In this article, Raghav Gupta who is currently pursuing M.A. IN BUSINESS LAWS, from NUJS, Kolkata, discusses Financial investment solutions for Non-Residential Indians (NRI).

Areas to invest in India

• Real estates
• Financial estates

Real estate assets

• Popular investment scheme amongst NRI’S
• Lots of legislative measures to be followed
• Possession and maintenance need physical presence and attention
• Time and effort consuming because it needs attention
• It is more likely this invites black money into investing activity
• It is a long term investment

Financial estate investment

• Not popular amongst NRI investors because they have various alternatives out of our country
• Free of many legalities
• Online facility helps the NRIs to take easy care of their documents
• Online finance handling takes few minutes as its intangible form of asset
• There is zero possibility of black money investment

Over the years the opportunities to invest for Non-Resident Indians (NRIs) in safe investment options has increased tremendously.

There was a time when NRIs found it safe to invest in real estate. But banks today also offer a great number of financial solutions. If you are an NRI, it is suggested to invest in financial assets rather than real estate. Real estate is a popular option but comes with its own set of challenges which NRIs and even locals routinely underestimate, only to repent later.

Financial assets are much easier to handle from abroad and are free from legal issues, possession and maintenance issues, require lower time and effort from you, and of course, don’t require you to handle “black” money. Also, most transactions can be done online from wherever you are, giving you significant control. NRIs can also consider fixed deposits or mutual fund schemes. Mutual funds tend to be slightly risky investment as compared to some of the other instruments. Fixed deposits can be considered the best plan for financial investment in India.

It is important to remember for NRIs that some additional documentation may be required. These include a passport photocopy with a valid visa, overseas employment letter, PAN Card and a local address proof.

The length of your financial investment in India depends upon you and your assets. However, these are the few commonly available options,

• Very short term – A few days/weeks/months: Bank Fixed deposits, Liquid/Ultra Short Term Funds
• Short Term – 1 to 3 years: Short Term Debt Funds
• Medium term – 4 to 7 Years: Combination of Debt and Equity Funds with Debt portion being higher
• Long Term – 8 to 14 Years: Combination of Debt and Equity Funds with Equity portion being higher
• Very Long Term – 15 years or more: Equity Funds

Always consider the taxation policy before investing in India. It should never be taken for granted that the tax policy of one country is same as the other. If you are new to the entire investment scenario, it is advised to seek professional help. Professional services will help you chalk out your entire investment plan. You can also learn about new methods of investment.

If you’re considering investing a significant portion of your hard earned money in India, do look for customised, honest and professional advice by engaging a qualified, fee-based financial planner/advisor in India.

Investment opportunities

For very short term say one week or a month

• Bank fixed deposits, liquid
• Ultra soft term funds

For 1 to 3 years

• Short term debt funds

For 4 to 7 year investment

• Combine debt and equity fund with high debt proportion making it less risky+

For 8 to 14 year investment

• Combination of debt and equity funds with higher equity

For 15 or more years investment

• Equity is preferred because it is viable to take risk for such period of time

Channels of banking for NRIs

• NRE- NON RESIDENT RUPEE
• NRO- NON RESIDENT ORDINARY RUPEE
• FRCNR- FOREIGN CURRENCY NON-REPATRIABLE ACCOUNT

PROCEDURE TO OPEN SUCH ACCOUNTS:-

SR NO.	POINT OF DIFFERENCE	NRE	NRO	FRCN
1.	Time to open account	After winning NRI status	After or before winning NRI status	After winning NRI status
2.	Joint account	Yes, only with close relatives	Yes	Yes, but with close relatives
3.	Currency nature in savings account	Indian rupee	Indian rupee	Foreign currency
4.	Can open current or savings account?	Yes	yes	No
5.	Can have fixed account	Yes	Yes	yes
6.	Aim	Can invest the income earned from abroad	Can invest income earned from Indian asset	Can keep fixed deposits for 5 years
7.	Income from India	Can’t be kept	Can be kept	Can’t be kept
8.	Repatriation	Yes	Income from deposits can be repatriated only	Yes
9.	Income tax on deposit’s interest	No	Yes	No
10.	Transferability of funds into any normal Indian bank account	Yes	Yes	No

Interest Rate

ON FIXED DEPOSITS FOR 5 YEARS:-

• NRE- 8.50%
• NRO- 8.50%
• FCNR- NA

ON SAVINGS ACCOUNT EARNING:_

• NRE- 4%
• NRO- 4%
• FCNR- NA

Investment into real estates

Smart city projects offer great upside for the NRI investors

In recent years Indian government has announced an allocation of 7060 crore rupees for new smart city projects. Gurgaon was a part of this plan too. A total of 100 new smart cities are planned. The possibility of high returns and safety gives the NRIS a great opportunity to invest in such projects all over India. Since most of these big budget projects are developed with the help or coordination or in joint venture with international realty developers, there are lesser chances of delays in project and the projects also finish on time. What’s more various smart city projects on which work is currently underway are already reaping good rewards with impressive returns of 10 to 15% in than one year.

According to the FEMA and RBI an NRI is allowed to make specific investment in Real estate. An NRI is allowed to do following investment in REAL ESTATE

• Any immovable property can be purchased by any NRI in India except an agricultural land, plantation property and a farm house.
• He can get an immovable property mentioned above as a gift from any Indian resident, Indian citizen residing outside Indian or anyone who is of Indian origin.
• Obtain any property by inheritance.
• He can transfer the immovable property to any resident of India by the way of sale.
• He can transfer agricultural land, plantation property or farm land as a gift to any resident of India.
• He can also transfer his residential or commercial property to anyone residing in India or abroad or a person of Indian origin by the way of gift.

Source of finance

NRIs consider financial institutions as easy option available in India for purchasing any property. At the same time financial institutions think that NRIs are their main clients. Financial institutes provide home loans easily, efficiently and sooner to those people living out of India as they are prompt with repayment. Further remittance can be easily done through proper banking channel. If someone is already getting income in India from rent or dividend he/she can directly repay the loan.

Norms by RBI

1. A maximum of 80% amount can be financed by Financial institutes as per RBI regulation and the rest have to be paid by the NRIs
2. The remittance of the amount of down payment can be done from the place of residence by normal banking channels i.e NRO/NRE account in India.
3. The NRI has to repay the principal amount as well as the interest part from the similar channel only.

Documents required to buy property in India

• A copy of passport and visa of the person who intends to invest in real estate in India.
• Salary certificate in English, specifying name, date of joining, designation and salary details.
• Both domestic (NRO/ NRE/ FCNR) and international bank statements for last six months.
• If you are available in India when the application form is submitted, then a general power of attorney duly attested by the Indian consulate in your resident country needs to be submitted. If you will be in India then the power of attorney can be locally notarised.
• A copy of your appointment letter as well as a contract.
• In case you are employed in merchant navy, you need to submit a copy of your CDC as well as your contract slip with income details.
• Passport size photographs.

Tax implications for NRIs on property

• An NRI has to shell out stamp duty as well as registration fees during the time of the purchase. He is entitled to avail all sorts of benefits at par with Indian resident for interest paid in home loan.
• As the amount of income received from such actions comes under heads of house property then standard deduction under IT act is applicable as per standard slab. In this case the NRI has to pay the applicable tax if he is residing in the country where the worldwide income is taxable unless the country has double tax avoidance agreement with India.
• The special advantage for the NRI is that the amount paid by him for the interest of home loan is deductible from NRIs taxable income without any upper limit. The NRI is legally responsible to pay tax under capital gains tax of Income tax act in case he sells his property.

For a hassle free transaction

1. The name of property ought to be clear of problems and the vendor ought to have the specified right to sell it, particularly if it is inherited or any joint property.
2. Without fail check whether there is any outstanding water bills or electricity bills or any other dues unfinished with the property. Take a no dues certificate from the vendor at the time of the purchase.
3. It is always good to acquire bank release letter from the concerned bank to check whether the property has been mortgaged in past or not.
4. In terms of construction the property of approval must have all approvals and permits from the civic authority.

NRI Investment in financial market

How can NRIs invest in Indian stock market?

India being one of the fastest growing economies of the world is an investment heaven for the NRIs. More and more people are becoming drawn towards investing in Indian stock market nowadays. Indian law allows foreign individuals to invest in the domestic market.

What can NRIs buy in Indian stock market?

• Dated government securities (other than bearer securities) or treasury bills
• Units of domestic mutual funds
• Bonds issued by public sector undertaking (PSU) in India
• Shares in public sector enterprises being disinvested by the government of India
• Exchange traded funds (ETFs)

How to start investing in India?

All investments made by the NRIs should be in local currency that is rupees and not in any foreign currency at all. Mutual Funds in India are not allowed to accept investments in foreign currency and they can only accept our domestic currency that is rupees. In order for an NRI to invest in Mutual funds in Indian stock market he needs to have one of these three bank accounts and they are NRO, NRE or FRCN account mentioned above. If any of the three accounts are not opened then the NRI won’t be able to invest in the mutual funds. The relationship managers help the NRIs to open NRI/ NRO/ FRCN account to attain PIS approval ad open a DEMAT and trading account.

Taxation for NRIs in India for investing

• Financial year ending in India is March 31^st
• Last date for filling IT returns is July 31^st
• Long term capital gains (LTCG): zero or exempt. Any gains made on stock held on for more than one year is exempt from any taxes.
• Short term capital gain (STCG): 15% on any gain made on stock before one year.
• Trading income from F and O: considered as business income and taxed according to the income tax (IT) slabs in India.

Trading in derivatives can only be done from an NRO account by an NRI. An approval from the clearing member to clear trades for the allotment of the custodial participants (CP) code. The NRI client must have only one clearing member at any given point of time.

Important points for NRIs to invest in Indian stock exchange

• NRIs need to go through Reserve bank of India guidelines to start investing in India.
• NRIs wants to invest in shares of any particular company there is a limit of 5% in paid up values of shares.
• They have to invest in stock market in Indian currency
• An NRI cannot hold more than 10% of the total holdings in an Indian listed company (20% in case of public sector banks)
• NRIs cannot trade shares in India on a non delivery basis, which means they cannot do day trading or short selling. If they buy a stock today they can only sell after two days.
• An NRI cannot hold more than one PIS account each for repatriable and non repatriable shares.
• A power of attorney to a person in India must be assigned to manage the assets. Power of attorney can be assigned generally (all powers with one individual) or particular to particular asset class (property, bank account etc)
• The tax liabilities arousing out of stock investment must be ignored. Although tax liabilities of an NRI investing in India are the same as that of a resident investor, tax is deducted at source (TDS) in case of former. This leads to a question that are NRIs subjected to double taxation once in India and again in the country of residence? Well, it depends on the country of residence. If the Indian government has an avoidance of double taxation treaty with other country. NRI will be saved from double taxation.

General documents required to open a share investment account

• Self attested copy of passport and visa
• Self attested copy of Indian address proof and international address proof
• Self attested copy of pan card
• Passport size photos
• Bank statement of 3 months
• A cancelled cheque and a cheque for an initial investment.

The banks and share brokers are increasingly interested in bringing back money of the NRIs and make investment in Indian stock market, mainly because of huge investment potential of NRI’s and opportunity of making revenue from the investment.

Advantages of investing in India

• FDI up to 100% in many sectors and activities which include many manufacturing activities, non-banking financial services, hospital, private oil refineries, software development, electricity generation (non-atomic), transmission and distribution, roads& highways, hotel & tourism, research, and development etc.
• Multiple forms of entry are allowed for a corporation depending on its requirements and needs. Different forms include entry through setting up a Joint Ventures, Wholly Owned Subsidiaries, Liaison or Representative Office, Project Office or Branch Office.
• A mature and favorable taxation system with low custom duties and excise duties and low corporate taxes. Numerous tax holidays or rebates depending on the sector and geographical location of investment provided. For an example, there is a tax holiday often years for foreign investment in infrastructure projects taken up in certain backward areas of the North Eastern States and Sikkim, units located in specified zones, projects which are 100% export oriented etc
• India has already entered into a Double Taxation Avoidance Agreement (DTAA) with 65countries, under which the income generated in India will be taxed in India only and would not be re-taxed in the home country of the investor. Only the difference in the tax rate between the home country and India would be payable.  This is quiet a relief for the NRIs who are worries about investment in India which will ead to double taxation and instead of earning some profit they will incur losses.
• Establishment of Foreign Investment Implementation Authority (FIIA) to assist in implementation of FDI approvals along with the formation of the Foreign Investment Promotion Board (FIPB) to assess FDI proposals and appointment of Grievances Officer-Cum-Joint Secretary in the Ministry of Commerce and Industry to cater to the complaints of potential and current investors
• Various rules and regulations to protect intellectual property rights such as The Trademarks Act, Patents Act, Geographical Indicators of Goods Act and The Designs Act.
• Liberal foreign exchange regulations, under the Reserve Bank of India.
• Huge availability of skilled workforce added by a low average age close to 25 years make India a suitable destination for investor.
• To ensure up-to-date information on current policies and procedures, various points of call have been set up which are easily accessible. For example, the Secretariat for Industrial Assistance (SIA) has been set up for this purpose

As we all know every coin has the other side and this question has always been raised is it worth investing in India even though it is the fastest growing economy in the World. This question is asked by many NRIs and its not easy to answer because there are flaws and loopholes in our system which at times make it difficult for NRIs to invest so few of them are :-

• The faulty infrastructure is a big problem. Though India has developed impressively fast and the after we have our new Prime Minister we are suddenly seeing a boom in FDI but still the infrastructure in our country is not up to the mark.
• Corruption is another huge predicament that has to be minimised as much as possible if India is to become an apple of the investors’ eyes. The Indian courts have huge backlog of more than 27 million cases, with many cases taking more than a decade to get solved! Unfriendly labour laws, difficulty in getting patent rights, and various other legal and ethical challenges add to India’s affliction. What officials put forth is not exactly how the true picture is.
• The laws are too vigorous and there are different amendments happening almost every year which makes it tough and unpredictable.
• The sudden decisions like the demonetisation scheme which was introduced to kill the shadow economy and black money also had a bad troll on the investment cycle. Our GDP fell and stock market was at a loss but these steps surely insure a better future for NRIs investing in India as it will lower the black money rate and bribery will be reduced at a huge rate making things easier.

On a whole India has been a breeding ground for investors and businessmen always so why not an NRI investment. There are far more advantages than disadvantages in investing in the fastest economy of the world.