Just because one is an NRI or a Non-Resident Indian, it does not mean that they cannot invest in Indian stocks. One can invest under the Portfolio Investment Scheme or PIS, by opening and NRE or NRO account in any of the RBI authorised Indian Banks.
But before making an NRI investment there are few factors that you should keep in mind. They are-
• First and foremost concern while making an NRI investment is to know if India is actually a good option to invest in or not. Compared to nations like Brazil, China and Russia, India was underdeveloped and its economic condition was not that great, but over the years there has been a steady rise in the economy which has made the country a suitable investment destination.
• Secondly, as an NRI you should look into the different options of investment. You may either invest in Direct Equity or Mutual Funds or Real Estate.
o Direct equity or Direct Investment means that one can directly buy shares in a company or invest in shares through a broker or sub broker.
o Indirect investment or Mutual Funds means that one can buy mutual fund.
o Real estate investment trusts or REITs are also considered as indirect investment. It is one of the most popular form of investment for NRIs.
• Thirdly, another important factor to be considered before making an NRI investment is tax.
Tax is usually made on Dividends and on Capital Gains on Mutual Funds.
o Dividend refers to the distribution of the profit earned by a company to their shareholders.
o There are two types of Capital Gains- Long term and Short Term:
When an NRI investment is made in Mutual Funds and an asset is kept or held by the investor for a year or more than it is a Long Term Capital Gain. If it is sold within a year itself, it is a considered a Short Term Capital Gain and the tax on it is 15%. Long Term Capital Assets are exempted from tax.
• Fourthly, an NRI should also consider the type of bank accounts available. You can either consider a NRE account or NRO account based on your preferences. These preferences takes into consideration three main factors:
o The currency one wishes to deposit- In case of the NRO account, foreign funds cannot be transferred, unlike in the case of an NRE account.
o Fund Repatriation is another factor that determines the type of account that one should opt for. In case of an NRE account, principal as well interest can be freely repatriable, while in the case of an NRO account, the interest is taxed in India @30%.
o Another factor to keep in mind is the Funds that one wishes to invest in a bank are acquired from Indian sources and if they can be repatriated from the country or not.
Keeping mind these points will help an NRI make a wise and profitable investment.
But before making an NRI investment there are few factors that you should keep in mind. They are-
• First and foremost concern while making an NRI investment is to know if India is actually a good option to invest in or not. Compared to nations like Brazil, China and Russia, India was underdeveloped and its economic condition was not that great, but over the years there has been a steady rise in the economy which has made the country a suitable investment destination.
• Secondly, as an NRI you should look into the different options of investment. You may either invest in Direct Equity or Mutual Funds or Real Estate.
o Direct equity or Direct Investment means that one can directly buy shares in a company or invest in shares through a broker or sub broker.
o Indirect investment or Mutual Funds means that one can buy mutual fund.
o Real estate investment trusts or REITs are also considered as indirect investment. It is one of the most popular form of investment for NRIs.
• Thirdly, another important factor to be considered before making an NRI investment is tax.
Tax is usually made on Dividends and on Capital Gains on Mutual Funds.
o Dividend refers to the distribution of the profit earned by a company to their shareholders.
o There are two types of Capital Gains- Long term and Short Term:
When an NRI investment is made in Mutual Funds and an asset is kept or held by the investor for a year or more than it is a Long Term Capital Gain. If it is sold within a year itself, it is a considered a Short Term Capital Gain and the tax on it is 15%. Long Term Capital Assets are exempted from tax.
• Fourthly, an NRI should also consider the type of bank accounts available. You can either consider a NRE account or NRO account based on your preferences. These preferences takes into consideration three main factors:
o The currency one wishes to deposit- In case of the NRO account, foreign funds cannot be transferred, unlike in the case of an NRE account.
o Fund Repatriation is another factor that determines the type of account that one should opt for. In case of an NRE account, principal as well interest can be freely repatriable, while in the case of an NRO account, the interest is taxed in India @30%.
o Another factor to keep in mind is the Funds that one wishes to invest in a bank are acquired from Indian sources and if they can be repatriated from the country or not.
Keeping mind these points will help an NRI make a wise and profitable investment.
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