The year 2014 has been a roller coaster for India, starting with a new government promising big bang reforms, stock markets reaching all time highs, inflation at all time lows, and economic revival on the cards. This is likely to be one of the best times for NRI's to invest in India for the long term, and there are several investment options ranging from equity to real estate to retirement planning. Let us take a look at some of the options.
Any person of Indian Origin and having an Indian passport can invest in real-estate (both commercial and residential), further there is no limit on the number of property purchased by a NRI in India. However, a NRI cannot purchase any form of agricultural land or farm house in India. NRIs have the option of self funding the home purchase, or one can take a home loan.
If a NRI has inherited property in India, one would have to pay tax on deemed income. Another important point, is to decide where to buy the land / property. One should not just buy based on advertisements, but select the property after taking a look at it (or having a relative / friend look it over), and also taking into account factors such as climate, amenities, etc.
It is advisable for NRIs to give a Power of Attorney (PoA) to a local (e.g. relative or friend), as this person can look after all formalities related to purchase of property, such as registration, possession, execution of agreement deed, collecting no dues, etc. However, it is important to note that the PoA must be attested by any authorized official of the Indian Embassy/Consulate or Trade commissioner in that country.
NRI's are eligible to invest directly in equities or through equity linked mutual funds as long as they operate via a NRE / FCNR account. The income from capital gains and dividends can be repatriated, or kept inside the country - depending on your preference. In the case of repatriation, the amount to be transferred must suffer applicable taxes, and be transferred out through proper banking channels or through their NRE / FCNR account. No additional permission is required. The tax rules for equity investments is the same for NRI's and domestic resident investors.
Debt Instruments & Retirement Planning
The government of India does not permit NRI's to invest in PPF, with the clause that if one has a PPF account before moving abroad and becoming an NRI, then the PPF can continue - but no new PPF accounts can be opened.
However, there are several debt instruments and retirement products that NRI's can invest in, via mutual funds or institutions, such as LIC, SBI, etc. NRI's are not permitted to invest in NSC, Post office savings, etc, as these are reserved only for resident investors. Other avenues include debt mutual funds - for which a NRE / FCNR account is required, and taxes are applicable at current rates (same as resident investors).
Companies such as SBI, LIC, etc offer pension schemes for NRI's, most of which can be purchased online, and have various options to suit the risk appetite of the NRI's. It should be noted that many financial institutes offer the service of deducting the tax (short term / long term capital gains) before disbursal for NRI clients, to make it easier for them to invest.
There are several investment options, and the outlook for the Indian economy and markets in general are positive for the medium to long term. One should look into these various options to invest in India.
> Equity & debt investments are possible through NRE / FCNR accounts
> NRI's are not permitted to hold PPF accounts (unless already opened when they are residents in the country)
> Pension plans are available through various financial institutions
> Property is another area that can be invested in
(Contributed by Anil Rego, CEO & founder, Right Horizons)