More than 30 million Indians are living abroad as “Overseas Indians” which includes Non-Resident Indians (NRIs) or an Overseas Citizens of India(OCIs). While the allure of foreign opportunities is there but many NRIs/OCIs also hold a strong connection to their homeland. Financial freedom for NRIs is the ability to live a secure and comfortable life, free from financial stress, while maintaining strong ties to their home country. For them, investing in India offers NRIs a chance to benefit from the country’s rapid economic growth while achieving their long-term financial goals. With a range of investment options available, NRIs can secure their future and contribute to India’s development simultaneously.
Quick Learn: Who is an NRI investor?
To understand NRI investment in India, it is important to determine that an individual investor is an NRI. An NRI (Non-Resident Indian) is someone who is a citizen of India but not a resident of India i.e. is now living outside India. Residential status of an individual, whether a resident or non-resident, is determined under Section 6 of the Income Tax Act.
As per Section 6 of ITA, a citizen of India is considered to be an NRI if he/she is not a resident of India, and an individual is deemed to be an Indian in any previous year if he/she meets any of the following criteria:
- If an individual resided in India for a period of 182 days or more during the previous year; or
- If he/she lived in India for a period of 60 days or more during the previous year and 365 days or more during 4 years immediately preceding the previous year.
An Indian citizen who does not meet the above-mentioned criteria is considered a non-resident Indian or NRI. However, the rules to determine the residential status of an individual change over time. Hence, you must be aware of new rules for NRIs.
What is Financial Freedom for NRIs?
Financial freedom for NRIs is the ability to live a secure and comfortable life, free from financial stress, while maintaining strong ties to their home country. It’s about having enough financial resources to achieve personal goals, support loved ones, and enjoy life on their terms—whether that’s through investments, savings, or passive income streams. Financial freedom allows NRIs to navigate both their host and home countries without worrying about monetary constraints, ensuring they can retire comfortably, pursue passions, or invest in future opportunities with confidence.
Also read: What Is Financial Freedom and 5 Ways to Achieve It
Why Invest in India?
India is one of the fastest-growing economies in the world, with a young population, rising consumer demand, and an increasingly robust infrastructure. The country currently ranked as the fifth largest economy is aiming for a $5 Tn economy by 2027 and to reach the coveted third rank. These factors make India a compelling destination for investment. By investing in India, NRIs can benefit from the country’s growth story while enjoying competitive returns on their investments.
Moreover, Indian markets have historically outperformed global benchmarks, providing attractive opportunities for wealth creation. For NRIs looking to achieve financial freedom, investing in India is a powerful way to build wealth and stay connected to their roots.
Also read: 10 Fastest Growing Economies of the World in 2024
Best Investment Options for NRIs/OCIs in India 2024
While there are various best investment plans for NRIs to invest in India, it is not easy to sort out the best options for them. With some restrictions, investment plans for NRIs in India are more or less similar to those for resident Indians, provided they follow guidelines set by the RBI, FEMA, and SEBI, and laws enacted by the country of their residence. Knowing about NRI investment options in India and the rules that may apply will help you make the right investment choice.
In such situations, it is important to find an ideal NRI investment option that provides complete financial security and attractive returns. Some of the best investment options include secondary market equity shares, mutual funds, NRI fixed deposits, bonds, commercial real estate, pre-IPO, micro VC funds, etc.
Also read: Top 5 NRI Mutual Funds for Retirement Planning 2024
1. Mutual Funds
Mutual funds pool investments from various investors and use the funds to invest in different investment avenues like equity, government securities, bonds, and more. Mutual funds can be one of the ideal investment options for NRIs/OCIs with limited knowledge and understanding of the Indian market as fund managers can make the investment decisions on behalf of the investors and allow NRI/OCI investors to achieve their goals.
Mutual funds can offer much higher returns than bank FDs and can be a good option to start your investment in India. There are several NRI mutual fund schemes in India for NRI investors. However, for NRIs from the US and Canada, there are a few compliance requirements under FACTA to be completed. Thus, only a select few AMCs offer mutual funds for NRIs based in the USA and Canada.
Also read:
10 Mutual Funds That Doubled Wealth In 5 Years
Best SIP to Invest in 2024 – Top 10 SIP Mutual Fund Plans for NRIs/OCIs
2. Fixed Deposits
Fixed Deposits are the most common investment options for NRIs/OCIs. FDs are one of the safe investment options for NRI in India to invest and earn fixed income over a predefined period. There are three types NRI Fixed Deposit Accounts:
- Non-Resident External (NRE) Account
- Non-Resident Ordinary (NRO) Account
- Foreign Currency Non-Resident (Bank) [FCNR(B)] Account
Let’s understand these NRI fixed deposit accounts:
- Non-Resident External (NRE) Fixed Deposit: NRE FD accounts are opened by NRIs to deposit their foreign earnings in Indian rupees. NRE FD account interest rate ranges from 2.75% to 7% p.a. The interest earned in an NRE account is tax-free in India but may be taxed in your country of residence. Both the principal as well as the interest earned can be fully repatriated.
- Non-Resident Ordinary (NRO) Fixed Deposit: NRIs can open an NRO Fixed Deposit account to maintain and save their income generated in India, such as dividends, rental income, pension, etc. You can earn up to a 7.30%* interest rate on these accounts. Interest earned on the funds is taxable in India at 30% along with surcharge and cess.
- Foreign Currency Non-Resident (Bank) [FCNR(B)] Fixed Deposit: An FCNR (B) fixed deposit account allows NRIs to deposit funds in a foreign currency in India, such as USD, GBP, EUR, JPY, AUD, CAD, SGD, HKD, and others. You can deposit money for different terms, like 12 months, 24 months, 36 months, 48 months, or 60 months. An FCNR account helps NRIs avoid currency fluctuation. FCNR FD interest rates vary based on the currency. The interest income is not taxable in India and both the principal amount and the interest are completely repatriable.
Also read: What is Goal Based Investing? How can NRIs do goal-based investing?
3. Commercial Real Estate
Real estate has been a traditional long-term investment option with the Indian diaspora. With new investment options like Commercial real estate becoming a prominent option, the investment options for NRIs/OCIs have increased multifold. Over 52 percent of NRIs are looking to invest in commercial real estate properties as a means of portfolio diversification and long-term wealth generation. NRIs/OCIs can invest in various commercial real estate properties and earn stable, high-yield, and risk-free returns.
Also read: Bhive Investment Review: Bhive Workspace & Bhive Alts Review
4. Portfolio Management Services (PMS)
Portfolio Management Services (PMS) allows NRI/OCI investors with high net worth to invest in the Indian equity market. Fund managers make the decisions on behalf of the investors and invest in the desired portfolio of stocks as per the investor’s investment goals and risk tolerance. NRI investors can invest in PMS with Rs 50 lacs and curate a tailored portfolio for themselves.
Also read: PMS for NRI: A Comprehensive Overview
Disclaimer: SBNRI is a distributor of portfolio management services offered by SEBI registered portfolio managers. SBNRI is facilitating your investment and any assistance provided by SBNRI shall not be considered as advice/ recommendation. SBNRI does not intend to predict the success of the strategies. You are advised to read related documents and independently determine its suitability to your goals & investment objectives.
5. National Pension Scheme
National Pension Scheme or NPS can be one more reliable source of investment for NRIs/OCIs in India. NPS scheme is fully backed by the government and allows NRIs to invest in equity funds, debts, or a combination of both.
Individuals between the ages of 18 years and 60 years can invest in NPS with minimal documents like a PAN card and an Aadhaar card. You need a Non-Resident External (NRE) account or a Non-Resident Ordinary (NRO) account when investing in NPS.
Other Noteworthy Investment Options for NRIs/OCIs
1. Public Provident Fund (PPF)
NRIs/OCIs can continue with his/ her PPF account which they opened as a resident Indian. However, if an NRI doesn’t have a PPF account, she/ he can’t apply for the same with non-resident status. NRIs can’t extend their PPF account after the maturity period of 15 years.
Key Considerations for NRIs When Investing in India
- Taxation: Understanding the tax implications of different investment options is crucial for NRIs. For instance, while NRE FDs are tax-free in India, income from mutual funds or equities may attract capital gains tax. Consulting a financial advisor who specializes in NRI taxation can help optimize your tax liability.
- Repatriation of Funds: Depending on the investment, NRIs should ensure that their funds can be easily repatriated to their country of residence. Investments like NRE FDs and certain mutual funds allow full repatriation, while others may have restrictions.
- Currency Fluctuations: Currency exchange rates can impact the returns on your investments in India. NRIs should consider the potential impact of currency fluctuations, especially if they plan to repatriate their earnings back to their country of residence.
- Regulatory Compliance: NRIs must ensure that their investments in India comply with the guidelines set by the Reserve Bank of India (RBI). This includes adhering to the rules around repatriation, holding property, and opening accounts like NRE or NRO.
Wrapping Up
Achieving financial freedom as an NRI requires a well-thought-out investment strategy tailored to your goals, risk tolerance, and time horizon. By diversifying across different asset classes like mutual funds, equities, real estate, and fixed deposits, NRIs can build a solid portfolio that balances growth, income, and security.
Investing in India allows NRIs to be a part of the country’s growth story while ensuring they have the financial freedom to live life on their terms. With the right approach, NRIs can achieve financial freedom and secure a prosperous future for themselves and their families.
India Investment Made Easy for NRIs/OCIs with SBNRI
NRIs can now download the SBNRI App and choose to invest in different NRI mutual fund schemes in India with ease. You can also get detailed mutual fund advice from experts at SBNRI. Also, visit our blog and YouTube channel for more details.
SBNRI is an authorized Mutual Fund Distributor platform & registered with the Association of Mutual Funds in India (AMFI). ARN No. 246671. NRIs willing to invest in mutual funds in India can download the SBNRI App to choose from 2,000+ mutual fund schemes or can connect with the SBNRI wealth team to better understand Mutual Fund investments.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions. SBNRI does not intend to predict future returns, please read all related documents before investing.
FAQs
Can NRI invest in mutual funds in India?
Yes. NRI can invest in mutual funds in India using their NRE/NRO bank account once they complete their Mutual Fund KYC.
How can NRI buy mutual funds in India?
NRI investors can purchase or sell mutual funds in India once they complete their Mutual Fund KYC and have an operating NRO/NRE Bank account.
Can NRI invest in property in India?
Yes. An NRI can invest in property in India but there are exceptions. Though RBI has given general permission to the NRIs to purchase immovable properties in India, the permission does not grant power to acquire any and every property in India. The NRIs are allowed to purchase only residential or commercial property. So NRIs cannot purchase any agricultural land or plantation property.
Can NRIs invest in PPF?
Yes, NRIs can have a Public Provident Fund (PPF) and invest in it. However, an NRI can open a PPF account when he/she was a resident Indian.
Are mutual funds a good long-term investment for NRIs?
Yes, mutual funds are a great long-term investment vehicle to generate returns and build wealth for NRIs. Investing in mutual funds for NRIs helps to utilize their savings and build wealth for the future. It also helps them to beat inflation and fulfill their investment goals.
Can NRI Invest in Retirement Mutual Funds in India?
Yes, NRIs can invest in mutual funds in India. It is one of the top investment options for NRI and can easily invest in different mutual fund schemes to generate higher returns and wealth building. The FEMA Act, RBI rules, and SEBI guidelines govern the rules and regulations regarding NRI investments in mutual funds which is why it has a slightly different procedure than that of resident individuals. However, it is very easy to set up your Mutual Fund KYC and link it to your NRO/NRE bank account to invest in mutual fund schemes in India.
What is a retirement fund, and how does it differ from other investment options?
A retirement fund is a specialized investment vehicle designed to help individuals save for their post-retirement years. It typically differs from regular investment options by focusing on a mix of assets tailored for long-term growth and income stability.
Can NRI invest in SIP in India?
Yes, an NRI can invest in India through the SIP route. SIP stands for Systematic Investment Plan.
How to make Rs 1 crore wealth from mutual funds in 10 years?
You can invest in a monthly SIP of Rs 43,100 for 10 years at an expected return of 12% to generate Rs 1 crore corpus at the end of 10 years. Based on the historical performance as aforementioned, the NIFTY 100 Index has provided 12.3% average annual return for the past 15 years.
How to make Rs 1 crore wealth from mutual funds in 15 years?
You can use the rule of 15x15x15 to make a wealth of Rs 1 crore from mutual funds in 15 years. With this rule of 15x15x15, you can invest Rs 15,000 a month for 15 years at an expected return of 15% and can generate Rs 1 crore (Rs 1.01 crore approx.) after 15 years.
Can I earn Rs 1 crore from mutual funds in 10 years?
Yes, you can earn Rs 1 crore from mutual funds in 10 years by investing in SIP on a monthly basis and become a crorepati from mutual funds.
Can NRIs become crorepati from mutual funds in 10 years?
Yes, NRIs can invest in various mutual fund schemes in India. If an NRI invests in a monthly SIP of Rs 43,100 over 10 years at an expected return of 12%, they will have a corpus of Rs 1 crore at the end of 10 years. Based on the historical performance as aforementioned, the NIFTY 100 Index has provided 12.3% average annual return for the past 15 years.
Can NRIs become crorepati from mutual funds in 15 years?
Yes, NRIs can become crorepati from mutual funds in 15 years by following the rule of 15x15x15 and investing Rs 15000 a month in SIP for 15 years with an expected rate of return of 15%, then they will become crorepati after 15 years with a wealth corpus of Rs 1 crore.
