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NRI Investment Options in India in 2023

8 Mins 04 Aug 2023 0 COMMENT

It’s a common misconception among several Non-Resident Indians (NRIs) that they are not allowed to invest in their motherland. However, the truth is that NRIs can easily invest in domestic investment instruments just like resident Indians.

However, they may have to follow certain guidelines laid down by the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) under the Foreign Exchange Management Act (FEMA). One also needs to be mindful of the laws of the country where they are residing.

If one can understand these technicalities, there are a lot of NRI investment options in India where they can invest. Out of all the available investment plans for NRIs, one can choose the best option as per their risk appetite and investment objective.

Let’s have a look at some of the investment options for NRIs in India:

1. Fixed Deposits

Fixed Deposits, or FDs, are among the safest investment options for NRIs. These deposits allow them to invest a specific amount for a particular period and get guaranteed returns on maturity. As an NRI, one can open an FD account with a bank or a non-banking financial corporation (NBFC) in India. The only drawback of investing in an FD is that the investor is not allowed to withdraw their money before maturity.

The following three types of FDs are available in India for NRIs:

  • Non-Resident External (NRE) FD, which allows an NRI to invest their foreign earnings in India
  • Non-Resident Ordinary (NRO), FD, which allows them to invest their income generated in India
  • Foreign Currency Non-Resident (FCNR) FD, which allows them to deposit funds in a foreign currency

2. National Pension Scheme

The National Pension Scheme, or NPS, is a government-backed retirement investment scheme. It allows NRIs, as well as resident Indians, to ensure annuity income after the age of 60. An NRI can open an online NPS account with any authorised service provider by submitting a few documents, such as a PAN card, Aaadhar card, and their NRO or NRE bank account details.

The investment made towards an NPS account is allocated to debt, equity, or a combination of both instruments. One can choose between the ‘Active Choice’ and the ‘Auto Choice’ options to decide the allocation of their investments.

3. Stock markets

Stock markets are considered the best investment options for NRIs who are willing to take some risks to get high returns. An NRI can invest in the shares of different companies and earn profits through capital appreciation under the Portfolio Investment Scheme (PIS) of the RBI. However, they need to have an NRE or NRO bank account, a demat account, and a trading account for this.

4. Mutual Funds

Mutual funds are one of the most popular NRI investment options. They can provide very high returns in the long term and are not as risky as the stock markets. It’s because mutual funds are managed by professional fund managers who decide on the investment allocation and other parameters.

Moreover, mutual funds allow investors to select between equity, hybrid, and debt funds as per their risk appetites and investment objectives. One can invest in a mutual fund scheme through a Systematic Investment Plan (SIP) or lump sum.

5. Real estate

Several financial experts recommend real estate as the best investment for NRIs. The main reasons behind this are the favourable government policies for NRI investment in Indian properties and the possibility of earning significant returns. The values of real estate properties in India have escalated rapidly after the COVID-19 pandemic.

NRIs can use any of the following bank accounts to purchase a real estate property in India:

  • NRE bank account
  • NRO bank account
  • FCNR bank account

Conclusion

Apart from the investment plans for NRIs mentioned above, one can also invest in instruments such as a Unit Linked Insurance Plan (ULIP), Public Provident Fund (PPF), bonds, Non-Convertible Debentures (NCDs), and more. One can choose from the available NRI investment options to create a diversified portfolio for better risk-return management.

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