NRI (Non Resident Indian) | About Non Resident Indian

A Non-Resident Indian (NRI) is an Indian citizen currently living, working or studying outside India.

NRI is any person holding Indian Passport but has immigrated to some other country for the duration of 6 months or more for residence, employment purpose, and vacation circumstances that indicate intention to stay out of India for an indefinite period.

Following people are also considered NRI:

• If a person’s stay in India is less than 182 days during the preceding financial year, then also the person will be considered NRI.
• Citizens of India who are working abroad with foreign government agencies like United Nations Organisation (UNO), affiliates, International Monetary Fund (IMF), World Bank etc. on assignment.
• Officials of Central and State Government and Public Sector undertaking deputed abroad on temporary assignments or posted to their offices, including Indian diplomat missions, abroad.

Non-resident foreign citizens of Indian Origin are treated on par with non-resident Indian citizens.

Who is a person of Indian Origin (PIO)?

A person of Indian origin means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who:

Any foreign citizen (other than a citizen of Pakistan or Bangladesh) is considered of Indian Origin, if:

• Indian passport is held by him anytime throughout life
• Himself or either of his parents or grand-parents was Indian citizen according to Citizenship Act as per Indian Constitution
• A spouse( should not be a citizen of Bangladesh or Pakistan) of an Indian citizen /Indian origin if Bank account is opened or investment is made in share/securities in India provided the Bank accounts are opened or investment is made in shares or securities jointly with their spouse

NRI for Making Investment in India?

For an NRI to make any type of investment in India needs to have Bank account from below mentioned options:

Non-Resident Ordinary Rupee Account (NRO) –

• NRO account is mainly used to manage the Indian income of NRIs which can be received in India in any form of dividend, rent or pension
• This kind of account is not useful if Indian earnings need to be transferred abroad as the limit for this account is 1 million USD.
• Also, it needs to be certified by CA to provide tax paid certificate before repatriation.
• Foreign funds can also be deposited in this account.
• The interest earned from this account is taxable in India.
• Depositing and managing the earnings in India should be the prime use of this account

Non-Resident External Rupee Account (NRE) –

• In this kind of account in which foreign currency funds are converted into Indian currency
• In this type of account, foreign currency funds are converted into Indian currency at the current rate at the time of conversion.
• Funds in the NRE account, as well as the principal amount and interest, are completely repatriable
• NRE account can be opened as NRE fixed deposit account, recurring or savings account.
• In India Interest earned and the principal amount is not taxable
• NRE account is most suitable for NRIs who wish to transfer their foreign income to Indian accounts

Foreign Currency Non-Resident Bank Deposits (FCNR) –

• FCNR is a kind of fixed or term deposit account where money can be deposited in foreign currency.
• Thus, the fluctuation can be avoided in the exchange rate. Also, you can open the account jointly with the resident of India.
• Minimum and maximum maturity period for deposits is 1 and 5 years respectively. The principal amount is taxable whereas the interest earned is tax free

Investment Options in India fot NRI?

Bank Fixed Deposits -

One of the most common investment options for NRIs is opening Fixed Deposit in Indian Bank who deals in foreign exchange. NRIs are provided high-interest rate by Banks on fixed deposits. They can open any out of the mentioned term deposit accounts in India i.e. NRE account, NRO account or FCNR account (As explained in above section).

Mutual funds

NRIs can also invest in Mutual funds. For investment in mutual funds, NRI should have the any out of the above mentioned 3 Bank accounts i.e. NRE, NRO or FCNR. NRI also need to provide a rupee Demand draft or cheque from NRO/NRE Account. Also, investment amount should be in Indian currency and direct debit/credit can be done from NRE/NRO account.Although, according to some countries laws NRIs cannot invest in Mutual funds in India.

Stock Market -

Another option available to NRI for investment in India is in Stock market under RBI’s Portfolio Investment Scheme(PINS).But, for investment in PINS, the NRI needs to take permission under PINS scheme for sale/purchase of shares in India.

Real Estate Sector -

Investing in property/real estate is one of the most common and lucrative investment options for NRIs. They are eligible to invest in both commercial and residential property that too as much as they want, as there is no restriction on the number of properties owned.

Investment in Bonds/Government Securities -

NRIs can also invest in Bonds and government securities. Fixed return is earned by NRIs on these bonds/government securities. In case the purchasing of these bonds/government securities is done via NRE/FCNR accounts then the proceeds are easily repatriable to their country of residence.

Certificate of Deposits -

NRIs are given an option for investment on the repatriable basis on Certificate of Deposits. Certificate of Deposits is either issued as a Promissory note or in demat form. This is non-negotiable money instrument. Interest earned from these is higher than fixed deposits. Also, the maturity period is 7 days to 1 year.

National Pension scheme(NPS) -

NPS is another good option of investment for NRIsbetween 18 to 60 years of age. For investment in NPS holding Indian citizenship is mandatory, in case the NRI gives up the citizenship of India the NPS account will get closed.

Point to Note While Nri Investment in India

• NRIs are liable to pay taxes on earned income from India.
• Capital gains from property sale, shares and securities or salary earned in India is Taxable income
• USA/Canada based NRI’s cannot invest in some of the mutual fund houses. Therefore this needs to be checked before investing
• Double taxation can be avoided by NRIs but DTAA or Double Taxation Avoidance Agreement needs to be checked between the countries.
• Certain investment options like PPF, senior Citizen scheme, NSC etc.. are not available to NRIs

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