Indian government schemes for NRI investment

There are various NRI investment options in India offered by government and private players. The government of India offers a wide range of investment schemes to NRIs and OCIs. Some of the schemes include fixed deposits, mutual funds, government bonds, and national pension schemes for NRIs. All these Indian government schemes for NRI investment help them achieve their financial goals. 

Indian government schemes for NRI: FD, Mutual Funds & NPS
Indian government schemes for NRIs

Indian government schemes for NRI investment

The government of India offers diverse range of schemes for NRIs for investment and saving:

  • NRI fixed deposits
  • National pension scheme for NRIs
  • Mutual funds for NRIs
  • Government bonds and securities

These schemes help NRIs plan their future finances, meet their financial needs and also plan retirement.

Fixed deposit for NRIs

NRIs can open a fixed deposit account to save their money and receive fixed interest. You can’t withdraw money from your fixed deposit account prematurely unless allowed by your bank. Premature fixed deposit withdrawal will attract a penalty. There are three types of NRI fixed deposits:

  • Non-Resident External (NRE) account

An NRE fixed deposit allows you to save your foreign earnings in Indian rupees (INR). NRE FD interest rates vary for different banks and principal amounts. 

  • Non-Resident Ordinary (NRO) account

NRIs can open an NRO FD account to save their income earned in India, such as rental income, dividends, pension, etc. There is a limit on the amount that you can repatriate from an NRO account to the account in your country of residence. The interest accrued is taxed at the rate of 30%.

  • Foreign currency Non-Resident (FCNR) account

A foreign currency non-resident (bank) account can be opened to deposit money in a foreign currency. This type of account helps depositors to avoid currency fluctuations in foreign exchange markets. FCNR interest rate depends on the type of currency deposited. Interest earned on the deposit is exempt from tax in India. 

Government bonds and securities for NRIs

Non-resident Indians can invest in government bonds and securities, including PSU bonds, G-Sec Bonds, and treasury bills. Government bonds are loans that government or PSUs take from resident or NRI investors such as individual investors, HNIs, insurance companies, mutual fund houses. 

The government repays these loans including the interest to the investors by redeeming the bond. There are three types of primary government bonds that NRIs can invest in:

  • Fixed-rate government bonds: These bonds are extended at a fixed coupon rate.
  • Floating rate government bonds: The coupon rate fluctuates depending on the current market trend. 
  • Capital index bonds (CPI bonds): The coupon rates are adjusted as per the inflation in India. 

Mutual funds for NRIs

Asset management companies (AMCs) or fund houses pool funds from different individuals, NRIs, HNIs, and corporate houses. This fund is then managed by professionals known as fund managers. Fund managers invest this pool of funds into different stocks, bonds, or other investable securities.

Mutual fund investment is regulated by SEBI or Securities Exchange Board of India, a government authority. Investment in mutual funds is a little bit riskier than fixed deposit accounts, but MF can generate higher returns as compared to fixed deposits. 

Types of mutual funds for NRIs

  • Equity mutual funds: They invest at least 65% of its investor’s contributions in equities or stocks.
  • Debt mutual funds: Investor’s money is invested in debt markets, money markets, or treasury bills, government bonds and PSU bonds. 
  • Balanced/ hybrid mutual funds: Investors’ contribution is invested in both equity and debt instruments, which helps balance the risk of the portfolio. 

Non-resident Indians need to have an NRE, NRO or FCNR account in India to invest in mutual funds. Government companies that offer mutual funds for NRIs are:

  • SBI Mutual Fund
  • UTI Mutual Fund

Tax for NRI investment in India

Nature of Profits / IncomeEquity Funds*Debt Funds*
Minimum Holding period for Long term capital gains1 year3 years
Short term capital gains taxation15% + cess + surchargeAs per the tax rate of the investor
Long term capital gains taxation10% + cess + surcharge (if the long term gain exceeds Rs 1 Lakh)(long term gains up to Rs 1 Lakh is tax-free) 20% + cess + surcharge
Tax for NRI investment in India

National pension scheme for NRIs

National pension scheme for NRIs is a retirement savings scheme launched by the Indian Government. It is a cost-effective and tax-efficient scheme that enables investors to operate a flexible and portable retirement savings account. Benefits will depend on the volume of contributions, returns on investment, the total period for which contributions are made. 

NRIs aged between 18 and 60 years can contribute to the NPS, using an NRE or NRO account. Features of NPS account for NRIs are as under:

  • Minimum contribution should be Rs. 500 per month and Rs. 6000 per annum. 
  • Investment can be allocated in a variety of asset classes like equity, corporate bonds, and government securities. 
  • Up to 85% of the funds can be invested in equity, or government securities, or corporate bonds – depending on the risk appetite of the investor. 

Benefits of Indian government schemes for NRI

NRIs can enjoy the following benefits by investing in India:

  • Income Generation: NRI can earn passive income by investing their money in asset classes such as fixed deposits, mutual funds, NPS, etc. 
  • Financial planning: Investing can help NRIs to meet their financial goals in India, such as buying their own house, car or school/ college fees of their children. 
  • Higher returns: It is difficult to earn an attractive return on investment for NRIs living in countries like the UK, USA, etc. As India is a rapidly growing economy, markets in India offer higher interests than the US.

To ask any question related to NRI investment in India, you can schedule a call by clicking the button below or download SBNRI App from the Google Play Store or App Store. You can also use the SBNRI app for investment in stock market/ mutual funds, NPS, Fixed Deposit, Pre-IPO, Asset Finance, Commercial Real Estate, Indian Startups Funds, NRI account opening, etc. To ask any questions, click on the button below. Also, visit our blog and YouTube channel for more details.

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