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Why to invest in India?

  1. Strong infrastructure spending.
  2. Sustained high growth in India’s domestic consumption.
  3. Increasing Urbanization and Metro Culture.
  4. Majority of India’s population is in ‘working class’ category.
  5. Opening up of the Indian economy to foreign investment.
  6. Strengthening of the domestic financial system.
  7. Liberalization of imports.
  8. Rationalization of interest and exchange rates.
  9. Undeniably, foreign direct investment (FDI) in recent years.
  10. The Indian stock and debt markets (including banks and mutual funds) are well regulated by the Securities and Exchange Board of India and the RBI.
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Which asset class to invest in?

  1. Small Savings Schemes:
    NRIs are not permitted to invest in bearer securities like Indira Vikas Patra / Kisan Vikas Patra. NRIs were earlier allowed to make investments in National Savings Certificates subject to the terms and conditions applicable to the sale/ issue of such certificates; however, now investments in NSC by NRI have been barred. NRIs are not allowed to make any fresh investments in Public Provident Fund. Investment already made, if any, shall persist. NRIs are not allowed to invest in the ongoing series of RBI Bonds. NRIs who are senior citizens shall not be allowed to invest in the recently introduced Senior Citizen Savings Scheme 2004.
  2. Government securities / Units of Unit Trust of India:
    NRIs are permitted to invest in Government securities through primary dealers. They are also permitted to invest in units of UTI, either through authorized dealers or directly from the Unit Trust of India. These investments are freely transferrable and saleable through authorised dealers or upon repurchase by UTI. The maturity proceeds can be repatriated, provided these are purchased out of funds remitted from abroad or from NRE/FCNR accounts.
  3. Bonds, Company Deposits and Commercial Papers:
    NRIs are permitted to purchase non-convertible debentures of Indian Companies. They may also place their funds in Fixed Deposits with Public Limited Companies. NRIs are also allowed to invest in commercial papers issued by Indian companies on non repatriable basis. These are non transferable and are required to be held till maturity. NRIs can invest in bonds issued by Public Sector Units (PSU’s) from NRE account on repatriable basis.
  4. Shares / Convertible Debentures of Indian companies:
    NRIs can make investments in shares and convertible debentures of Indian Companies both on repatriation and non repatriation basis. This is provided the company is not involved in plantation, real estate or agricultural business. NRIs can make investments both in the primary as well as secondary market.
  5. Portfolio Investment Scheme (PIS):
    NRIs are allowed to invest in shares or debentures of Indian companies and mutual fund units through the stock exchanges in India, both on repatriation and non repatriation basis. These purchases can be made only through the designated branch of an authorised dealer. The NRI can select only one such designated branch for the purpose of investments through PIS. Although not necessary, it is advisable to maintain a bank account with the designated branch for administrative convenience.
  6. There are ceilings for investments made by NRI/OCB/PIO/FII in shares of Indian companies. Individually, the above entities may invest up to 5% of the total paid up capital (equity + preference) of the company. This limit shall include investment under PIS, both on repatriable as well as non repatriable basis. Besides the individual limit, there is an overall limit up to 10% of the paid up capital of the company, which can be increased to 24% by passing a special resolution in a shareholders’ meeting. Investments made through IPOs are excluded for the purpose the limits mentioned above.
  7. Mutual Funds:
    NRIs are permitted to invest in mutual funds both on repatriable as well as non repatriable basis. However, investments in Money Market Mutual Funds can be made only on non repatriable basis. There is no limit for investment in domestic mutual funds.
  8. Real Estate:
    General permission is available to a NRI, being an Indian Citizen, to invest in immovable property in India, provided funds are if from outside India or through NRE/ FCNR accounts.
    NRIs / PIOs can freely rent out their immovable properties, without seeking any permission from RBI.

They are permitted to transfer the immovable property to any person resident in India, NRI or PIO. The sale proceeds are allowed to be repatriated if the property is acquired as per applicable exchange control laws and the amount does not exceed the following:

In the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.

  1. The amount paid for acquisition of the immovable property in foreign exchange or
  2. The foreign currency equivalent of the amount paid where the payment is made from funds held in NRE account for acquisition of the property
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About NRI, PIO

Who is a non-resident Indian (NRI)?

“Non-Resident Indian (NRI) means a person resident outside India who is a citizen of India or is a person of Indian origin.

The following are the main three categories of NRIs:-

  1. Indian citizens who stay abroad for employment or for carrying on a business or vocation or any other purpose in circumstances indicating an indefinite period of stay abroad.
  2. Indian citizens working abroad on assignment with foreign government agencies like United Nations Organization (UNO), including its affiliates, International Monetary Fund (IMF), World Bank etc.

Officials of Central and State Government and Public Sector undertaking deputed abroad on temporary assignments or posted to their offices, including Indian diplomat missions, abroad.

Who is a person of Indian Origin?

For the purposes of availing of the facilities of opening and maintenance of bank accounts and investments in shares/securities in India

  1. Person of Indian origin means a citizen of any country other than Pakistan or Bangladesh
  2. if
    he at any time, held an Indian passport
  3. or
    he or either of his parents for any of his grand parents was a citizen of India by virtue of the constitution of India or Citizenship Act, 1955 (57 of 1995)
  4. or
    the person is a spouse of an Indian citizen or a person referred to in clause (a) or (b)

For investments in immovable properties;

Person of Indian origin means an individual (not being a citizen of Pakistan or Bangladesh or Afghanistan or Bhutan or Sri Lanka or Nepal or China or Iran)who at any time, held an Indian passport or who or either of whose father or whose grandfather was a citizen of India by virtue of the Construction of India or the Citizenship Act, 1955 (57 of 1955)

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About OCB

Overseas Corporate Bodies (OCBs) are bodies predominantly owned by individuals of Indian nationality or origin resident outside India and include overseas companies, partnership firms, societies and other corporate bodies which are owned, directly or indirectly, to the extent of at least 60% by individuals of Indian nationality or origin resident outside India as also overseas trusts in which at least 60% of the beneficial interest is irrevocably held by such persons. Such ownership interest should be actually held by them and not in the capacity as nominees. The various facilities granted to NRIs are also available with certain exceptions to OCBs so as long as the ownership/beneficial interest held in them by NRIs continues to be at least 60%
What are the various facilities available to NRIs/OCBs?

NRIs/OCBs are granted the following facilities:

  1. Maintenance of bank accounts in India.
  2. Investment in securities/shares of, and deposits with Indian firms/ companies.
  3. Investments in immovable properties in India.
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Difference between NRI, PIO and OCI

NRI PIO PIO Card Holde OCI
Definition A citizen of India, holding an Indian passport, but residing abroad A foreign national who has Indian origins or Indian ancestors. A PIO holding a PIO Card, as per the Scheme of The Ministry of Home Affairs, 2002 Overseas Indians who migrated from India after 26th January, 1950, except those from Pakistan and Bangladesh
Apply to 1) Any Indian Mission abroad or,
2) Any of the Foreigners Regional Registration Offices in India or
3) The Joint Secretary (Foreigners), Ministry of Home Affairs
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Scope of Income & its Tax structure

Particulars Ordinary Non Ordinary Non
  Resident Resident Resident
  Taxable Income Y/N
Income received in India whether accrued in or outside India Y Y Y
Income deemed tobe received in India whether accrued in or outside India Y Y Y
Income accrued in India whether received in or outside India Y Y Y
Income deemed tobe accrued in India whether received in or outside India Y Y Y
Income (other than business or profession setup in India) accrued or received outside India Y N N
Income from business setup in India accrued or received outside India Y Y N
Income remitted to India Y N N
Past untaxed income remitted to India N N N
Agriculture income from agricultural Land N N N
Gifts received in cash or kind by relatives N N N