Different ways for NRIs to invest in India
In most cases, Non-Resident Indians (NRIs) have the same opportunities to invest in India as Resident Indians (RIs), and the tax treatment is almost equal. Constraints, if any, are due to FATCA (Foreign Account Tax Compliance Act) and home country stipulations. For example, NRIs based in the United States and Canada have a limited choice of mutual funds due to the strict requirements of the United States Securities and Exchange Commission (SEC). “Also, due to Passive Foreign Investment Company (PFIC) rules, investing in mutual funds for NRIs based in the US and Canada may not be a good option,” said Anup Bansal. , Chief Investment Officer at Scripbox.
Some of the different ways NRI can invest in India are:
Shares of Indian companies: You can buy these shares on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). NRIs can open investment accounts linked to either NREs (funds transferred from home country on a repatriable basis) with PIS or NROs (funds transferred from sources in India on a non-repatriable basis). There may be company-specific limits on NRIs for investing in stocks.
Mutual fund: NRIs can easily buy mutual funds through various online portals. However, in such cases, their KYC must be complete. Additionally, residents of the United States and Canada may have certain restrictions. Some of the Asset Management Companies (AMC) that allow US and Canadian residents to invest are L&T MF, PPFAS MF and UTI MF.
Portfolio Management Services (PMS): These are similar to the purchase of shares in listed Indian companies but in a non-discretionary manner from the investor’s point of view. “Each PMS provider asks you to invest a minimum of ₹50 lakh with them as per Sebi requirements,” Bansal said.
Alternative Investment Funds (AIF): NRIs are allowed to invest in the AIF, although some restrictions are imposed by the regulator. These investments are available for equity and debt strategies (listed and unlisted).
Fixed deposits: NRIs can invest in NRE/NRO bank term deposits. Bansal said: “Although the interest rates offered on these accounts are higher (5% – 5.4% currently for a 1-10 year term) than the country of origin, there is no significant long-term arbitrage due to fluctuations in exchange rates. NRE deposits are tax exempt, so get a tax benefit.”
Real Investment Trust (REIT)/Infrastructure Investment Trust (InvIT): These investments are listed on the stock exchange and are backed by cash flows from commercial real estate or infrastructure projects. Bansal said, “90% of cash flow should be paid out as dividends to investors. The minimum investment amount that can be requested is in the range of Rs. 10,000 to Rs. 15,000. The three listed REITs are Embassy Office Parks REIT, Mindspace Business Park and Brookfield India Real Estate Trust. The two InvITs listed are IRB InvIT Fund and Powergrid Infrastructure Investment Trust.”
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