Why should NRIs Invest in India
Fastest Growing & Robust Economy
Diversification Benefits with Stable Currency
High Return on Equity Investments
Investor Friendly Market
Right PORTFOLIO
Right PRODUCTS
Right SERVICE
NRIs (Non-Resident Indians) should consider investing in India for several reasons. Here are some relevant data:
Fast-Growing Economy:
India’s economy is growing at a fast pace. According to the International Monetary Fund (IMF), India is projected to grow at 5.9% in 2023, making it the fastest-growing major economy in the world. The Indian government has launched the Atmanirbhar Bharat Abhiyan, a special economic package of more than $270 billion, or 10% of India’s GDP, to counter the impact of the Covid-19 pandemic, providing the required support and boost to the Indian economy.
Large Market:
India has a vast market with a population of over 1.4 billion people, providing a significant consumer base for various industries. India’s status as the world’s largest democracy and a country with a stable government provides a foundation for its economy to thrive, making it an attractive option for investment.Robust Financial System: India’s financial system is strong, with sound banking and financial institutions such as the Reserve Bank of India, Securities and Exchange Board of India (SEBI), and National
Stock Exchange (NSE):
India’s market is governed by the Reserve Bank of India and India’s Securities and Exchange Board, which oversee it diligently, contributing to its safety and stability.
High Returns:
Indian markets have delivered some of the highest returns over the past decade. According to the National Stock Exchange (NSE), the average annual return for the NIFTY 50 index (India’s benchmark index) was approximately 10% over the past ten years.
Tax Benefits:
NRIs investing in India are entitled to various tax benefits, including a lower tax rate on capital gains, dividend income, and interest income. For NRIs, the Indian market presents various tax benefits, including the Double Taxation Avoidance Agreement. This agreement helps investors avoid double taxation on their investment in both the country of investment and their country of residence. India has this agreement with many countries such as France, the USA, Italy, the UK, Canada, among others.
Ease of Investing:
The Indian government has introduced several measures to make it easier for NRIs to invest in India. For instance, they can invest in Indian mutual funds online and repatriate the funds without any restrictions.
Overall, these factors make India an attractive investment destination for NRIs, offering high returns potential and a robust financial system.
Frequently Asked Questions
Do Know What You Need To Know
For NRI investors looking for NRI Investment Options in India, and particularly looking to invest in Portfolio Management Services (PMS) and/or Alternative Investment Funds (AIF), we at Rajendra Dumbre’s Art of Finance Pvt. Ltd. have made an endeavor to answer some Frequently Asked Questions.
What are the documentation requirements, before you can start Investing in INDIA as an NRI?
NRIs interested in investing in India need to have their basic KYC documents like Foreign residence proof, and PAN card, and so on, in place.
NRI investors are required to submit immigration documents to verify the last time the investor had visited the Indian soil. In normal circumstances, this is a mandatory requirement for PMS and AIF investments, as these are private placement products and the documentation is expected to have happened in-person with the client. But, given the post-Covid era, this requirement has been relaxed somewhat. If the investor is outside India, he needs to send notarized or banker attested KYC documents with attestation of in-person verification done by the Notary officer or Banker.
Apart from KYC documents, NRI investors need to also open a Portfolio Investment Scheme (PIS) account as required under the RBI guidelines. All the other do’s and don’ts are applicable to NRIs under the RBI’s PIS Scheme. These include limits on the investments made in single stocks or on the procedure for investments made under repatriation & non-repatriation basis as well as those applicable for short-selling of shares.
Once the above documentation is completed and PMS is activated, funding can be done by sending money via RTGS or transferring existing shares to the PMS service provider.
What are the Capital Taxation rules for investing in PMS or AIF products?
| EQUITY | |||||
| Listed Equity | Unlisted Equity | ||||
| MF | PMS^ | CAT III AIF | CAT I AIF | CAT II AIF | |
| Tax on Short Term Gains on Equity* | 15% | 15% | Taxed at the fund’s level ^^ |
Taxed at the investor’s end, as per his/her tax slab | |
| Tax on Long Term Gains on Equity* | 10% | 10% | 20% with Indexation benefit | ||
| DEBT | |||
| MF | PMS | CAT II AIF | |
| Tax on Short Term Gains on Debt | Gains will be added to investor’s income and taxed as per income tax slab rate | Gains will be added to investor’s income and taxed as per income tax slab rate | It is a pass through structure in Cat II AIFs, hence the interest income is taxed as per the investor’s tax slab |
Differences between NRI and RI taxation may come in when the country where the NRI resides doesn’t have a Double taxation avoidance agreement(DTAA) with India. However, India has DTAA with most major countries like USA , UK, Singapore, Canada, and so on.
Pls refer to our section on country-wise taxation rules to know more.
Footnotes for Equity PMS Taxation
*Short term = Holding period <12 months in case of Listed Equity & <24 months in case of Unlisted Equity
Long Term = Holding period >12 months in case of Listed Equity & >24 months in case of Unlisted Equity
LT Gains are charged on MFs & PMSs @ 10% above Rs 1L p.a.
Non-equity Capital Gains: Added to income; ST = < 3 year holding, LT = > 3 year holding, no indexation benefit
^For the income earned in form of dividends credited in the financial year, dividend distribution tax is already deducted at the source and in the hands of investor, these dividends tax-free. But, if total income from such dividends earned in a financial year is more than 10 lacs across all investments, then additional dividend income tax is also applicable.
^^ Cat III AIFs are NOT pass-through vehicles, and thus they are taxed at the AIF level itself. The taxation rate depends on the type of income:
Business Income / Trading & Speculation / ST Capital Gains on Non-equity / Dividend
Income: 42.7%
ST Capital Gains on Equity: 15% + 15% Surcharge = 17.9%
LT Capital Gains on Equity: 10% + 15% Surcharge = 11.9%
LT Capital Gains on Non-equity: 20% post indexation + 15% Surcharge = 23.9%
Footnotes for Debt PMS Taxation
PS: For Debt MFs, amount invested before 31.03.2023 will be subject to indexation benefits on LTCG.
In case of Debt, STCG = <36 months and LTCG = > 36 months
Pls refer to our section on country-wise taxation rules to know more.
What is a Portfolio Investment Scheme (PIS) account & how many PIS accounts can an NRI hold?
PIS account is a scheme of Reserve Bank of India ( RBI ) which enables NRIs ( Non – Resident Indians ) and OCBs( Overseas Citizens of India ) to purchase and sell shares and convertible debentures of Indian companies on a recognized Indian stock exchange by routing such purchase/sale transactions through their NRI Savings account with a designated bank branch.
There can only be one PIS account that an NRI investor can open with any bank – In fact there is an undertaking that has to be given by NRI stating that the NRI has no other PIS account(s).
All popular banks today have PIS options for their customers – like HDFC bank, ICICI bank HSBC, Standard Chartered, Kotak, SBI, etc. There are certain restrictions with PIS like on intraday trades, short selling of shares, etc are not allowed. PIS is used to purchase only listed shares and debentures.
What are implications of investing from NRE bank account vs NRO bank account?
Opening an NRE or NRO account is, hence, a viable option for Non-Resident Indians. It can help NRIs in two ways. One, they can send the money they earn abroad to India at any point of time. Two, they can also retain their income from India (via any asset sale of rent etc) in the home country itself.
Both NRE and NRO accounts are Indian rupee accounts.
NRE account is used to transfer foreign earnings to India. Money from NRE accounts is freely repatriable i.e. both the principal amount and interest earned are freely and completely transferable. You should opt for NRE account if you want to hold or maintain your overseas earnings in Indian currency.
Whereas, NRO is used to manage income earned in India. Funds from the NRO accounts can be repatriated post payment of applicable taxes with a limit of USD 1 million in a financial year. You should opt for NRO accounts if you want to save your earnings from India in Indian currency itself. These earnings could include rent, income, dividend, sale of property etc. Also under NRO accounts, interest earned on this account is taxed at the rate of 30% (plus surcharge) and other applicable taxes in India according to the ITA.
In order to take the benefit of lower rates of tax as per double taxation avoidance agreement (DTAA) entered in by India, NRIs need to submit the Tax Residency Certificate issued by Tax Authorities of the country of his residence.
Pls refer to our section on country-wise taxation rules to know more.
Still Have Questions?
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