INVESTMENT OPPORTUNITIES IN INDIA FOR NRI’S:

Growing economy like India offers great diversification and return profile for NRI investors in their home country.  Majority of them are overweight on real estate either by purchasing land, flats etc to create rental income and a place to dwell once they are back in their home country.

However, it is prudent to diversify into financial assets like equity and debt which are very liquid and offer better prospects.

NRIs are now not permitted to invest in bearer securities like Indira Vikas Patra/Kisan Vikas Patra, National Savings Certificates, Public Provident Fund, RBI Bonds, Senior Citizen Savings Scheme 2004. Investment already made, if any, shall persist.

They are allowed to invest in govt bonds, NCD,PMS, mutual funds.  The most cost efficient option is investing through mutual funds.

Before investing one must also consider exchange risk due to rupee depreciation.

For example, Assume an individual  invests USD 100,000 in India at an exchange rate INR 65/USD. Total investment is Rs 65 lacs. The corpus grows at 12% per annum to 1.14 crores in 5 years. And in the course of time, assume the rupee depreciates from INR 65/USD to INR 75/USD. So, Rs 1.14 crores equivalent to USD 152000. A return of 9% p.a. in dollar terms. On the contrary if the rupee appreciates to 55/USD, then 1.14 crores equals USD 207000. A return of 15.5%. in dollar terms.

Foreign Account Tax Compliance Act (FATCA) declaration has to be given mentioning the Tax Residency Number or functional equivalent.(it will be done while investing)

Note: FATCA is a tax sharing agreement between India and USA.

Double Taxation Avoidance:

Since a resident is liable to pay tax in India on his ‘total world income’, it is possible that he may have to pay tax on his foreign income in that country also. To avoid such a situation the Government of India has entered into agreements for avoidance of ‘double taxation’ with different countries.