India’s economy is one of the fastest-growing in the world, and its stock market is booming. For Indian nationals living and earning their income abroad, known as Non-Resident Indians, this presents multiple investment opportunities. Read on to learn about NRI investment in India and what one needs to successfully grow their wealth while living overseas.
Please, note that investment comes along with certain risks, and it's up to you to decide how to manage your budget wisely. We are providing information to consider rather than a clear call to action.
NRI investment in India: eligibility criteria
Opening an account for NRI investment in India
NRI investment options in India
Transferring funds from abroad
NRI investment in India: eligibility criteria
Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs), and Overseas Citizens of India (OCIs) are all terms that describe persons of Indian origin who live outside of India. For more details, check this comparative chart from the Ministry of Home Affairs. For the purposes of investing in India, however, their eligibility is mostly the same.
An NRI is an Indian citizen holding an Indian passport and residing outside India for more than 182 days in a previous financial year. Those who plan to move abroad for an unspecified period and have a respective proof, such as an employment contract with an overseas company, can also be classified as NRIs for investment in India.
Additionally, to be investing in India, an NRI must:
· Be between 18 and 60 years old
· Hold a valid Permanent Account Number (PAN)
· Have an NRO/NRE bank account.
Hence, before investing in India, the following steps must be completed:
Apply to the Indian Income Tax Department for a PAN, which is a unique identifier used for taxation purposes under the Indian Income Tax Act
Complete the KYC procedure and open an NRE/NRO bank account
Select NRI investment options in India.
Opening an account for NRI investment in India
There are two types of accounts an NRI can open in an Indian bank to be able to carry out investment activities:
· Non-Resident Ordinary (NRO) account to manage NRIs’, PIOs’, and OCIs’ income generated in India; can be used as a savings account for rental, dividend, pension, and other types of income.
· Non-Resident External (NRE) account to hold NRIs’ foreign earnings in Indian rupees; can be used as a recipient bank account for overseas income.
Read our article to find out more about NRE and NRO accounts, or check the table below
| Criteria | NRO account | NRE account |
|---|---|---|
| Funds source | Foreign and local credits | Foreign credits only |
| Repatriation | Up to USD1 million in a financial year, after tax | Unlimited |
| Taxation | Interest subject to tax deductible at source | Exempt |
| Fund transfer | To NRO/resident accounts only | To NRE/NRO/resident accounts |
Are you looking for swift transfers to your bank account in India? We have you covered! Check out what we have to offer:
If an NRI explores how to invest in the Indian stock market via Portfolio Management Services with a broker or a bank, which typically involves investments in the Indian secondary stock market, they will also need a demat and trading account under the Portfolio Investment NRI Scheme (PINS) linked to their NRO/NRE account.
NRI investment options in India
There is a wide range of formats for NRIs investing in India, from equities and mutual funds to pension and insurance schemes, from Indian stock market to real estate. The ultimate choice depends on the available funds and the risk-reward ratio an investor is willing to accept.
Those interested in how to invest in the Indian stock market may consider the following popular formats.
Mutual funds
Mutual funds are a great NRI investment option in India for those looking to put their money into professionally managed and regulated assets on the Indian stock market. Some popular choices include Equity Funds for steady long-term benefits and Balanced Funds that combine stability and growth through equity and debt instruments. In turn, Debt Funds are a low-risk option with a focus on government and corporate securities offering stable capital appreciation.
Portfolio Investment Scheme
The Portfolio Investment Scheme is a solution for those looking at how to invest in the Indian stock market under professional management. As mentioned earlier, this format requires a dedicated PINS account and ensures regulatory compliance which makes it easier for an NRI investor to access the best Indian stocks to buy.
Fixed deposits and bonds
Fixed deposits and bonds offered by banks are low-risk, reliable instruments for NRI investment in India. Their maturity periods and interest rates vary, allowing investors to find a combination most suitable for their goals.
Sovereign bonds and securities
Sovereign bonds and securities are traditionally among the best Indian stocks to buy for long-term, stable fixed income.
National Pension System
The National Pension System might attract those who are not particularly interested in how to invest in the Indian stock market for faster profits but instead aim for financial security after retirement. The system’s major advantage is that in addition to wealth growth it allows for substantial tax savings and is considered relatively safe as guaranteed by the state.
IPOs
Initial Public Offerings (IPOs) allow an NRI investor to participate in the initial offering of shares on the Indian stock market. This NRI investment option in India may bring higher returns but also bears higher risks, so it is essential to fully understand how to invest in the Indian stock market through a particular IPO. Also, limitations apply to the maximum size of investment and types of industries.
Investing in India goes beyond hunting for the best Indian stocks to buy. For those who value a less hectic business environment, real estate remains the traditionally preferred NRI investment option in India. NRIs are permitted to buy both residential and commercial properties with the exception of agricultural land, plantations, and farms. Such transactions can be conveniently executed through a Power of Attorney and are especially popular among those who plan to eventually return to India.
Transferring funds from abroad
An important question for any NRI earning their income overseas would be how to transfer funds to an account in India most efficiently and at the lowest cost. Those NRIs who are based in Europe and plan to start investing in India have a major advantage here: they can use Profee, a licensed online money transfer service. Here are some benefits that Profee offers to its Indian customers in Europe:
· Cost. Profee has the best foreign exchange rates on the market thanks to its unique monitoring system and offers a special promo rate on the first transfer.
· Security. The service operates in full compliance with all regulatory and industry requirements.
· Speed. It takes only a couple of minutes to register and send the first transfer, which will be delivered almost instantly.
· Usability. Profee is available as an iOS/Android app and a web service, and both come with a customer-friendly interface. The bureaucracy is minimal and tiered according to the amounts sent: transfers of up to €1,000 require only the basic details, and for larger amounts, there are simple and effective procedures in place.
· Referral opportunities. The Indian stock market is not the only place to earn money. Profee customers can take advantage of its referral programme to make extra income every time their referee sends the first transfer.
Whatever strategy of investing in India from abroad you may choose, you cannot invest without transferring money to your NRO/NRE account. Now you know how to do this in the most effective way: use Profee as your smart money transfer solution and enjoy your financial security.
