How NRI invest in India: Mutual Funds and Real Estate

NRI Investment in India has been appreciating since the last few years. FII net inflow in India for the past week (28th Feb-06th March 2021) was 1246 crores and that too just in equities while the Forex Reserves rose to USD 584.55 Bn. Time and again, many NRIs have put up this question of how can NRI invest in India? In this article we will browse through two asset classes: NRI Mutual Funds and Real Estate, and understand how NRI invest in India particularly in these two asset classes. But before we slide into the details, let’s us first understand who is an NRI:

How NRI invest in India: Mutual Funds and Real Estate
How NRI invest in India: Mutual Funds and Real Estate

What does NRI stand for?

Sometimes, the basic definitions can be the most confusing. What does NRI stand for? What does NRI mean? These are some fundamental questions that need clear understanding before we move ahead to something that is as complex as NRI Investment in India. So what does NRI stand for and who is an NRI?

NRI stands for Non-Resident Indian and it is defined under two separate acts in India viz. Foreign Exchange Management Act (FEMA), 1999 and Income Tax Act, 1961.

Differentiating Factor: The basis of these definitions in these acts differ on the basis of intent and period of stay.

  • FEMA considers a person to be an NRI if he/she has gone out of India or stays outside the country for the purpose of employment, business, vocation (occupation for which an individual is trained) or any other circumstances indicating his/her intention to stay outside India for an uncertain period of time (job or assignments where you don’t know when you will return to India).
  • As per the IT Act, there are certain criteria based on period of stay that are laid down to assess the residential status of an individual. These criteria define a Resident Indian and someone who doesn’t fall in this category automatically becomes a Non-Resident Indian or NRI. The criteria for becoming a Resident Indian are:
    • If an individual is in India for at least 182 days in that year, OR
    • If the individual was not in India for at least 182 days in the previous year but he/she was in India for at least 365 days during the last 4 years to that year and at least 60 days during that year

So, if you don’t fall under any of the above mentioned categories, you become an NRI as per the IT Act.

Did you know? FEMA dictates your residential status for the current financial year whereas the IT Act dictates your residential status for the previous financial year.

Technical and Legal differences between NRI, PIO & OCI

Now, we know what does NRI stand for and what does NRI mean clearly. In the next segments, let’s understand more about how NRI invest in India. We will cover two important investment classes that bring in most of the doubts and queries around the investment processes, documentation, taxation and much more.

Can NRI invest in Mutual Funds in India?

Can NRI invest in Mutual Funds in India is that doubt that doesn’t even need to be typed completely in the search bar. The initial predictive text always guesses this doubt. Why is it so? Why are NRIs confused whether they can invest in Mutual Funds in India or not? In this segment let’s answer the most asked questions around NRI Mutual Fund.

  1. Can NRI invest in Mutual Funds in India?
    Yes! NRIs can invest in Mutual Funds in India. NRIs are given parity with Indian Residents in terms of Financial aspects. There are certain elements related to NRI Investment in Mutual Funds in India that an NRI needs to understand (KYC, In-Person Verification, Taxation etc.). For a detailed understanding of NRI Investment in Mutual Funds in India, head over to our guide on NRI Mutual Funds.

  2. Can US based NRI invest in Mutual Funds in India?
    Yes! A US based NRI can invest in Mutual Funds in India. However, there’s a catch. There are only a handful of AMCs/Fund Houses in India that allow NRI investments from the USA. These fund houses are:

    – DHFL Pramerica Mutual Fund
    – Birla Sun Life Mutual Fund
    – ICICI Prudential Mutual Fund
    – SBI Mutual Fund
    – UTI Mutual Fund
    – L&T Mutual Fund
    – PPFAS Mutual Fund (Parag Parikh Financial Advisory Services)
    – Sundaram Mutual Fund
  1. Can NRI invest in SIP?
    SIP refers to Systematic Investment Plan. SIP for NRI is a very useful option which means that NRIs can invest in India through the SIP route. The benefits of SIP for NRI include factors like Rupee Cost Averaging, Power of Compounding, 2X higher returns when compared to RDs and convenience on top of it all.
NRI Mutual Fund: Expert Assistance

To learn more about NRI Mutual Funds. You can browse through our blog or connect directly with our experts on WhatsApp using the button at the end of the article.

In the next segment, let’s take up NRI Investment in Real Estate and answer some questions that NRIs often ask.

Can NRI buy agricultural land in India?

Let’s start with a very specific question that NRIs ask: Can NRI buy agricultural land in India? Well the answer to this specific question would be NO! NRIs can’t purchase agricultural land, a plantation property or a Farmhouse in India. Such properties can only be inherited or received as gifts. NRI buying property in India is a broader segment however. Agricultural land is just an aspect of Real Estate investment in India by an NRI. In the next segment, let’s answer some categorical questions put up by NRIs:

  1. Can NRI buy property in India?
    Yes! NRIs can buy a residential or commercial property in India. Investment in India by NRI in Real Estate is subject to certain guidelines. These guidelines include factors like which properties an NRI can buy in India or how can they invest in these properties (i.e. which bank accounts can be used, loans etc.). The procedure for NRI to buy property in India involves aspects like documentation and taxation angles along with legal elements such as a Power of Attorney which need expert assistance.

  2. What is the tax on sale of property in India?
    Taxation on sale of property by an NRI involves various aspects. The TDS on sale of property by NRI is something that they need to understand. Also, NRI selling inherited property in India is a common thing. The fundamentals of capital gains come in play once an NRI sells a property. The repatriation of sale proceeds also adds a layer of confusion as it involves furnishing of forms 15CA and 15CB. Visit the Real Estate category to learn about the taxation around buying, selling, renting and inheriting a property in India as an NRI.

  3. Which is the best place to invest in Real Estate in India?
    NRI Investment in Real Estate is done on the basis of various factors. These factors resemble the needs of the individual. Many NRIs invest in Real Estate in India with a vision of retirement life and select the place as per their requirement of a post-retirement lifestyle. Many NRIs invest with the purpose of generating income through rent, capital gains or new concepts like reverse mortgage. Read more about why should an NRI buy a house in India and then decide on a place accordingly. For help, you can glance through the top 10 places to retire in India.
NRI Investment in Real Estate: Expert Assistance

In the above segments, we covered the two important asset classes: Mutual Funds and Real Estate and it is evident that there are so many layers to it that you might need expert assistance with end to end execution. Let’s see how to get it at the comfort of your homes.

Get Expert Assistance and understand how NRI invest in India

At SBNRI, we understand that there is a need for end to end assistance in terms of execution when it comes to asset classes like Mutual Funds and Real Estate. Also, other intertwined elements like NRI Bank Accounts, NRI Investment, NRI Income Tax etc. need similar attention and an integrated platform is necessary to address all these elements at one place. That’s precisely what we do. Get in touch with our experts directly on WhatsApp for more details using the button below. Also, visit our blog and Youtube Channel for more information.

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FAQs

What are the investment options for NRIs in India?

There are a plethora of investment options for NRIs in India. The top 5 investment options for NRIs include Fixed Deposits, Mutual Funds, Stocks, Real Estate and GOI Securities.

How can NRI invest in Indian Mutual Funds?

An NRI can invest in Indian Mutual Funds using his/her NRE/NRO Account. The NRE Account is used to invest on a repatriable basis and NRO Account is used to invest on a non-repatriable basis.

Can I invest from the USA in India?

Yes an NRI can invest from the USA in India in various asset classes such as FDs, Mutual Funds, Stocks etc.

Can NRI invest in SIP in India?

Yes, an NRI can invest in India through the SIP route. SIP stands for Systematic Investment Plan.

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