Simple how-to articles and free tools for financing your goals, managing your money, mutual fund and stock investments. I have received repeated request to write about investment options available for NRIs. However, since it is an area that I know little about, I requested fee-only financial planner Melvin Joseph 's help.

Union Bank of India | NRI Banking Services

India has the largest population of people living abroad in the world. As per the UN report, 16 million people from India were living outside India in If you include the person of Indian origin PIO this number will rise to 30 Million.

What are the investment options for NRIs? A good number of NRIs are interested in creating assets in India because they wish to return after retirement. NRIs based in US and Canada has some restrictions in investing in India. The scope of this article is limited to NRIs in other countries.

It is advisable to convert your savings account to NRO account before going overseas. You can visit your bank with Visa and passport and they will convert your existing Savings account to NRO account. However, an individual residing outside India and qualifying as a resident of another country can avail the benefit of a lower tax deduction on interest on NRO account under a double tax avoidance agreement.

Any individual intending to avail this option can intimate the bank and submit a copy of tax residency certificate from the country where he qualifies as a resident. Interest income earned from deposits maintained in FCNR account is exempt from tax up to such period the NRI continues to be a non-resident or a resident but not ordinarily resident RNOR in India for income-tax purposes.

As a first step, you should update your KYC as an NRI investor. If you are already an investor, you have to change your KYC with NRI status. If you are new to mutual funds, you can submit the following documents at the office of any fund house or registrars like CAMS or Karvy for KYC. They will verify your documents and do the in person Verification IPV.

You can do this during your visit to India or before leaving India. As an NRI, you can invest in mutual funds on non — repatriable basis or on repatriable basis. If it is non repatriable basis, you can invest from NRO account. Otherwise you have to use NRE account. If you sell equity funds after holding it for 1 year, the gains are treated as long-term capital gain and it is tax-free.

If you sell non-equity funds within 3 years of holding, the gains will be treated as short-term capital gains and will be taxed as per your tax slab. Dividends are tax free in your hands.

But in the case of debt funds, the fund house deducts dividend distribution tax before releasing dividends. If your tax liability is less than these rates, an NRI can file the income tax return and claim the refund. NRIs can invest in Indian shares through Portfolio Investment Scheme PIS of the Reserve Bank of India RBI. Each transaction through the PIS account is reported to the RBI. Investing in real estate is easy for NRIs under the ambit of Foreign Exchange Management Act FEMA.

An NRI or a Person of Indian Origin PIO can invest in both residential and commercial properties in India. But they are not allowed to invest in agricultural land, plantation property and farm house. They can own such properties only if it is gifted to them or inherited. PPF is a 15 year scheme of the government with an option to extend it after 15 years in blocks of 5 years.

It allows tax benefits under Section 80C and the maturity amount is also tax free. This is a good option for debt investing and can be used as a retirement tool to ensure tax free withdrawal.

But those who opened a PPF account before they actually got NRI status can continue the account until it matures. But they cannot extend it after 15 years. On maturity, either, they can close the account or can keep it there and enjoy tax free interest till they close the account. NPS is an easily accessible, low cost, tax-efficient and flexible retirement savings account.

Under the NPS, the individual contributes to his retirement account. NPS is designed on defined contribution basis wherein the subscriber contributes to his own account.

The benefit subscribers ultimately receive depends on the amount of contributions, the returns made on the contributions and the period of contributions. Yes, an NRI in the age of 18 — 60 years, and complying with the KYC norms, can open an NPS account.

NPS is distributed through authorized entities called Points of Presence POP. Almost all the banks in India are enrolled to act as Point of Presence under NPS. To invest in NPS, you are required to open an NPS account through a POP bank, preferably where you have your NRI account. You can send your NPS application form to your Bank for opening of the NPS account. However, there is no restriction on repatriation of pension, whether paid as annuity or in lump sum.

Provisions of Income Tax Act, subject to amendments from time to time, would be applicable. Some times NRIs are subjected to double taxation - once in India and again in the country of their residence. It depends on their country of residence. If the Indian government has a Double Tax Avoidance Agreement DTAA with that country, the NRI will be spared from paying tax twice.

This means he gets a deduction on the tax paid in India from his tax payable in the UK. Please join me in thanking Melvin for this article.

4 Investment options for NRIs

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Read more about the book and order now! Please clarify NRE is tax free even after settling in India as resident until maturity of the deposit. As stated - "If you are already an investor, you have to change your KYC with NRI status.

Should NRI file Income Tax returns in India ? | Wealthcom

But what happens to the already invested amount under resident status? Does it automatically converted in to repatriable? Though you can continue to receive the contracted rate of interest on NRE deposit till maturity, the interest will be taxed once his tax status changed to Resident. But, if he can maintain the Resident - But Not Ordinary Resident status RNOR , till that time, the interest will be tax free. Once you return permanently, you are no longer NRI as per FEMA. Hence, you can't own NRE account.

Those NRE deposits have to be re-designated as resident deposits. Interest on resident deposits is taxable. Investments in units purchased in Rupees, where the investor was a resident of India and subsequently becomes a non-resident, will not qualify for repatriation. Once you become NRI, you are supposed to change the tax status.

You can continue investing from NRO account without repatriation option. Investing under old KYC from NRE account is not possible. Amount invested as resident before turning NRI does not become repatriable. However, funds after redeeming those units come to NRO account.

And you can repatriate upto USD 1 million per annum from NRO account. Must be enough for most of us. Hi Melvin, As I understand, only interest on FCNR is exempt from tax for RNOR. So such benefit for NRE deposit re-designated as resident deposits. Interest will be taxable for RNOR. So technically it is upto me whether to declare the status or not. Suppose if I remain out of India on work for days of a FY and then back to India for the remaining days and continue in India for the next days total of days and the take up a job out of India for the next 6 months, I will be NRE for both FYs..

Yes, you do exercise a lot of discretion as per FEMA. Only you know if you have returned permanently. However, if you are coming to India to take up employment, you are resident from day 1 as per FEMA.

The definition of NRI is different as per FEMA and Income Tax Act. Agree with you fully. Once we take up employment at India it becomes different.

What I have assumed is not doing any work during such period. Yes, You are right Deepesh. Only FCNR is exempted. Thanks for pointing out. You are testing limits of the law.

I doubt your bank or RBI will come after you for a subjective matter. However, there can be an issue if your case comes up for scrutiny for Income Tax. You will have to convince IT Assessing officer. I say this because Section 10 of Income Tax Act refers to FEMA when it comes to exemption for NRE interest.

Most likely, nothing will happen. Are NRI eligible to claim TDS deducted on debt fund investments by filing tax returns, subject to the tax free income limit of ? Hi Ajay, You can claim back excess tax paid through TDS at time of filing returns. Btw, the limit is Rs 2. In case DTAA allows taxation at lower rate, you can submit requisite documents with the AMC.

They will deduct TDS at a lower rate. Under DTAA, You get tax credit for taxes paid in India. Has any one done this. I have done this for my NRO FD but could not do it for debt fund, one CA said it's not possible Ajay, To be honest, none of my clients have tried this.

Hence, I do not have practical knowledge. Do not check with CA. Check this with AMC. Drop an e-mail to find out. For NRI, you have NRE FDs. Hence, the charm, need and tax benefits of debt mutual funds is not anyways not so high. TDS is merely deduction at source. If excess tax is deducted, you can claim it back at the time of filing returns. There is a post on my website about TDS deductions for NRIs. Suggest you check it out. If suppose i am NRI investing in MF through my wife or other blood relative accounts means i can avoid TDS in Eq.

MF and Debt also.. One important thing to note is that once you become NRI and have NRE status then it is in the interest to close either Resident Indian savings account or convert them to NRO. As per FEMA an NRI cannot have Resident Indian Savings account. All interest from NRE deposits are taxable upon return to India. The account holder is allowed to hold the deposits until maturity, but is responsible to pay taxes on it on par with resident deposits. Only FCNR is exempted from tax as long as the account holder enjoys RNOR status.

The moment the NRI returns back to India and stays over days in a FY, the NRE FD interest is taxable, though he can hold the NRE deposits till maturity. Nee fixed deposit will remain as NRE status for a 2 year period after your return to India.

Post that it will be treated as ordinary fixed deposit of resident. A guide to using freefincal. Twitter freefincal Facebook page Youtube Videos Feedburner Google Plus Pinterest Contact Us.

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