Top 10 NRI Investment Options In India

The Three R's of investing are Research, Risk, and Reward. 

The highlights from the Reserve Bank of India's research report state that NRI investment in Indian has doubled in 2024, reaching 7.82 billion USD between April and August, with the outstanding total now at nearly $159 billion USD.

Amid global chaos, India's economy is growing steadily and sustainably and has become a preferred investment destination for NRIs. Hence, in this guide, we will discuss the top 10 NRI investment options in India, including their taxation and compliance requirements.

Why Should NRIs Invest In India?

India's economy is among the fastest-growing and is projected to become the world's third-largest by 2028-2030. This rapid growth has made India an enticing global investment destination for NRIs.

For NRIs, investing in India is more than financial benefits; it's about staying connected to their roots while contributing to their home country's economic growth.

Given India's robust, rapidly transforming economy, NRIs must invest in India for the following reasons:

Portfolio Diversification.

One of the key reasons NRIs invest in India is to diversify their portfolios across different market segments. Diversification helps you minimize the overall risk.

India offers an array of investment options for NRIs, such as: 

• Equities and the stock market.
• Mutual Funds
• Real estate.
• Fixed deposits & more

Good Potential Return.

The Investment Avenue in India offers strong potential for returns. Perhaps this is why, from April 2020 to September 2023, Foreign Direct Investment (FDI) in India amounted to $953.143 billion and has been growing annually.

Better Interest Rates.

Banks in India offer better interest rates than those in the US, Australia, Japan, Saudi Arabia, China, and many other countries. This might sound surprising, and many NRIs aren't even aware of this fact.

For example, the United States Bank does not offer interest rates above 2-3%, and in Japan, interest rates are negative.

Stable Economy

There is no doubt that India's economy is among the most stable in the world. Hence, investing in a stable country reduces risk even when the market is volatile.

The list of reasons why, as an NRI, you should invest in India is endless. It all boils down to one thing: Research, Research as much as you can about the economy of India, and you yourself will be surprised to know that the economy of your home country has a lot to offer.

What Are The Best NRI Investment Options In India?

Right from safe investment bets like fixed deposits and government bonds to high-return options like fractional real estate, REITs, and equities, the investment options for NRIs in India are wider and smarter than ever.

The following are 10 investment options for NRIs, along with their estimated returns, tax implications, and rules, to help you grow wealth in your home country while living abroad.

1. Direct Equity (Stocks, Exchange-Traded Funds)

When you invest in direct equity investments in India as an NRI, it's like you are driving India's economic growth story.

What is Direct Equity?

Well, direct equity investment for NRIs means investing in listed securities traded on Indian stock exchanges, such as BSE (Bombay Stock Exchange) and NSE (National Stock Exchange).

Exchange-traded funds, or ETFs, offer another way to combine the best of both stocks and mutual funds. ETFs invest across bonds, money market instruments, and shares, making them accessible to you even if you lack the core stock market knowledge.

As an NRI, when you invest in India, you must follow the regulatory framework set by the Reserve Bank of India and the guidelines rolled out by the Office of Foreign Exchange Management (FEMA).

Why Investing In Direct Equities Is Good?

It is good because of the ownership and control you have with direct equity investments: you can choose which stocks to buy and when to sell. Additionally, direct equity investment also offers high potential returns, liquidity, dividend income, and transparency, which is the cherry on the cake.

How To Invest In Equity:

To invest in direct equity, you need.

• Portfolio Investment NRI Scheme (PINS).
• Demat Account for holding your securities electronically.
• Trading Account linked to your Demar account.

However, as per recent RBI guidelines, you do not need separate NRO PINS accounts and NRE PINS accounts; only one NRE PINS account is sufficient.

Taxation And Compliance

The capital gains here are classified as.

• Short term (under 12 months): 15% tax.
• Long term (over 12 months): 10% tax on gains exceeding Rs 1 lakh.

TDS for NRIs of 10% applies to equity-related gains, and 20% to non-equity-related gains.

2. Mutual Funds

As an NRI investor, if you're seeking professional management and do not need any direct stock selection complexity, the mutual fund is your pick. This investment option stands out as one of the most practical options for NRIs aiming for long-term growth.

What are mutual funds?

The mutual fund collects money from different non-resident investors to build a diversified portfolio of bonds, stocks, and other related securities.

Here, the mutual fund manager will be responsible for managing your investment in the mutual fund scheme. They will allocate your money into different instruments such as money market instruments, equity, or debt. Now, the professional mutual fund manager handles the investment decisions here. This brings in the expertise particularly needed for managing investments abroad.

So, depending on your potential return expectation, risk appetite, and the goal of the investment, you can choose any mutual fund.

Why is this good for NRIs?

It is excellent for NRI investors for multiple reasons, such as.

• Expert management: The fund managers here will handle your daily decisions.
• Additional reasons why it's great for NRIs include instant diversification, cost averaging, complete flexibility, and currency benefits.

How to invest in MFs

To invest in MFs, you need to complete the mandatory SEBI KYC process. Here you'll be needing.

• A passport
• PAN Card
• Overseas address proof
• Bank statement.
• FATCA declaration.

Now open the designated NRI accounts, and once your account is ready, you can invest in mutual funds through AMC websites, registrar platforms, stock exchange facilities, and mutual fund utilities.

Taxation And Compliance

For mutual funds, the tax treatment for NRIs depends on the fund type and the holding period.

• Equity mutual fund faces 20% tax on short-term gains and 12.5% on long-term gains over Rs 1.25 lakh.

Whereas with respect to debt funds.

• Short-term gains are taxed at 12.5% without the indexation.

3. Debt Mutual Funds

This type of mutual fund is ideal for NRIs seeking a lower-risk investment product with stable returns. Debt mutual funds are great at providing a balanced approach to wealth creation while keeping risk at a manageable level.

What are Debt Funds

Debut funds are a specific type of mutual fund scheme that invests primarily in fixed-income securities, such as corporate bonds, government bonds, and other money-market instruments. These funds offer a steady income stream.

Why It Is Good For NRIs

For NRI investors, debt funds are great in the following ways:

• Debt funds offer high returns that often beat the returns on traditional fixed deposits after taxes.
• They offer high liquidity to their investors. Meaning you can redeem the units whenever you want.
• A flexible investment product.
• Partial withdrawals are allowed.
• Since it is a low-risk investment option, it serves as a cushion, reducing overall portfolio risk.

How To Invest In Debt Funds

• Open the NRI-designated accounts.
• Complete the KYC process using your password, PAN Card, overseas address proof, and the FATCA declaration.
• Once KYC verification is complete, you can start investing through the AMC websites or via other means.

Taxation & Compliance

• For the debt funds that you have bought before April 1, 2023, and sold after July 22, 2024: the long-term gains are taxed at 12.5% without indexation, whereas short-term gains follow the income tax slab rates.
• For debt funds purchased after April 1, 2023, all gains are taxed as per your income tax slab rate, regardless of how long you have held them. These taxation changes came into effect after the Finance Act 2023.

TDS on redemption is generally deducted at a rate of 30%.

4. Fixed Deposits (NRE/NRO/FCNR)

If you are selling redirect resources with lower risk, NRI fixed deposits must be in your investment portfolio. You can think of these fixed deposits as a reliable, easy financial safety net designed for NRI investors seeking steady market growth.

What are NRI Fixed Deposits

NRI fixed deposits are of three different types.

• Non-Resident External FDs (NRE Fixed Deposits): The funds you are depositing in NRE FDs are your foreign earnings that are maintained in INR in India. The NRE fixed interest rates vary from bank to bank.
• Non-Resident Ordinary FDs (NRO Fixed Deposits): The funds you are depositing in NRO FDs are your indian income sources, such as rent, dividends, or pension. The NRO fixed interest rates vary from bank to bank.
• Foreign Currency Non-Resident FDs ( FCNR Fixed Deposits): This type of fixed deposit can hold your money in six major currencies, such as USD, Pounds Sterling, Euro, Japanese Yen, Australian Dollars, and Canadian Dollars, with a 1-5 year tenure.

Why It Is Good For NRIs

• The fixed deposits offer predictable and guaranteed returns.
• Since returns are predictable, this eliminates investment uncertainty.
• For NRIs, here joint holding is available with other NRIs or resident Indians.
• With NRE and FCNR deposits, you get complete repatriation rights.
• The tenure of fixed deposits can be aligned as per your financial timeline.

How To Invest In FDs

The process to invest in NRI fixed deposits is relatively seamless.

• You can either roll out an online application through bank websites.
• You can visit the branch on your trip to India and start a fixed deposit then.
• You can even do it through internet banking channels if you already have NRE or NRO accounts.

The documentation here requires you to have a copy of your passport, valid work and residence permits, and address proofs of both overseas and Indian locations.

Taxation & Compliance

With NRI FDs, the tax treatment depends on what type of deposit you hold.

• NRE and FCNR deposits, the interest here remains entirely tax-free in India.
• The NRO deposits are subject to 30% TDS for NRIs, plus applicable cess and surcharge.

5. Real Estate (Residential & Commercial)

Real estate investments offer something that stocks and mutual funds cannot: a tangible asset in India. This type of investment provides both a strong emotional connection to India and substantial financial returns, making it a favorable option for NRIs planning their future in India.

What Is Real Estate Market Investment?

Investing in real estate means owning a property in India, such as a villa, apartment, office space, house, retail outlet, or other commercial building.

As an NRI, you cannot invest in agricultural land, plantation properties, or farmhouses. However, you can inherit these properties but can not directly invest in them.

Why Real Estate Investment Is Good For NRIs?

It is a great investment option for NRIs for the following reasons.

• Massive returns: NRIs might be able to churn out superior returns on commercial properties, which can yield up to 7 to 10% of annual rental yields. This is much more than most of the traditional savings options.
• The currency advantage: Today's exchange rate is approximately Rs 85 per USD, making purchases in India more affordable than ever. 
• Future Planning: Almost two-thirds of NRIs plan to return to India at some point; hence, for such NRIs, pre-arrival investment is a practical preparation.
• Smart Diversification: Real estate investment diversifies your portfolio beyond the usual market-linked investments.

How To Invest In Real Estate

The real estate investment process follows a structured approach.

• Documentation: Keep your address and identity proof handy, plus a PoA (power of attorney) if you cannot be present in India to purchase the property.
• Fund Transfer: You must route all yur property-related transactions through NRE/NRO/FCNR accounts.
• Property verification: Verifying and running legal checks on the property's background.
• Registration: Complete property registration at the sub-registrar's office.

Taxation & Compliance

• The seller will be obliged to pay the purchase TDS and the capital gains taxation, depending on how long the property has been held. 
• The buyer deducts TDS on the purchase from the seller.
• Additionally, all property-related transactions must comply with FEMA and RBI guidelines.

6. National Pension Scheme (NPS)

This investment product aims to solve the retirement challenges for NRIs through a restricted market-linked investment.

NPS is government-backed and offers numerous tax advantages for NRIs, along with long-term wealth creation.

What Is NPS

The national pension scheme was initially established in 2004 as a government-sponsored retirement plan for its employees. It later then opeded ot all the Indian citizens, including NRIs.

This National Pension Scheme is managed by the Pension Fund Regulatory and Development Authority (PFRDA). Here, your investment occurs in two stages: accumulation, where you contribute regularly to the scheme, and withdrawal, when you have access to the funds at maturity.

Why Is This Good For NRIs?

It is excellent for NRIs because:

• The returns are market-linked: equity schemes deliver returns of 12 to 15% annually, government bonds yield 9 to 10%, and corporate bonds yield 8 to 10%.
• When you invest in NPS, your funds are spread across various financial securities to achieve balanced growth.
• After connecting to the NPS for three years, you can have access to 25% of your crops.
• The repatriation is easy under NPS if you have invested through NRE accounts.

How To Invest In NPS

To invest in NPS, you must be between 18 and 60 years old. Please note that PIOs are not eligible to open an NPS account, whereas OCI holders are. The documents that you will need to invest are.

• Subscriber registration form.
• Paspoet Copy.
• PAN Card.
• Canceled Cheque. 
• Address Proof.

You can start with an account opening of Rs 500 and can then maintain an annual contribution of Rs 6,000.

Taxation & Compliance

When you invest in NPS, you get tax benefits under the old regime, which allows the deduction of up to Rs 1,50,000 under Section 80CCD(1), plus an additional Rs 50,000 under Section 80CCD (1B).

7. Corporate Bonds & NCDs 

Corporate bonds and Non-Convertible Debentures (NCDs) provide a fixed-income investment channel for NRIs looking to diversify their portfolios in India.

What Are Corporate Bonds

To put it simply, corporate bonds are a type of debt instrument used by both public and private companies to raise capital for expansion, operations, and other business needs.

These bonds are known for offering higher returns than government bonds, but they do carry greater risk. Whereas NCDs are a specific debt instrument that cannot be converted into equity shares of the issuing company.

Why is it A Good Option For NRIs?

From higher returns to semi-annual or annual interest payments that help you have a steady income stream, these bonds are a preferred option for NRI investment in India.

Additionally, these securities can be traded on the stock market, which ensures liquidity whenever needed.

How To Invest In Bonds

To invest in corporate bonds:

• Open the designated NRI account and a demat account.
• Verify the NRI eligibility at the bond offer before you make the investment.
• Lastly, ensure that all investments are made through reliable banking channels.

Taxation & Compliance

• NRIs are subject to a 20% TDS rate on corporate bonds. Whereas the capital gains taxation depends on how long you have held the bond.
• Short-term gains (held for less than 36 months) are taxed at 30% whereas long-term capital gains are taxed at 20% with indexation benefits.

8. Gold Investments (ETFs, Digital Gold)

Inevitably, investing in gold has been a tradition in India, and even in today's volatile market, it acts as your financial anchor.

What are Gold Investments?

With ETFs and digital gold, NRIs can invest in gold beyond traditional jewelry. Exchange-traded funds (ETFs) are a specific type of mutual fund traded on stock exchanges that track the price of gold, with each unit representing 1 gram of 99.5% pure gold.

Digital gold gives you the flexibility to purchase gold online in denominations as small as 1 Rs. Additionally, these digital goods are secured in insured vaults on your behalf.

Why is it great for NRIs?

Gold has been the unsaid king of the investment world since the beginning of human existence. It is excellent for NRIs

• This acts as an inflation shield because gold preserves your wealth when currencies weaken or prices rise.
• Gold helps stabilize your overall investment returns because the stock market does not influence it.
• Digital gold eliminates the risk of physical storage and the associated costs.

How To Invest In Gold

• To invest in digital and EFTs, you need to open a designated NRI account. For gold EFTs, you will need a demat and a trading account. 
• Purchase via Non-PINS accounts only. For digital gold, prioritize those platforms that offer secure vault storage.
• Digital gold can be purchased without a demat account.

Taxation & Compliance

• Physical and digital gold held for less than 24 months is a short-term gain and is taxed as per your income tax slab.
• Held for more than 24 months, the gains are long-term and taxed at 12.5% without indexation.
• Please note that the TDS here does not apply when you trade Gold EFTs through the exchange.

9. ULIPs (Unit Linked Insurance Plans)

This investment option combines the best of life insurance and investment opportunities in one package.

What are ULIPs?

ULIPs split your insurance premium for two purposes. The first part of your money goes toward your life insurance coverage, while the remaining part is invested in market-linked funds.

You can think of this investment product as two engines running in tandem: one protects your family's financial future, and the other grows your wealth through market-linked funds.

Why Is It Good For NRIs?

• It is excellent for NRIs, offering market-linked returns, flexibility to switch funds, dual protection for your family and your investment portfolio, and a disciplined investment approach.

How To Invest In ULIPs

When investing in ULIPs, you need basic identity and address proof documents, along with income documentation and a PAN Card.

The premium payment flows through your NRI accounts, online wallets, international credit cards, and internet banking.

Taxation & Compliance

• For NRIs, the tax benefit here applies to a premium of Rs 1.5 lakhs under Section 80C.
• The maturity proceeds of ULIPs remain tax-exempt under Section 10(10D) when annual premiums are less than Rs 2.5 lakh for policies issued after Feb 1, 2021.

10. Portfolio Management Services (PMS)

PMS offers tailored services for high-net-worth NRIs who need expert-backed guidance in the Indian market.

What is PMS?

The portfolio management services, as the name suggests, provide NRIs with professional investment management, with a portfolio manager overseeing their portfolio based on their risk appetite and long-term financial goals.

As per SEBI guidelines, a minimum investment of Rs 50 lakh is required to open a PMS account.

Why is it great for NRIs?

• You get expert-backed, personalized portfolios built around your financial objectives.
• Experts will manage your portfolio.
• You have direct ownership of securities in your Demat Account.

How To Invest In PMS

The investment process here involves.

• Opening designated NRE/NRO accounts.
• Complete the KYC verification process with your passport, visa, PAN Card, and address poof.
• Set up the Demat and trading account.
• Signing a discretionary or a non-discretionary management agreement.

Taxation & Compliance

TDS applies to the NRI portfolio. However, the TDS rate depends on your country of residence.

How Can NRIs Start Investing In India

To start investing in India as an NRI, all it takes is careful planning and a well-thought-out approach to grow your wealth while staying close to your roots.

• Start by opening NRI-designated accounts under FEMA regulations.
• Apply for a PAN card, and you become eligible for most investment avenues in India.
• Begin with simple investment options like fixed deposits or mutual funds for easier compliance and to get a knack of the indian market.
• Use a PIS account while investing in Indian equities.
• You must also explore the real estate segment for long-term investment.
• Please ensure you review the tax implications before choosing any investment.
• And yes, always keep in mind to start small, grow gradually, and invest with a clear financial plan that an investment professional approves.

The Bottom Line

These were the top 10 NRI investment options that you can choose to invest in India. Apart from the ones mentioned above, you can also invest in Sovereign Gold Bonds (SGBs), Fractional real Estate Ownership, REITs (Real Estate Investment Trusts), and Alternative Investment funds.

The only way to build a successful investment portfolio is to find what best fits your financial goals and invest wisely. If you lack core knowledge of the investment sector, it's best to seek professional help from an NRI investment strategist who is also well-versed in cross-border taxation.

One such expert for NRIs is Savetaxs. We have been helping NRIs across 90+ countries build their investment portfolios in India. Our portfolio and fund managers bring extensive knowledge and a decade of experience across all investment avenues in India.

Connect with us today as we serve our clients 24/7 across all time zones.