Investment Options for Non Resident Indians (NRIs)

What investment options exist for Non Resident Indians (NRIs) in India?

In a previous blog post, we discussed various non resident Indian account options available to NRIs. Specifically, we discussed NRE vs NRO vs FCNR accounts and situations where one may be more suitable than the other.

Before we get going, lets explain some terms that we will be using throughout this article.

NRI

A Non Resident Indian (NRI) is a person resident outside India, who is a citizen of India or is a person of Indian origin.

PIO

A Person of Indian Origin (PIO) is a citizen of any country other than Bangladesh or Pakistan, if

1. he/she at any time held Indian passport, or
2. he/she or either of his/her parents or any of his/her grandparents was a citizen of India or
3. the person is a spouse of an Indian citizen or a person referred to in sub-clause (a) or (b).

RBI

The Reserve Bank of India (RBI) is India's central banking institution that guides and regulates the monetary policy of India. The RBI works closely with the Government of India to ensure economic and financial policies are implemented and executed well.

Continuing on, in this article, we discuss other investment options available to NRIs. As per RBI guidelines, in addition to investing funds in NRE, NRO and FCNR bank accounts, NRIs can also invest money in following vehicles.

NRIs may, without limit, purchase on repatriation or non-repatriation basis any of the following:-

1. Government dated securities and Treasury bills.
2. Units of domestic mutual funds.
3. Non-convertible debentures of a company incorporated in India.
4. Shares and convertible debentures of Indian companies through stock exchange under Portfolio Investment Scheme, subject to the terms and conditions specified in Schedules 3 and 4 to the FEMA Notification No. 20/2000- RB dated May 3, 2000, as amended from time to time.

NRIs may, without limit, purchase on repatriation basis any of the following:-

1. Bonds issued by a Public Sector Undertaking (PSU) in India.
2. Perpetual debt instruments and debt capital instruments issued by banks in India.
3. Shares in Public Sector Enterprises being dis-invested by the Government of India, provided the purchase is in accordance with the terms and conditions stipulated in the notice inviting bids.
4. Shares and convertible debentures of Indian companies under the FDI scheme (including automatic route & FIPB), subject to the terms and conditions specified in Schedule 1 to the FEMA Notification No. 20/2000- RB dated May 3, 2000, as amended from time to time.

NRI may, without limit, purchase on non-repatriation basis any of the following:-

1. Units of Money Market Mutual Funds.
2. National Plan/Savings Certificates.
3. Exchange traded derivative contracts approved by the SEBI, from time to time, out of INR funds held in India on non-­repatriable basis, subject to the limits prescribed by the SEBI.

Investment in Immovable Property

NRIs and PIOs may acquire and/or transfer immovable property in India other than agricultural land and/or plantation property or a farm house out of repatriable and/or non-repatriable funds.

Note that NRIs have to pay tax when they sell property in India. That said, there are various possible deductions and exemptions to lower the tax liability.

Are there any investments schemes that NRIs cannot invest in?

Yes, there are. According to RBI guidelines, NRIs are not permitted to invest in small savings or Public Provident Fund (PPF).

Now that you are aware of all banking and other investment options available to non resident Indians living abroad, remit your hard earned money happily and build your savings!