NRI CORNER
Who Is A Non-Resident Indian (NRI)?
A non-resident Indian (NRI) as per Foreign Exchange Management Act 1999(FEMA), is an Indian citizen or a person of Indian origin who stays abroad for employment, business or vocation outside India, or stays abroad under circumstances indicating an uncertain duration. An individual will also be considered NRI if his stay in India is less than 182 days during the preceding financial year.
Can an NRI maintain a bank account in India?
Yes. NRIs can maintain accounts in rupees as well as in foreign currency.
What Types Of Rupee Accounts Can NRI Maintain?
| Basis | NRE Account | NRO Account | FCNR Account |
|---|---|---|---|
| Acronym | Non Resident External Account | Non Resident Ordinary Account | Foreign Currency Non-Repatriable account |
| Meaning | It is an account of an NRI to transfer foreign earnings to India | It is an account of an NRI to manage the income earned in India | It is a kind of fixed deposit account opened for depositing income earned overseas |
| Taxability | Interest earned is tax free. However, it would be taxed in the country where NRI resides as per tax rules applicable there | Interest earned is taxable. Tax deducted at source is 30% | Interest earned is tax free. However, it would be taxed in the country where NRI resides as per tax rules applicable there |
| Repatriability | Can repatriate | Can repatriate the interest amount, the principle amount can be | Principle and Interest can be freely repatriate |
| Joint Account | Can be opened by two NRIs | Can be opened by an NRI along with an Indian citizen or another NRI | Can be opened by two NRIs |
| Deposits and Withdrawals | Deposits in foreign currency but withdrawals in Indian Rupee | Deposits in both foreign currency and Indian Rupee but withdrawals in Indian Rupee | Any currency with is freely convertible |
Conclusion – If your total income includes income earned in India and you want to manage it within the country, you can opt for an NRO account. An NRE account can be opened if you want to transfer your foreign income to India and want to avoid taxation liabilities.
Can NRI Invest In India?
Yes! NRI can invest in India. There are certain documentations required and a process to follow. NRI from USA and Canada will also be able to invest in mutual funds in India, however, due to FATCA regulations, their choices of mutual funds are limited. Still, there are more than 8 fund houses available for them.
Is It Too Complicated To Invest In India?
NO! It is lengthy but not complicated. Documentation part is a bit more than a normal resident, but it’s just a few extra forms and documents – and that’s it.
In the end, you just have to follow the guidelines set by SEBI and do the one-time documentation in the start. After that, the investment process is exactly the same as any resident.
How Will Taxation Work When An NRI Invests In India?
If not done in a right way, NRI’s can end up paying more taxes in India because of wrong investment choices. An NRI has to optimize his taxes, along with increase in investment returns and timely use of his money. NRI or not, every individual must file a tax return if their income exceeds Rs 2,50,000. But note that NRIs are only taxed for income earned/collected in India. So, Rahul will pay taxes on income earned while in India, and income accrued from FDs and savings account.
Is India A Better Place For An NRI To Invest Compared To The Country He Is Currently In?
Any country which is a developing nation has lots of opportunities and money grows in that country because there is growth potential to become better. Hence India, unlike other developed nations provide much high speed and return on investments.
In last 40 years, Indian stock markets have delivered a CAGR return of around 15-17% and are set to continue that for another 30-40 years at the minimum.
Hence, if you are an NRI based out of US, Europe, Singapore, Middle East or any other developed country you are better off investing your money in India for wealth creation.
Investment Options For NRI
India has become an attractive investment destination for investors all around the globe. The growing popularity of the Indian leadership, improved foreign relations, strong institutional flows, stable and reformist government, multi-year low inflation and interest rates, improving the economy and promising future are a few of the key leading factors.
It is commonly observed that NRIs invest in India to flow money to family, build a financial asset in the home country, build and attain financial stability, build a corpus for retirement and generate higher returns on investment. However, it is lesser known that there are not limited investment options for NRIs. One can explore and invest in several investment avenues available in the Indian Markets, best of which are:
- Direct Equity
- Mutual Funds
- Bonds and Government Securities
- Certificate of Deposits
- National Pension Scheme
- Insurance
- Real Estate