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NRI Investments (General Info)

  • Taxation of NRIs in Real Estate Sector Investments by Preeti Gandhi
To read this article click on Taxation of NRIs
  • The book titled “HAND BOOK FOR OVERSEAS INDIANS” has been compiled/summarized from information available in official documents/circulars/websites of the Government of India, RBI, information received from various States and other reliable sources.

To read this book click here.

  • Portfolio Investment Scheme for NRIs

To know more on “Portfolio Investment Scheme for NRIs (SHARES & SECURITIES)”, click here.

  • NRI Investment in India: A New Beginning ………

For NRIs,India is an attractive destination for investment. According to World Bank, Indian economy will become one of the largest by 2050 AD. The Indian diaspora channels the hard-earned money home. It knows that ‘home is where the heart is’……..
BEING THE 10TH largest economy in the world and the 4th largest in terms of purchasing power parity (PPP), India has emerged as a potential destination for NRI investment.  It has a large reservoir of skilled labour which is internationally cost-competitive, a large entrepreneurial base and a diversified manufacturing sector.  These attributes make it easy to find partners for collaborations.

The country has a 20 million-strong scientific and technical manpower, more than the population of Taiwan.

To read this article click here.


(A Government of Gujarat Undertaking)

Gujarat State Non-Resident Gujaratis’ Foundation (NRGF) has been established by the Government of Gujarat to further the common interests, concerns and historical ties that bind the people of Gujarat to NRGs (Non- Resident Gujaratis, or people of Gujarati origin living outside Gujarat, in other states within India as well as places outside the country) with a firm belief that the contact and friendship established through programs of the foundation can go a long way towards generating mutual benefits for the people of Gujarat as well as NRGs and achieving avowed objectives of the NRGF.

For more information, click here.

  • Investment with Repatriation Benefits

100% Scheme for High Priority Industries
NRIs and Overseas Corporate Bodies (OCBs) predominantly owned by NRIs can invest with full repatriation benefits upto 100% in the new issues of equity capital or convertible debentures of a private/public limited company in high priority industries, listed in the New Industrial Policy (NIP) Statement. Approvals for such investments are granted on automatic basis by RBI.

51% Scheme for New Issues
NRIs and OCBs are permitted to subscribe upto 51% of the face value of new issues of shares or convertible debentures of any new or existing company engaged in the manufacturing activities with automatic approval given by the RBI

Investment in Housing and Real Estate Development
RBI has given permission to NRIs/OCBs to invest on repatriable basis upto 100% in the new issues of equity shares/convertible debentures by an existing or new company engaged or proposing to engage in the following activities:

  • Service plots and construction of built- up residential premises;
  • Real estate covering construction of residential and commercial premises including business centres and offices;
  • Development of townships; City and regional level urban infrastructure facilities, including roads and bridges;
  • Manufacturing of building materials; and Financing of housing development.

Repatriation of original investment will be permitted after a lock in period of three years from the date of issue of the equity shares/convertible debentures. Annual dividend on equity shares/interest on debentures can, however, be freely repatriated, subject to payment of applicable taxes. In case of OCBs, net profit (upto 16%) arising from the sale of such investment after the lock-in period of three years can also be repatriated.

The RBI permission is not required for acquiring/ holding or transfer/disposal of immovable properties by Indian citizens resident outside India. Indian citizens holding immovable property in India but who acquire foreign citizenship at a later date are required to take permission from the RBI for continuing to hold the immovable properties.

Investment in Air Taxi Operations
NRIs/OCBs are allowed 100% equity participation in Indian companies carrying on Air Taxi Operations in terms of guidelines issued by the Director General of Civil Aviation. Repatriation of the investment and/or remittance of dividend will be permitted only after the expiry of five years of operation and only out of accumulated net foreign exchange earnings. In this sector, foreign equity investment upto 40% is allowed.

Revival of Sick Units
NRIs/OCBs are permitted, on application ,to participate in the revival of sick industrial units in India by making bulk investment upto 100% either by way of purchase of existing equity shares or by subscribing to new equity issues of the sick company. Repatriation of original capital is allowed.

Investment in FTZ, EPZs and EOUs
NRIs/OCBs can invest upto 100% on repatriation basis in companies/firms setting up units anywhere in India, in Free Trade Zones (FTZ) or Export Processing Zones (EPZs) or setting up units under the 100% Export Oriented Units (EOUs) Scheme.

Banking Service
NRIs can invest upto 40% of the paid up capital in the banking service sector.

Trading Houses/Export Houses
100% NRI equity for establishing Trading/Export Houses is allowed with the automatic approval given by the RBI.

Investment in Non-Convertible Debentures
Indian companies desiring to issue non-convertible debentures to NRIs and OCBs should submit their applications in Form ISD to the RBI for necessary permission.

Deposits with Companies
NRIs/OCBs are permitted to place funds in fixed deposits with public limited companies (including Government undertakings with limited liability) with full repatriation benefits for a period of three years. The total amount of fixed deposits permitted to be accepted will be stipulated by the RBI in individual cases. Application is to be made by the Indian company to the RBI for permission to accept the deposits.

Investment in the Schemes of Domestic Mutual Funds
NRIs/OCBs are permitted to invest in the schemes of all domestic public sector/private mutual funds floated on repatriation basis. Applications for necessary permission should be made by the concerned mutual fund to RBI. The non-resident investors do not need separate approval from RBI for the purpose.

Investment in Bonds Issued by Public Sector Undertakings.
NRIs/OCBs are permitted to invest in bonds issued by Public Sector Undertakings (PSUs) in India with repatriation benefits. The concerned PSUs should obtain the necessary approval from Government of India for raising funds through issue of bonds. Necessary application for permission is to be made by the concerned PSU to RBI in Form ISD (R).

General Permission to NRIs/OCBs to purchase Shares of Public Sector Enterprises
NRIs/OCBs can purchase the shares on repatriation basis disinvested by Government of India in certain Public Sector Enterprises (PSEs) against convertible foreign exchange money received through normal banking channels or by transfer of funds held in investor’s NRE/FCNR accounts.

Investment in Securities/Shares
NRIs are permitted to invest their funds in Government Securities or Units of UTI, National Savings Certificates through authorised dealers. Units can also be purchased directly from UTI and freely transferred and sold.

Portfolio Investment Scheme
Under this scheme NRIs/OCBs are permitted to invest in shares/debentures of Indian companies through Stock Exchanges in India. These investments require prior approval of RBI which is valid for a period of five years and can be renewed upon written request. Individual NRIs/OCBs can make investment upto 5% of the paid up share capital/each series of convertible debentures. The overall ceiling of investment by NRIs and FIIs has been raised to 30% if the company concerned passes a resolution to that effect in its General Body meeting. The lock-in period of one year, prescribed earlier, for investment made on repatriation basis has since been removed.

Import of Gold/Silver by NRIs
NRIs can bring into India gold upto 10 kilograms and silver upto 100 kilograms as part of their baggage once in six months subject to payment of Customs Duty.

Concessional Tax Rate
NRIs can opt for concessional tax rate of 20% on the income arising from shares, debentures, deposits and Government securities.

Gift Tax Benefits
Gift made by an NRI out of the amounts standing in his credit in Non Resident External Account is exempt from Gift Tax.

Wealth Tax Benefits
Assets of NRIs are exempt from Wealth Tax levy for a period of seven successive years including money standing in Non Resident External Account.

Advance Income Tax Rulings for NRIs
To have clear picture on Income tax liabilities, Government has introduced a procedure of Advance Income Tax Rulings for NRIs under the Income Tax Act.

Residential Property

  • Indian Citizens
  • Indian citizens who are residing abroad are not required to obtain permission of RBI for purchase of immovable property for residential use.
  • Foreign Citizens of Indian Origin
  • RBI has granted general permission to foreign citizens of Indian origin, whether resident in India or not, to acquire by purchase or inheritance, hold and transfer or dispose of by way of sale or inheritance immovable property in India for residential purpose. The purchase consideration should be met out of inward remittances in foreign exchange or out of funds from NRE/FCNR accounts maintained with banks in India. A declaration in the prescribed form has to be submitted to the RBI within a period of 90 days from the date of purchase of the property. The property can be let out if it is not immediately required for residence. The sale proceeds can be repatriated to the extent of the foreign exchange invested only in case of properties purchased after 26 May, 1993, and held for at least three years for upto two residential properties with prior RBI permission.
  • The RBI has also delegated the powers to authorized dealers (Banks) to grant loans to NRIs against the security of NRE/FCNR deposits (subject to certain conditions) for purchase of immovable property. There is also no limit on the number of properties an NRI can buy.

Facilities to Returning Indians
NRIs returning to India after a continuous stay abroad for one year and above are not required to declare or surrender their foreign currency assets abroad. They can retain their foreign currency accounts with banks abroad. They enjoy complete freedom for utilisation of these assets as well as income earned or sale proceeds received subsequently.

Bank Accounts/Deposits
NRIs can maintain accounts in rupees and in foreign currency NRIs/OCBs are granted the following facilities:

  • Maintenance of bank accounts in India.
  • Investment in securities/shares and deposits of Indian firms/companies.
  • Investment in immovable property in India.

NRIs can maintain current/savings/term deposit rupee accounts with authorised dealers/authorised banks in India. There are two types of rupee accounts viz. Non Resident (External) Rupee Accounts (NRE Accounts) and (Non Resident Ordinary) Rupee Account (NRO Accounts). The distinction between NRE accounts and NRO accounts is that funds remitted from abroad or local funds which can otherwise be remitted abroad to the account holder can be credited to NRE accounts. Local funds which do not qualify, under the Exchange Control Regulations for remittance outside India are required to be credited to NRO accounts. NRO accounts can be held jointly with residents, whereas NRE accounts cannot be held jointly with residents. The interest rates for NRE accounts are fixed by RBI, and interest rates in the case of NRO accounts are same as in the case of domestic deposits. Debits for local payments/ disbursements in both the accounts are allowed freely. Funds held in NRE accounts can be repatriated abroad freely. But funds held in NRO accounts cannot be repatriated. However, interest earned on funds in NRO accounts is repatriable. The account holders of NRE and NRO accounts are eligible for loans/ overdrafts against their fixed deposits. Remittances made by NRIs for credit in these accounts are converted at single market determined rate.

Non Resident (Non-repatriable) Rupee Deposit (NRNR) Scheme
Under this scheme, NRIs as well as other non residents can keep deposits with banks in India. Such an account can be opened by NRIs and other non residents with an authorised dealer in India by remitting funds from abroad in any convertible foreign currency.Under the NRNR scheme, deposits designated in rupees can be kept for periods ranging from 6 months to 3 years. The principal amount of deposit is not eligible for repatriation. However, interest on the deposits is repatriable.

Foreign Currency Accounts
NRIs can maintain FCNR accounts with authorised dealers in India in designated four foreign currencies viz. Pound sterling, US Dollar, Deutsche Mark and Japanese Yen in the form of ‘Term Deposit’ only for a fixed period of 6 month to 3 years. Interest rates on FCNR deposits are fixed by Reserve Bank of India from time to time. But deposits will continue to earn the contracted rates till maturity. Funds under this scheme are repatriable.

Resident Foreign Currency Accounts
Under Resident Foreign Currency Scheme (RFC), NRIs who have returned to India for permanent settlement can open foreign currency accounts with banks in India. To be eligible for this facility, the person should have been resident outside India for a continuous period of not less than one year. RFC accounts can be maintained in any convertible foreign currency. The entire amount of foreign exchange brought to India at the time of their return to India for permanent settlement as well as balances standing to the credit of their NRE and FCNR accounts at the time of return can be credited to RFC accounts. The income received from their overseas assets, sale proceeds, pension dividend’s etc. repatriated to India can be credited to RFC accounts. Funds in RFC accounts can be remitted abroad for any bonafide purpose of the account holder or his dependents. The funds in RFC accounts can also be repatriated by the holder who desires to go abroad for employment/business etc. Returning Indians are permitted to retain their assets abroad even after their return to India.

Tax Concessions
Tax concessions are available to NRIs on balances/deposits held in NRE/FCNR accounts. Income from interest on funds standing to the credit of NRE/FCNR accounts is exempt from income tax and gift tax. The tax benefits available to NRIs under NRNR deposit account are as under:

  • Income from the deposits will be free from Indian income tax.
  • The deposit will also be exempt from gift tax for one time gifting.
  • Exemption from income tax will not be available to resident donee and those residents who being joint holders become owners of the deposit as survivor of the Non Resident Depositor.