In most cases, non-resident Indians (NRIs) have the same avenues available to invest in India as resident Indians (RI), and the tax treatment is almost on par. Constraints, if any, are on account of Foreign Account Tax Compliance Act (FATCA) and the home country’s stipulations. For example, US/Canada-based NRIs have limited choices of mutual funds due to stringent requirements of US Securities and Exchange Commission (SEC). “Additionally, due to passive foreign investment company (PFIC) rules, investing in mutual funds for US/Canada-based NRIs may not be a good option," said Anup Bansal, chief investment officer, Scripbox.
Some of the different means for NRI to invest in India are:
Indian company stocks: You can buy these stocks on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). NRIs may open investment accounts linked either to NRE (funds transferred from the home country on a repatriable basis) with PIS or to NRO (funds transferred from sources in India on a non-repatriable basis). There may be company-specific limits on NRIs to invest in stocks.
Mutual funds: NRIs can easily buy mutual funds through various online portals. However, in such cases, their KYC should be complete. Besides, US/Canada residents may have some restrictions. Some of the asset management companies (AMCs) that allow US/Canada residents to invest are L&T MF, PPFAS MF and UTI MF.
Portfolio Management Services (PMS): These are akin to buying listed Indian company stocks but under a non-discretionary mode from an investor point of view. “Every PMS provider requires you to invest a minimum of ₹50 lakh with them as per Sebi requirements," Bansal said.
Alternate Investment Funds (AIFs): NRIs are permitted to invest in the AIF, although there are certain restrictions imposed by the regulator. These investments are available for equity and debt (listed and unlisted) strategies.
Fixed deposits: NRIs may invest in NRE/NRO bank fixed deposits. Bansal said, “Though the interest rates offered on these accounts are higher (5% - 5.4% currently for 1-10 years tenure) than the home country, there is no meaningful arbitrage in the long term due to exchange rate fluctuations. NRE deposits are tax-exempt, so have a tax advantage."
Real Investment Trust (REIT)/Infrastructure Investment Trust (InvIT): These investments are listed on stock exchanges and are backed by cash flows from commercial real estate or infrastructure projects. Bansal said, “90% of the cash flows need to be paid in the form of dividends to the investors. The minimum investment amount that may be applied for 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 listed InvITs are IRB InvIT Fund and Powergrid Infrastructure Investment Trust."
