are the best investment options for NRIs in India. I asked him to leave it for the next meeting. Till then
Also, keep asking the questions, I will keep adding them in the article.