Nri Investments In India

The Indian stock market has one of the largest investor bases in the world

. It offers a lot of financial products to choose from, including shares, bonds, debentures, mutual funds, etc. The Securities and Exchange Board of India (SEBI) is the watchdog, keeping a tab on all the investor activity in the country.


Non-resident Indians (NRIs), too, may invest in Indian share market,under the Portfolio Investor scheme (PIS), which is governed and regulated by the Reserve Bank of India. All investments, however, have to be in the local currency and through a stockbroker only.


To invest in the Indian share market, an NRI must open an NRE/NRO account with any of the Indian banks authorized by RBI. The next step is to open demat and trading accounts with a SEBI-registered brokerage firm.


NRIs are prohibited from engaging in day trading or short selling. Moreover, if they subscribe to shares during an IPO, it is the responsibility of the issuing company to inform the RBI regarding the allotment.


To engage in NRI investment activity, the following NRI accounts need to be opened. These accounts may be either reptariable (balance held may be remitted to foreign countries) or non-repatriable (balance held may not be remitted to foreign countries).


NRE (non-resident external rupee) account This reptariable account could bein the form of current, savings or fixed deposit, following the minimum balance requirements. Funds held are convertible in Indian rupees as per the ruling exchange rate. Joint accounts and minor accounts, too, may be opened with the condition that all concerned parties must be NRIs. The balance held in these accounts is exempted from wealth tax. Besides, the interest earned is exempt from income tax.


NRO (non-resident ordinary rupee) account The balance in this account (savings, current or fixed deposit) is maintained in Indian rupees only. NRIs,who earn local incomes (rent, dividend or interest) or accrue local expenses in India, may open this account. The interest earned on this account is not exempted from income tax. Interest income on this account is repatriable, too, subject to RBI guidelines. Joint accounts with residents as well as non-residents are permissible.


FCNR (Foreign currency non-resident) account This is aforeign currency fixed account maintained in basket currencies like US dollar, euro, pound sterling, Japanese yen,etc. with a minimum balance requirement of USD 1000 or equivalent, and offers multiple tenure options. Interest paid is half-yearly on this accountand is non-taxable. Fixed deposits may be made in the form of remittances from abroad or from NRE accounts or foreign currency may be directly deposited.


Investing in the booming Indian economy could turn out to be one of the most prudent choices for any NRI. Be smart and start investing today!


by: Mike Smiths

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