Investment Plans for NRIs: Best Investment Options for NRIs in India (2024)

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  OCI and NRI Investment OptionsFor High Returns In India

  Direct Equity

  NRIs and OCIs can choose to invest in the Indian stock market. Equity investments can beat the inflation rate and provide higher returns over the long term. NRI and OCI investors can purchase the shares of a company listed on the Bombay Stock Exchange or the National Stock Exchange.

  They need to open a Portfolio Investment Scheme (PIS) Account with a bank to invest in direct equity. The PIS Account will be linked to the Demat Account with a registered broker in India and their Non-Resident Ordinary (NRO) Account or the Non-Resident External (NRE) Account for the transfer of funds.

  NRIs and OCIs can open a trading account. However, they cannot do intra-day trading and only sell the stocks they previously held.

  Tax^~implications-The applicable income tax^~is 15% if the investment is sold within one year of purchase (Short Term Capital Gains) and 10% without indexation benefit on the amount exceeding ₹1 lakh if it is sold after one year of purchase (Long Term Capital Gains).

  Mutual Funds

  Mutual fund investment plans for NRIs and OCIs are less risky than investments in direct equities as it is managed by professionals of an Asset Management Company.

  OCI and NRI mutual fundoptions extend toequity, debt, or hybrid fund investments. The option can be exercised based on the individual risk profile. Furthermore, investments in mutual funds can be made using the Systematic Investment Plan (SIP) or the Systematic Withdrawal Plan (SWP). SIP investment for NRIsand OCIs can be more convenient, affordable, and profitable over the long term.

  It is important to note that investments in mutual funds are restricted to the NRIs and OCIs residing in the USA and Canada.

  Tax^~implications - The applicable income tax^~rate for OCI and NRI mutual fundinvestments is as detailed below.

  Fund Option	Capital Gains Tax~		TDS On Capital Gains		Tax~on Distributed Income	TDS on Distributed Income
  	STCG	LTCG	STCG	LTCG
  Equity Mutual Funds subject to Securities Transaction Tax~(Holding Period to determine STCG and LTCG - 1 year)	15%	10% without indexation	15%	10% without indexation	Applicable Slab Rate (Under Dividend Option)	20% (Under Dividend Option)
  Other than Equity-Oriented Funds (Holding Period to determine STCG and LTCG - 3 years)	Slab Rate	20% with indexation	30%	20%	Applicable Slab Rate (Under Income Distribution cum Capital Withdrawal)	20% (Under Income Distribution cum Capital Withdrawal)

  
  Please Note: Tax^~and TDS are subject to Surcharge and Health and Education Cess at 4%, if applicable or at the rate specified under the DTAA, whichever is lower under Section 196A of the IT Act 1961.

  Unit Linked Insurance Plans (ULIP^{^^}Plans)

  ULIP^{^^}Plans are comprehensive life insurance plans that provide dual benefits, life insurance, and market-linked^@returns. Therefore, it is one of the good investment optionsfor NRIs and OCIs because they can secure their family in their absence while alsoensuring the capital appreciation of their investments in India.

  ULIP^{^^}plans provide the option to invest in the fund options based on the individual risk appetite and requirements. For example, investors can choose between high-risk equity fund options, low-risk debt options, and medium-risk hybrid options. In addition, the policyholders can switch between the fund options during the policy term based on the changing economic conditions.

  Tax^~implications- The ULIP^{^^}tax^~benefits are applicable to investors who stay insured and invested for 5 policy years.

  The premium paid for a ULIP^{^^}Policy will qualify for the tax^~deduction benefit under Section 80C of up to ₹1.5 Lakhs under the Income Tax Act, subject to the prevailing tax^~rules.

  On the other hand, the ULIP^{^^}returns qualify for tax^~exemption based on the following conditions:

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    Premium should be less than 10% of the sum assured for policies purchased between 1st April 2012 and 1st February 2021.

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    Premium should be less than 20% of the sum assured for policies purchased before 1st April 2012.

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    Premium should be less than ₹2.5 lakhs for policies purchased after1st February 2021.

  At Tata AIA Life Insurance, we provide varied ULIP^{^^}Plan solutions. In addition, The NRI and OCI investors can choose between the fund options, premium payment options, etc., and customise the ULIP^{^^}policy based on their requirements and maximise the applicable benefits.

  Real Estate

  NRIs and OCIs can invest in residential and commercial real estate properties in India. However, OCI real estate investment does not apply to farms, plantations, and agricultural land.

  Investing in reputed properties can provide higher returns in the long term and is considered one of the best investment options for NRIs and OCIs.

  Tax^~Implications- Based on the total income taxable in India, the short-term gains shall be taxed at the applicable income tax slab rates, and the long-term capital gains are taxed at 20%, for the NRIs and OCIs.

  Further, the TDS on the sale of a property is as follows:

  Time of Sales	Type of Gains	Applicable TDS*
  Less than 2 years of purchase	Short Term Capital Gains	As per IT Slab rate
  More than 2 years of purchase	Long Term Capital Gains	20%

  
  NRIs and OCIs can claim tax^*TDS Rate shall be increased by applicable surcharge & education cess.

  NRIs and OCIs can claim tax^~exemptions under Section 54(selling a residential property and investing in another property), Section 54EC (investment gains from property sale are invested in specified bonds), and Section 54F (sale of any asset other than a residential property and investing in a residential property) on long-term capital gains.

  Retirement Plans

  While people move to a foreign destination with a purpose, retirement might be aligned to the home country, India. There are wide-ranging retirement plans with varied annuity options to help NRIs and OCIs plan their retirement in India. It is one of the best investment opportunities for the NRIand OCI to secure their future during the golden years of life. Financial institutions such as banks and life insurance providers offer retirement plans.

  Retirement plans offer the benefit of accumulating funds for the long term, withdrawing a portion of it during maturity, and utilizing the remaining portion to purchase an annuity plan that offers a regular income throughout life. The two most common annuity plans are the immediate annuity plan, which starts providing the regular income immediately, and the deferred annuity plan, which defers providing the regular income to a later date.

  At Tata AIA, we offer various retirement and annuity plans with flexible options to benefit from a life cover and the immediate or deferred annuity option for a secured future.

  Tax^~Implications– The tax^~benefits are subject to the type of retirement plans purchased and the applicable prevailing tax^~laws.

  National Pension Scheme (NPS)

  NRIs and OCIs can open an NPS account with the aid of a Point of Presence (PoP), a service provider through which they can open and operate the account. It is one of the best investment options for an NRI or OCI looking forward to planning their retirement in India. Both the NRE and the NRO account can be utilised for the OCI and NRI National Pension Scheme.All the subscribers will get a Permanent Retirement Account Number.

  There are two stages in the NPS investment: Tier I and Tier II. Tier I is compulsory, and Tier II is voluntary.Tax benefits do not apply to an investment made in Tier II.

  Furthermore,the investors can choose between Active and Auto Choice methods. With the Active Choice investment method, the investors can choose the allocation between equity, corporate bonds, etc. And with the Auto Choice method, the allocation is done automatically based on the age of the OCI or the NRI investor.

  Some of the key aspects, regarding withdrawal,that need to be noted for this OCI and NRI investment in India are:

  NPS Tier-I account withdrawals are subject to specific rules for financial planning and emergencies.

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    Partial Withdrawals:Allowed after 3 years for reasons like illness or education, capped at 25% of personal contributions and limited to three withdrawals.

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    Premature Withdrawal:Post 5 years, or within 3 for those joining after 60, up to 20% can be withdrawn as a lump sum, with at least 80% used for an annuity.

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    Normal Withdrawal:Upon reaching 60, or after 3 years, if joined post-60, up to 60%, is withdrawable as a lump sum, with a minimum of 40% allocated for an annuity.

  For premature withdrawals, if the corpus is below ₹2.5 lakhs, or below ₹5 lakhs for normal withdrawals, the entire amount can be taken as a lump sum. Subscribers have the option to:

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    Continue contributions until age 75, offering flexibility in retirement planning.

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    Upon exiting NPS, options include deferring the lump sum withdrawal or annuity purchase until age 75, allowing for tailored financial arrangements.

  Tax implications

  The tax~ implications based on the Income Tax Act of 1961 for the OCI and NRI National Pension Scheme on income earned in India are as follows:

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    Salaried individuals- Under Section 80CCD (1), the applicable deduction is up to 10% of the salary, which includes basic pay and dearness allowance. However, it can be up to ₹1.5 Lakhs under Section 80CCE.
    In addition, the employer’s contribution under Section 80 CCD (2) over the limit of ₹1.5 Lakhs under Section 80CCE up to 10% of the salary is eligible for the tax deduction for the employee.

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    Self-employed individuals- Under Section 80CCD (1), the applicable deduction is up to 20% of the gross annual income. However, it can be up to ₹1.5 Lakhs under Section 80CCE.

  In addition to these benefits, both the salaried and the self-employed individuals can avail of ₹50,000 under Section 80CCD(1B).

  Tax^~benefits on maturity- The withdrawal benefit from the NPS investment is tax^~-exempt at the time of maturity. However, the amount earned from the annuity post-maturity is taxed based on the applicable tax^~slab rate. Furthermore, partial withdrawal made after 3 years of investment of up to 25% is tax^~-exempt.

  Pre - IPO Market

  NRIs and OCIs can invest in the pre-IPO market. Investors can purchase company shares that are yet to be listed on a public exchange. The private companies issue the shares through an investment firm.

  The units purchased will be deposited in the NRI's or the OCI’s Demat account. Pre-IPO investment can provide significantly higher returns if the company performs well in its business operations. However, it is highly riskier considering the unregulated market for unlisted shares.

  NRIs and OCIs can choose to invest in unlisted shares on a non-repatriation basis. However, they can also invest on a repatriation basis but must report the investment to the RBI.

  Tax^~implications– If the holding period for the unlisted share is more than 2 years, it is a long-term capital asset, else it is a short-term capital asset. If the shares are long-term capital assets, the gains would be taxed at 20% with indexation or taxed at 10% without indexation and without computation of capital gain in foreign currency. If it is a short-term capital asset, the gains would be taxed at 15% if STT (Securities Transaction Tax) is paid at the time of sale. In other cases, the STCG will be calculated based on the applicable tax~ slab rate.

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  OCI and NRI Investment OptionsWith Low-Risk In India

  Low-risk safe investment options provide consistent returns over the long term. They are less exposed to the different types of risks, such as interest rate risk, market risk, etc., and are ideal for conservative investors. NRI can purchase policy when visiting India

  Here are some of the low-risk best investment plans for NRIs and OCIs:
  

  Guaranteed** Return Savings Insurance Plans

  NRIs and OCIs can consider choosing savings insurance plans that offer dual benefits of a life cover for the entire policy term and guaranteed^** returns as the maturity benefit.T&C Apply

  As the returns are guaranteed**, it is considered one of the best and safest investment and savings plans for people having a family in India and future commitments such as a child's education, marriage, etc.

  At Tata AIA, we provide various insurance savings plan solutions, such as Tata AIA Fortune Guarantee Plus (Non-Linked, Non-Participating, Individual Life Insurance Savings Plan (UIN: 110N158V12), which provides an extensive life cover with guaranteed^** returns customisable at an affordable rate.

  For example, the policyholder can choose between the limited pay and regular pay premium payment options and the regular income and lump sum payout options based on their needs.

  Tax^~Implications- The premium paid, and the payout benefits are applicable for the tax^~deduction and tax^~exemption benefit under Section 80C and Section 10 (10D) of the Income Tax Act of 1961, respectively, subject to the prevailing tax^~provisions.

  Fixed Deposit

  Fixed Deposit is one of the best NRI and OCI savings plan options for conservative investors. OCI and NRI fixed depositsapply toNRE, NRO, and FCNR Accounts.

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    NRO Fixed Deposit- NRIs and OCIs can save and maintain income earned in India in Indian Rupees. The NRO fixed deposit rate for a deposit of less than ₹2 crores can range between 3% - 8%.
    
    Tax^~Implications– For the NRO Account, the interest earned is taxable as TDS at the rate of 30%, along with surcharge and cess. However, if it is taxable in the country of their residence, the NRI or the OCI can claim a tax^~benefit based on the Double Taxation Avoidance Agreement (DTAA).

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    NRE Fixed Deposit- NRIs and OCIs can deposit earnings made in foreign currency that have been converted to Indian Rupees. The NRE FD ratesfor an amount less than ₹2 crores range between 6% and 7.90% based on the holding period.
    
    Tax^~Implications– For the NRE Account, the interest earned is tax^~-free. However, it can be taxable in the country of their residence. Therefore, it is necessary to check the DTAA based on the country.

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    Foreign Currency Non-Resident (FCNR) Fixed Deposit– NRIs and OCIs can also open a FCNR Account to maintain a Fixed Deposit in India. It allows the NRI or the OCI to save money in the currency form of the country where they live. The FCNR FD ratesdepend on the type of foreign currency.
    
    Tax^~Implications- The principal and interest earned are tax^~-exempt, and the interest rates vary based on the currency in which the funds are held.

  Child Plans

  Planning for the child's future as an NRI or OCI, mainly when the family is settled in India, is essential. It helps in securing funds for their higher education, marriage, and other important financial commitments. Financial institutions in India have introduced different investment options that can serve as Child Plans.

  For instance, a life insurance endowment policy can help NRIs and OCIs secure funds systematically over the long term to ensure a lump sum maturity benefit for their child's future.

  Tax^~Implications- The tax^~benefits are subject to the type of child plans purchased and the applicable prevailing tax^~laws.

  Corporate Fixed Deposits (FDs) or Non-Convertible Debentures (NCDs)

  Corporate FDs or NCDs are debt instruments issued to the public by some high-rated companies to enhance their long-term capital appreciation. The investment option will have a fixed maturity date, and the interest earned will be paid to the NRI or the OCI investor along with the principal monthly, quarterly, or annually.

  Tax^~Implications -The interest income earned on corporate FDs is subject to TDS at the rate of 10% if the income exceeds ₹40,000 (₹50,000 for a senior citizen) in a financial year.

  The interest income earned on NCDs is taxed at applicable rates and comes under the head Income from Other Sources. If the income is earned by selling of the NCDs, it is applicable as STCG or LTCG based on the holding period.

  Public Provident Fund (PPF)

  Public Provident Fund (PPF) is considered one of the best NRI and OCI savings schemes for long-term investment. The investors must deposit a certain amount regularly into their PPF account. The interest amount earned, and the accumulated fund will be the maturity benefits at the end of the investment tenure. The lock-in period for the investment is 15 years.

  NRIs and OCIs can continue to contribute to their PPF Account that they had opened when they were resident Indians. However, it is important to note that they cannot open a PPF account if they have become an NRI or OCI.

  Tax^~Implications- The investment made, the interests earned,and the benefits earned at maturity for the OCI and NRI PPFqualify for the tax^~deduction and exemption benefits. However, the deduction in investment is up to ₹1,50,000 under Section 80C of the Income Tax Act of 1961.

  Money market instruments

  The Government and the companies use money market instruments to raise short-term debt for their financial needs.

  They are low-risk and best investment options for an NRI or OCI looking out for an investment tenure of less than a year and are listed both in the NSE and BSE stock exchanges.

  The Government of India has permitted the NRIs and OCIs to invest in these securities, such as treasury bills, on a repatriable or non-repatriable basis.

  Tax^~Implications- The returns made from such money market instruments are subject to income tax^~based on the investor's tax^~slab.

  Perpetual Bonds

  Perpetual bonds are bonds that are not redeemable but offer steady interest payouts forever.The bonds will not have a fixed maturity date, and the issuing company will provide regular returns annually.

  Tax^~Implications- The returns are subject to taxation based on the investor's tax^~slab. In addition, if the NRI or the OCI investor sells the bond in the secondary market after holding it for one year, it will be considered as Long Term Capital Gains and subject to the applicable taxes.

  PSU (Public Sector Undertaking) Bonds

  PSU Bonds, also called tax^~-free bonds, are issued by Government enterprises. They offer a fixed interest rate and a low-risk investment option. Tax^~-free bonds generally have a long-term maturity. The enterprise utilises the amount collected in infrastructure and other development projects.

  Tax^~Implications- The interest income is entirely tax^~-exempt. Also, TDS does not apply to these bonds. On the other hand, selling these bonds attracts capital gains tax^~. Capital gains earned after selling the bond before one year is taxable at the applicable slab rate. Selling it after one year will attract a capital gains tax^~of 10% without indexation.

  Sovereign Gold Bonds (SGBs)

  Gold is considered one of the best investment options for NRIs and OCIs in India as it protects against inflation, has a stable price subject to an increase, and is easy to buy and sell.

  Sovereign Gold Bonds are an alternative to possessing physical gold. The value is linked to the price of gold, and the cash benefit can be redeemed after the fixed tenure.

  While NRIs and OCIs cannot invest in SGBs, they can hold it until their maturity or opt for premature redemption that they had purchased earlier when they were resident Indians.

  Tax^~Implications- The interest earned from Sovereign Gold Bonds is subject to taxation based on the applicable tax^~slab.

  On the other hand, if the investment is held until maturity, it is exempt from taxes. It means the capital gains earned upon redemption are tax-exempt.

  Bharat Bond ETF

  Exchange Traded Funds (ETFs) are a type of mutual fund investment listed and traded on stock exchanges.

  The Bharat Bond ETF is an initiative by the Government of India to help satisfy the borrowing requirements of the Public Sector by getting funds from HNIs, individual investors, etc.

  Therefore, the Bharat Bond ETF will only invest in the bonds issued by PSUs (Public Sector Companies). NRIs and OCIs can invest in them and are considered a safer investment option.

  Tax^~Implications- The income earned from the Bharat Bond will be subject to taxation based on the applicable income tax^~slab if held for less than three years. It will be subject to a 20% tax^~rate with indexationif held for more than three years.

OCI and NRI Investment OptionsFor HNIs In India

High Net Worth Individuals (HNI) who are NRIs or OCIs can also invest in India. Some of thebest investment optionsare:

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  Portfolio Management Services (PMS)

  Portfolio Management Services is a financial service offered by professional portfolio managers. They manage the investor's investment portfolio with the guidance of a research team. It can be related to stocks, fixed income, debt, and other individual securities.

  Unlike in a mutual fund investment, the investor can have individual securities and professional managers to handle the investment. The minimum investment is ₹50 Lakhs. However, the NRIs and OCIs will have to analyse the costs and risks associated with the PMS before making an investment decision.

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  Startups

  NRIs and OCIs have found investment in startups a good option to increase their returns. The various investment platforms, such as AngelList India, LetsVenture, etc., provide easier access and a streamlined process to invest in startups. The platforms also provide tools for due diligence to evaluate the investments and help mitigate the risks.

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  Alternative Investment Funds

  Alternate Investment Funds are considered one of the best investment plans for high returnsthat refer to alternate asset classes such as real estate, hedge funds, private equity, etc. These high-quality investments previously available for institutional investors in India are now accessible for the NRIs and OCIs. AIFs are diversified and provide higher returns. It is regulated by SEBI and the minimum investment is ₹1 crore.

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  Fractional Ownership of CRE

  CRE refers to Commercial Real Estate in India. Fractional Ownership of CRE allows NRIs and OCIs to invest in highly valued properties that would have been unaffordable. It helps in accessing a portion of the rental income and the appreciation in value, making it an attractive investment option for a passive income. The minimum investment is ₹25 - 30 Lakhs.

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  INVITs

  INVITs refer to Infrastructure Investment Trusts in India. It provides the option for NRIs and OCIs to invest in infrastructure projects such as airports, roads, power plants, etc. The investors will receive a regular income through dividends and offer opportunities for cost-effective capital appreciation.

How Can NRIs and OCIs Invest In India?

The process for investing in the NRI and OCI investment plans varies based on the specific and chosen financial instrument.Here are the few essential steps that can help NRIs and OCIs to invest in India:

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  Open an NRO or NRE bank account

  NRIs and OCIs should open an NRO or NRE bank account with an Indian bank to invest in India. It is important to remember that an NRE account should be used for investments using foreign earnings that can be repatriated. The NRO account should be used for investments based on earnings in India that cannot be repatriated.

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  Apply for and get a Permanent Account Number (PAN)

  NRIs and OCIs should have a PAN card to invest in India. It is important for various processes such as opening a bank account, investing, filing Income Tax Returns, and claiming tax^~deductions and exemptions, etc.

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  Choose the investment plans

  NRIs and OCIs have different investment options, such as direct equity, mutual funds, savings schemes, etc. They need to compare and evaluate the benefits to choose some of the best options.

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  Complete the documentation and KYC norms

  Prepare the documents for the investment plans and complete the KYC (Know Your Customer) norms specific to the investment options in India for NRIor OCI by submitting the necessary identity and address proofs.

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  Ensure compliance with rules and regulations

  NRI and OCI investors need to understand the tax^~implications, rules, and regulations concerning India and the country of residence to avoid unnecessary discrepancies in the future. It is always recommended to take the advice of tax^~consultants or financial advisors regarding OCI and NRI tax^~lawsto make the best investment decisions.