Top NRI Investment Options in India for 2024 – Optimize Your NRI Investment

NRIs are looking for the Best NRI investment options in India but the problem is that NRIs tend to succumb to marketing gimmicks by sellers (mostly bankers) and end up buying products that they don’t need.

It’s important that NRIs first should look at their goal & risk profile – then only hit search for NRI investment in India.

We have divided this article into 3 Parts:

• Investment Opportunities with High Returns for NRIs
• Secure Investment Options for NRIs
• Top 5 Investments for High Net Worth NRIs

Must Raed – Investment restrictions for NRIs In India

Best NRI Investment Options in India 2024

The population of Non-Resident Indians (NRIs) is huge. It is estimated that there are 16 million Indians living outside India as per a UN survey.

But as an NRI, you cannot participate in all investments to diversify. But there is some Best Investment Plan for NRIs Where should NRIs Invest in 2024? Let us look at these –

High Return NRI Investment Options in India

Direct Equity

NRIs have the option to invest in the Indian stock market through a Portfolio Investment Scheme (PIS) account, often referred to simply as a PIS account. This account can be connected to a Demat account, which they can open with any authorized stockbroker in India.

Returns in the Indian stock market are high over the long term but not without volatility. Equity investments have the ability to beat inflation and make your wealth grow.

Risk is also higher compared to FDs and PPFs in any stock market-related instrument. You should only make informed decisions.

If the investment is sold within 1 year of purchase, the tax is 15%. If the investment is sold after a year, there is a 10% tax.

NRIs can open a trading account but they can’t do day trading in stocks – they can only sell the stocks that are already delivered to them.

Read More – How Can NRI Invest in the Indian Stock Market

Mutual Funds

NRIs except for the USA and Canada can invest in Indian Mutual Funds. NRIs from the US and Canada have certain restrictions and can buy only a select few Mutual Fund schemes. (even other fund houses request for additional information at the time of purchase & in a few cases even at the time of redemption)

Depending on risk profile, an NRI can invest in equity funds, balanced funds, debt funds, liquid funds, and MIPs.

The gains on the sale of non-equity funds within 3 years of holding will be considered as short-term capital gains. It will be taxed at 30%.

Gains on the sale of non-equity funds after 3 years are long-term gains. They will be taxed at 20% after indexation.

Taxation of Mutual Fund for NRIs is more or less the same as Resident Indian but for NRIs Tax is Deducted at source (TDS) by Mutual Fund Companies. Check Detailed Post on TDS for NRI & how to get a refund

Good Indian mutual funds give returns that can beat inflation in long term. They are managed by professionals so they are less risky in comparison to direct stocks.

There are various options for investing in Mutual Funds. You can use SIPs for regular investments and SWPs for regular withdrawals.

Equity-linked savings schemes or ELSS have become one of the most favored tax saving instruments for all including NRIs if they have some income in India.

Must Check – Mutual fund KYC Process for NRIs

Real Estate

NRIs can invest in residential real estate and commercial real estate. They can avail of loans in India to buy property. NRIs are not allowed to invest in farms, agricultural land, and plantations.

If you invest carefully in reputed properties, it can appreciate quite a bit.

But it might be tough to stay updated from far away and it is difficult to manage if there are some documentation or any processes  to be done

The sale of house property after 2 years of purchase is considered a long-term capital gain, and a TDS of 20% is applicable.

The sale of house property within 2 years of purchase is considered as short-term gain and a TDS of 30% is applicable. buyer shall deduct TDS at 20%.

You are allowed to claim capital gains exemption by investing in house property in India as per Section 54 or investing in Capital Gains Bonds as per Section 54EC.

You can also deposit your gains in a PSU bank or other banks as per the Capital Gains Account Scheme, 1988. Claim this as an exemption while filing returns and you will get a refund.

Till a few years back property was one of the favorite Best NRI Investment India but now they have seriously started considering financial investments like Mutual Funds.

Note – Real estate investment had not seen much appreciation in the last decade but 2024 looked better. End users have started taking interest in buying bigger and better houses – this means some price appreciation.

Must-Read – Investment in Commercial Real estate in India

NPS

NRIs can open National Pension Scheme accounts. Now there is an option of opening an NPS account as well if you have a PAN card or Aadhaar card. NRE or NRO accounts can be used.

If you are an NRI between the ages of 18 and 60 years, you are allowed to open an NPS account with a bank in India called the Point of Presence. You can choose the asset classes in which your funds should be distributed. If you do not choose, automatic distribution across asset classes as per age will be done.

For an investor below the age of 60 –

• A minimum of 80% of the total investment will have to be annuitized and withdrawal is limited to a maximum of 20%
• If the total corpus is less than Rs. 1,00,000, the entire sum can be withdrawn

The annuities and the maturity account are taxable.

For an investor who is 60 years or above-

• A minimum of 40% of the total investment will have to be annuitized and withdrawal is limited to a maximum of 60%
• If the total corpus is less than Rs. 2,00,000, the entire sum can be withdrawn

The pension/annuity will be paid in INR. It is best to open an NPS account with the same bank where the NRE/NRO account it.

It may not be the best bet considering the withdrawal rules, illiquidity and taxation if there are better alternatives. A small amount can be invested in it is required only if the NRI is sure to settle in India post-retirement.

You can read our detailed post on- NPS For NRIs

ULIP

ULIPs or other insurance products are sold to NRIs by bankers to maximize their earnings in the short term as these products have heavy upfront commissions. We normally do not suggest mixing insurance & investments but even if you are offered such products – do detailed research before signing dotted lines.

Must Read – NRI’s Investment Planning Mistakes

Low Risk – Best Investment options in India for NRI

Bank Account

I don’t want to count the bank account as an investment but as you need an account for the rest of the investments I am adding it here. There are two types of popular accounts that NRIs use:

• NRE (Non-Resident External Account) – this is preferred by most of the NRIs as repatriation of money is easy. They transfer their foreign currency to India and use this account for investments. Interest is tax-free.
• NRO (Non-Resident Ordinary Account) – for your income in India like rental this is a good option. Repatriation of money is also possible but with additional documentation & process. Interest is taxable.

Note – it’s illegal for an NRI to hold a Resident Indian Savings bank account – if you have one, you should immediately convert that to an NRO account.

Check – Best Bank for NRIs 

Fixed Deposit in NRO Accounts

NRIs can invest in Indian currency FDs in NRO.

The interest rate is good. The risk is low.

Interest on the NRO account is taxable and the tax is computed at 30% of the interest earned. It is deducted at the source.

It might be subject to tax in the country you live in depending on certain conditions. If there is tax to be paid, a beneficial tax rate or a refund can be claimed depending on conditions of the Double Taxation Avoidance Agreement (DTAA).

Fixed Deposit in NRE Account

As an NRI, you can have a Fixed Deposit in an NRE account.

Interest is tax-free but you have to understand that it can be taxed in your resident country. Example: If you are resident in a no income tax country like UAE, Saudi Arabia, Oman, Qatar, Kuwait, etc. – there is no tax that you have to pay in India or these middle east countries. But what about if you are a resident of Singapore, the UK, or the USA – you may have to pay tax in those countries depending on DTAA.

The risk is low. The interest rate ranges from 6% – 7.75%.

Check – NRE Vs NRO

FCNR Account

FDs can be opened for a period of 1 to 5 years.

It can be in any foreign currency.

Interest is exempt from tax until the person is an NRI or a Resident but Not Ordinarily Resident (RNOR). Another benefit is that you will not have any impact from foreign exchange fluctuations.

You can check our detailed post – FCNR Deposit

NSC

If you had invested in NSC when you had the status ‘Resident’ – you should withdraw that amount or you will get returns equal to Saving Bank.

PPF is a 15-year scheme, which can be extended indefinitely in blocks of 5 years. However, for a resident turned NRI, the extension is not allowed. wiseNRI

Public Provident Fund

If you opened your Public Provident Fund account when you were a resident Indian – you can contribute & continue that. If you are an NRI – you can’t open a new PPF account.

NCDs or Corporate FDs

NRIs can invest in Non-Convertable Debentures or Company Fixed Deposits if the issuer is allowing them to participate. These will be taxable so one should consider is tax liability or compare their return with NRE FDs which are tax-free.

Government Securities

Indian Government has now allowed NRI to invest in government securities and T-bills on a repatriable or non-repatriable basis.

Bonds

NRIs can also invest in various bonds if the issuer allows the same be it PSU bonds or perpetual bonds. A few years back government also issued tax-free bonds to NRIs.

HNI NRIs investment in India 

HNIs keep asking in India where to invest. So we have added a separate section in this article.

PMS

PMS or Portfolio Management Services are complex and risky. For 90% of the investors, Mutual Fund is a good way to participate in equity markets. But US-based NRIs due to tax issues when they invest in Mutual Funds can consider PMS as one of the Best NRI investments in India (but after doing due diligence). Don’t only look at the returns – also check the risk & cost involved. Minimum Investment INR 50 Lakh

Startups

Investing in Indian startups has become increasingly popular among NRIs in recent years. With the rise of online investment platforms like IPV, LetsVenture, AngelList India etc, NRIs now have easier access to the Indian startup ecosystem. These platforms provide a streamlined process for NRIs to discover and invest in promising startups. Additionally, these platforms offer tools for due diligence, allowing NRIs to evaluate potential investments and mitigate risks. No minimum investment but for diversification considers a minimum 20-30 lakh commitment over a period of time.

AIFs

Indian AIFs (Alternative Investment Funds) have emerged as a popular investment option among high Netwrth NRIs seeking exposure to alternative asset classes such as private equity, real estate, and hedge funds. These funds are regulated by the Securities and Exchange Board of India (SEBI) and provide NRIs with access to high-quality investment opportunities that were previously available only to institutional investors. AIFs offer diversification, higher returns, and the potential for capital appreciation, making them an attractive option for NRIs seeking to build a well-rounded investment portfolio. Minimum investment INR 1 CR.

Fractional ownership of CRE

NRIs are increasingly investing in commercial real estate (CRE) in India, which provides diversification and potential for higher returns than traditional investment options. Fractional ownership of CRE is also becoming popular among NRIs, as it allows them to invest in high-value properties that would otherwise be unaffordable. Fractional ownership provides access to a portion of the property’s rental income and appreciation in value, making it an attractive investment option for NRIs seeking passive income. Platforms have made investing in CRE and fractional ownership more accessible to NRIs, providing a seamless and transparent investment process. As the Indian real estate market continues to grow, investing in CRE and fractional ownership can provide NRIs with diversification and long-term value. Minimum investment R 25-30 Lakh.

INVITs

NRIs are increasingly investing in INVITs (Infrastructure Investment Trusts) in India as a means of accessing investment opportunities in infrastructure projects such as roads, power plants, and airports. INVITs are regulated by SEBI and provide NRIs with a cost-effective way to invest in infrastructure projects with low minimum investments. The trusts provide regular income to investors in the form of dividends and offer potential for capital appreciation.

Why Investing In India A Great Option For NRIs?

If you are practical, read on to find out why it makes sense to invest in India –

One Of The Fastest Growing And Stable Economy

When investing, it is important to consider a country’s economic stability. India is one of the most rapidly growing and stable economies in the world, which reduces the risk of investment even during market volatility.

Demographics

More than 65% of the population in India is below the age of 35. This segment has consumerist aspirations and a higher propensity to spend. They have a higher disposable income which they will use to improve their lifestyle. This will lead to increased revenues for companies.

Moreover, they are aware of investing, and therefore there is a high inflow of retail investments in financial products especially mutual funds.

This means our markets have the potential to do well. There will be more steps to streamline markets and financial products.

Must Check – How Can NRI Investment in Indian Stock Market?

Big-spending by corporates

Big brands like IKEA and H&M have started operations in India. Netflix is spending massive amounts on marketing in India. They must have done some research and analysis and seen some potential in India before committing huge funds in the country.

NRIs can follow their suit to create wealth for themselves.

Underdeveloped markets

The consumer base in India is growing by leaps and bounds. India is expected to be the third-largest consumer market by 2025.

Per capita income is on a rising trend which means expenditure on health, education, communication, transport, food, and entertainment will increase for the next few years. The consumption of goods in rural India is also rising. The Indian middle class which is increasing in numbers loves to buy which means companies can target these different segments aggressively.

“NRIs should not miss this growth story and invest in India such that they reap benefits too.” wiseNRI

Performance of Key Indicators

All the economic indicators have been showing the right signals. Inflation has come down. The interest rates on FDs have gone up. The equity markets and mutual funds in India have performed better than most countries in the last few years.

Although past performance cannot guarantee future performance, there are no events that have altered the fundamentals in India, so one can reasonably expect things to go on as they have been going on.

So India is a good destination for investment and NRIs should take advantage of the same.

5 FAQs for NRI Investment in India

1. What are the popular investment options for NRIs in India?

NRIs have access to a wide range of investment avenues in India, including real estate, stocks, bonds, mutual funds, and fixed deposits. Some of the most common options are:

– Real Estate: Purchasing property, either for residential or commercial purposes

– Stocks and Equity Investments: Investing in Indian stock exchanges like the BSE and NSE

– Mutual Funds: Investing in various mutual fund schemes managed by professional fund managers

– Debt Instruments: Investing in government securities, corporate bonds, and fixed deposits

2. What are the tax implications for NRI investments in India?

The tax treatment of NRI investments in India depends on the type of investment and the individual’s residential status. Generally, NRIs are subject to a similar tax regime that of resident Indians. It’s essential to consult with a tax professional to understand the specific tax implications for your investments.

3. How can NRIs remit funds to India for investments?

NRIs can remit funds to India through various channels, including bank transfers, wire transfers, and online payment platforms. It’s important to ensure that the mode of remittance complies with the regulations set by the Reserve Bank of India (RBI) and the Foreign Exchange Management Act (FEMA).

4. What are the different types of bank accounts available for NRIs?

NRIs have access to several types of bank accounts in India, including Non-Resident External (NRE) accounts, Non-Resident Ordinary (NRO) accounts, and Foreign Currency Non-Resident (FCNR) accounts. Each account type has its own features and benefits, so it’s essential to understand the differences and choose the one that best suits your investment needs.

5. What are the regulatory requirements for NRI investments in India?

NRI investments in India are subject to various regulatory requirements, including compliance with FEMA, KYC (Know Your Customer) norms, and other relevant guidelines. It’s crucial to familiarize yourself with the applicable rules and regulations to ensure that your investments are made in a compliant manner.

Navigating the world of NRI investments in India can be daunting, but with the right knowledge and guidance, you can make informed decisions that align with your financial goals

Conclusion 

In conclusion, NRIs have a variety of investment options available to them in India. However, it is important to understand the conditions and restrictions imposed by the RBI before making any investments. NRIs should also consult with a financial advisor to determine the most suitable investment options based on their financial goals and risk tolerance. With careful planning and research, NRIs can make sound investments in India and enjoy the benefits of long-term wealth creation.

Please share if you have come across any other best NRI investments in India.