Non-Resident Indians prefer the thought of investing in India. No matter where an Indian resides and earns, making an investment back home is always at the top of their mind. India is the fastest-growing economy in the world and has attracted investment from across the globe. An NRI can invest in the country after completing due formalities that are prescribed by the government.
Here are a few things you need to keep in mind as an NRI when investing in India:
- Investment options: An NRI can invest in most schemes in the country including bonds, mutual funds, real estate, fixed deposits, equities, ETFs and certificate of deposits.
- Opening an account: Before making an investment in India, it is essential for an NRI to have a bank account in India. They can avail NRI banking services through NRO and NRE bank accounts. In order to make investments in the country, it is important for an NRI to obtain PAN. It is a mandatory requirement for using NRI services.
- Repatriation: NRO accounts allow repatriation of principal and interest amount up to $1 million in a financial year.
- Taxation: Income earned from sources in India will be taxed at the applicable rate for NRIs.
- Trading accounts: In order to make an investment in the equity market, it is essential to open a Demat and trading account which is similar to those of the resident Indians.
- PIS letter: To open a trading and Demat Account with a registered broker, it is important for an NRI to get a Portfolio Investment Scheme letter by the RBI. This scheme allows foreign investments in the Indian stock market.
- Power of Attorney: In order to use the NRI services and to manage documentation, an NRI will have to assign Power of Attorney to a local resident. An NRI can do this by filling up a form which is duly signed by both the parties and then submitting it to the bank.
- Trading in derivatives: An NRI can only invest in derivative contracts approved by SEBI out of the funds held in the country in an NRO account.
- Holding threshold: The total holding by an individual NRI should not be more than 5 per cent of the paid-up equity capital and the total holding of all NRIs should not exceed 10 per cent of the paid-up equity capital.
- Real estate: An NRI can invest in commercial as well as residential properties in the country. However, an NRI cannot invest in companies which are engaged in real estate, agriculture, plantation activities or construction of farmhouses.
These are the ten things you must keep in mind before getting involved in NRI banking. NRIs can plan their investment in different instruments and earn good returns on it. However, an NRI can only make an investment after the formalities have been completed. This includes bank account opening after submission of necessary documents.