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Who is an NRI?
Non-Resident Indians (NRIs) are Indian citizens who have spent more than 182 days outside India in a financial year (1st April to 31st March). Although NRIs retain their Indian citizenship, they are exempt from paying taxes in India.
India’s burgeoning industrial landscape, drawing in substantial Foreign Direct Investment (FDI), has piqued the interest of NRIs in making investments back in India. At AIF & PMS Experts, we are dedicated to guiding you through the intricacies of NRI investing, eliminating the hurdles that may arise. Our primary objective is to offer our clients the finest market opportunities, ensuring a joyful and prosperous investment journey.
Investing in India presents an outstanding opportunity for NRIs, given the country’s expansive economy with the potential for robust investment returns. Let AIFPMS Experts simplify your investment journey and make it seamless.
Can NRIs Invest In India?
Dispelling misconceptions surrounding NRI investing, let’s explore the best options available for NRIs seeking to invest in India. At AIF & PMS Experts, we aim to clear any doubts and provide comprehensive insights into NRI investment possibilities.
Investment Options Available For NRIs In India
Below are the avenues for NRIs to invest in Indian capital markets:
- Portfolio Management Service (PMS)
- Alternative Investment Fund (AIF)
Despite common misconceptions, investing wisely in India is within reach, and our team of experts is here to assist NRIs in making judicious use of their hard-earned money.
Why is Investing in India a Perfect Choice?
India, being the largest democracy globally with a stable government, provides a secure foundation for economic growth—a vital factor for investment. The Indian market is regulated by two key government bodies, the Reserve Bank of India and India’s Securities and Exchange Board, ensuring a safe and stable investment environment.
At AIF & PMS Experts Pvt. Ltd., our experienced investment team is committed to helping NRIs make informed and wise investment decisions. For any queries or assistance, contact us at https://01946d7b-3c2a-7914-bc78-5733102488e2.skipns.com/contact/ and embark on the journey of making smart, intelligent investment decisions.
Why is Investing in India a Perfect Choice?
India, being the largest democracy globally with a stable government, provides a secure foundation for economic growth—a vital factor for investment. The Indian market is regulated by two key government bodies, the Reserve Bank of India and India’s Securities and Exchange Board, ensuring a safe and stable investment environment.
Globally, India’s position and rankings are on the ascent. The World Bank’s Ease of Doing Business Ranking 2020 saw India rise from 142nd in 2014 to 63rd in 2019. In the Global Competitiveness Index of 2018-2019, India secured the 68th position globally. The Aadhar Scheme, one of the world’s most extensive social security programs, adds to India’s credibility.
India is one of the fastest-growing economies globally, with a predicted GDP growth of 6.7% in 2022. The government’s Atmanirbhar Bharat Abhiyan, a special economic package exceeding $270 billion, equivalent to 10% of India’s GDP, has provided essential backing to counter the effects of the Covid-19 pandemic
The Indian market is an ideal choice for NRIs, offering various tax benefits. NRIs can benefit from the Double Taxation Avoidance Agreement, which helps avoid double taxation on investments made both in India and the country of residence. India has entered into this agreement with many countries, including France, the USA, Italy, the UK, Canada, etc.
Eligibility Criteria for NRIs for Investing in AIF and PMS in India
Under the regulations of the Securities and Exchange Board of India, both Indian and Non-Resident Indian investors can participate in the Indian market through Alternative Investment Funds (AIF) and Portfolio Management Services (PMS). However, specific eligibility criteria apply.
These criteria are not only applicable to the investment but also to the investor. Non-Resident Indians need to meet eligibility criteria set by the Securities and Exchange Board of India, which vary based on the source of funds—either self-investing or backed by angel investors.
For self-investing, NRIs need a minimum corpus of Rupees 20 crores. However, if backed by angel investors, the minimum corpus required is Rupees 10 crores. The sponsor or manager should have a continuous interest of Rupees 5 crores or less than 2.5% on the initially invested corpus. Each scheme has a maximum limit of one thousand investors.
Non-Resident Indians are required to have a Demat account and a trading account for investment. Additionally, possessing a Non-Resident External (NRE) account or a Non-Resident Ordinary (NRO) account is essential. An NRE account allows NRIs to park their foreign earnings in India, being tax-free, while an NRO account is for profits made in India, subject to tax deduction at source (TDS).
Taxation for NRIs
While NRIs are exempt from tax on foreign income, they are required to pay tax in India on capital gains from shares, mutual funds, term deposits, and rental property exceeding the basic exemption ceiling. In India, taxes play a crucial role in the economy, covering income tax, service tax, property tax, and tax deducted at source.
Non-resident Indians must adhere to the Income Tax Act of 1961, paying the necessary taxes. NRI taxation encompasses income tax, wealth tax, and property tax. Understanding the specifics of NRI taxation is crucial, especially how an NRI becomes liable for paying taxes in India.
As per the provisions of the Foreign Exchange Management Act, an individual of Indian descent is classified as an NRI if they maintain a predetermined duration of absence from India while traveling abroad. While an NRI’s foreign income is not subject to tax in India by default, they need to submit a tax return if their income from India exceeds the basic exemption amount.
Interest generated on capital gains from term deposits, shares, and mutual funds is taxed at the highest rate under the taxation imposed on the income of NRIs from sources headquartered in India. Typically, this eliminates the need for filing any tax returns. However, if the entire TDS surpasses the NRI’s minimum tax due, submitting tax returns is the sole way to request a tax refund.
Taxation Rules for NRIs
The tax laws in India for NRIs differ significantly from those applicable to resident Indians. Some crucial aspects to remember include:
- NRI income tax brackets determined solely by income, without consideration of gender, age, or other factors.
- TDS applied to all NRI income, regardless of any threshold amount.
- Nominal deductions allowed only under specific circumstances on investment income.
- If the income is covered by provisions under Section 115G of the Income Tax Act, NRIs often are not required to file taxes.
Investing in debt mutual funds held for less than 36 months is deemed a short-term gain, taxed at standard slab rates with a 30% TDS deduction. Investments retained for longer than 36 months are subject to a 20% long-term capital gain tax.
Gains on listed equity shares or units of equities-oriented mutual funds are subject to both short-term and long-term capital gains tax, with TDS applicable.
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