NRI investment options in India- An overview

The Indian economy is one of the fastest growing economies in the world. If you are an NRI, you can benefit from investing in various high return financial instruments in India such as the equity market, debt based instruments, mutual funds, and others governed by the RBI/ Indian Government.

While most instruments may not specifically prohibit foreign investors, only a few have specific guidelines defined for such foreign investment. These guidelines make these investments a preferred destination to park investment funds from NRI investors. When transferring funds to India, you can save a lot of money, effort and time by using Wise over traditional bank transfers.

In this article we will give you an overview of some of the investment opportunities for NRIs in India. This information is given in a general capacity and should not be taken as investment advice. For personalised investment advice, do consult an expert before investing.

Fixed Deposits (FD)

Fixed Deposits (FD) are a well known way to park your savings with the bank, with an option for withdrawing funds as and when needed. This is perhaps the safest and easiest investment opportunity. To open an FD, you may simply ask your bank to help set you up. Normally, you need to submit a form, post which funds would be deducted from your NRE/ NRO account and added to your FD.

The rates are typically 3-8%, but it depends on a lot of factors and can change day to day². However, once an FD is opened, the rate is constant for the entire period of the FD. The bank would also deduct TDS from your interest earnings, so you will want to file an Income Tax Return, in case you wish to claim a refund on this TDS deducted.

Public Provident Funds (PPF)

Another similar instrument is the option of Public Provident Funds with banks. But as opposed to FDs, there is limited support to NRIs for a PPF. Those who already have PPF accounts active are encouraged to continue with their account until final maturity¹. However, if you are already an NRI, you cannot open a new PPF account. The interest rates are as high as 8%, and also completely free of taxes.

National Pension Scheme (NPS)

After recent reforms, one lucrative scheme that still remains NRI friendly is the National Pension Scheme (NPS). Instead of the complications of calculating capital gains on maturity of investment, the NPS offers tax exemption on the entire disbursement amount. NPS could be a great investment option for NRIs who plan on returning to India at a later stage in their lives.³

Mutual Funds

NRI investors can transact in equity, debt and other instruments including mutual funds. For this, they need to open a Demat account with a broker of choice, and have their funds transferred into India. The TDS requirement on selling of equity and other such instruments, in the open market can be a deal breaker. However, the same can be recovered against their tax dues⁴.

While equity often has a higher risk to return ratio, knowledgeable investors can definitely make a sizeable earning if they’re smart. NRIs can invest in mutual funds as a more sensible investment for a risk averse investor, since the fund house is responsible to manage the investment portfolio.

Real Estate

This is perhaps the most capital-intensive investment opportunity. Those who find the correct opportunity and the correct time, stand to gain massive capital gains. The government recently passed the Real Estate Regulatory Authority (RERA) Act to supervise any fraudulent construction activity under the scope of real estate. India is now also moving towards, if not implemented completely in all areas already, an electronic form of document registration for transfer of title deeds.

When transferring money internationally, think Wise

When transferring money abroad for investing, transfers with banks can be tricky, difficult, and expensive. Apart from the hefty bank fees, the banks often charge hidden fees on high exchange rate, which can rack up high over your original transfer amount. Often, the remitter does not even know the final amount receivable in Indian currency.

For your next transfer, consider using Wise as a faster, cheaper and more convenient alternative. Wise uses the real mid-market rate, the one which you see when you Google the exchange rates at any time, charges a minimal fee, and shows you the exact amount you would be receiving. To find the best rates for your transfers, compare Wise vs leading banks and service providers before making your next international transfer.

Sources used for this article:

1. https://dea.gov.in/sites/default/files/NRI.pdf
2. https://www.hdfcbank.com/personal/interest-rates
3. https://www.india.gov.in/spotlight/national-pension-system-retirement-plan-all#nps3
4. https://nsdl.co.in/faqs/faqonnris_1.php