The article below is a short guide for all the NRI investments. Issues like Basic Banking Accounts, Insurance, Mutual Funds and Shares are discussed thoroughly.
The very first and foremost step that an NRI is required to take is opening correct Banking accounts. Following are the options they have:
An NRE account
NRE bank account is an external savings bank account opened for NRIs and hence is called Non-Resident External account. The money in such accounts is fully repatriable, can be converted into any foreign currency and remitted outside the country. To open such accounts, funds are required to be remitted to India through any bank from the country of residence of the prospective account holder. These accounts can be maintained in any of the savings, current, recurring or fixed deposit account form.
An NRO account
It is an ordinary saving bank account opened for NRIs and therefore is known as Non-Resident Ordinary account. The money in such accounts cannot be taken outside the country hence is non-repatriable. These accounts are opened when one wants to transfer money from an overseas bank account to Indian account in Indian Rupees. These can be in Fixed Deposit forms also.
FCNR account
Foreign Currency Non-Resident (Bank) Account is a Fixed Deposit account with maturities of minimum 1 yr to maximum 5 yrs of tenure. The money in this account does not carry currency risk because these are always maintained in foreign currency and is repatriable. Deposits in such accounts can be made by remitting funds from abroad.
Comparison Table
| Criteria | NRE | NRO | FCNR |
| Account type | Saving , Current or Fixed Deposits account |
Saving , Current or Fixed Deposits account |
Fixed Deposit only |
| Money maintained in which currency | Rupees | Rupees | Any of U.S. Dollar , Pound Sterling , Euro , Australian Dollar , Canadian Dollar |
| Repatriable (can money be taken outside country) |
Yes | No | Yes |
| Money can be Deposited from |
From Abroad through Bank account | India or Abroad | From Abroad through Bank account |
| Tax | Exempt | Taxable | Exempt |
| Joint Account with Indian Residents | No | Yes | Yes |
| Suitable for | NRI’s whose income source is only from abroad | NRI’s how have income source from both India as well as Abroad | NRI’s who don’t want to want to take currency risk |
Can NRI take insurance?
NRIs can take insurance in India but their presence is mandatory while taking them. Premiums should be paid from an NRE account if the maturity value is to be repatriable, otherwise only the partial amount for which premiums were paid from NRE account will be repatriable. All the necessary important documents should be present while taking insurance.
The documents required are as follows:
- PAN Card
- Income Address proof
- Overseas Proof of Address
- Proof of Income (Bank Statement , Salary slip or ITR for last 3 yrs)
- A separate form i.e. the NRI Questionnaire-Annexure II is also required to be filled by the person taking insurance.
NRI investments in shares
Few steps that NRI’s are required to follow to start trading in Stock Markets:
- Apply for a PAN card.
- Open an NRE/NRO account. This account is required to fund money for stock market transactions. Depending on your requirement, (Repatriable/Non-Repatriable basis), type of account should be carefully chosen.
- Apply for a general approval for investment in Indian Stock Market through its designated bank branch; this is called PIS (Portfolio Investment Scheme).
- Once PAN card is there, one needs to open a Demat account with any bank or a brokerage firm for trading.
- Finally, an online stock market trading account is required for investing in the stock market directly. Generally, a combo of Trading + Demat account at the same place can be there.
NRIs cannot indulge in intra-day trading i.e. they can’t buy and sell on the same day.
NRI investment in Mutual Funds
NRIs can invest in all Indian mutual funds except those promoted by Asset Management Companies based in the U.S. like Fidelity, Franklin Templeton and HSBC. Payments can be made from any of the NRO, NRE or FCNR accounts. Payments from NRE or FCNR accounts are repatriable i.e. the profit and principal can be taken out of country and those from NRO accounts are non-repatriable but the dividends can be repatriated. No prior permission is required to be taken by RBI for this purpose and is allowed by default. Also, there is no tax on dividend income and long-term capital gains tax is zero in India while investing in Indian equity mutual funds.