FDI Rules: NRI Investment Rules In India

India has always been an attractive destination for investors from all across the world. Instruments like the Indian stock markets and mutual funds have attracted not only foreign nationals but also non-resident Indians (NRIs). However, any investment made by NRIs is considered a foreign investment in India. And they are, therefore, governed by laws related to Foreign Direct Investment (FDI) in India.

If you’re an NRI willing to invest in the Indian market, you must be aware of a few rules for NRI investment in India.

Bank account you need to invest in India
 

No matter where you live currently, you will have to conduct your transactions in Indian Rupees (INR) if you want to invest in the Indian market. As per the foreign investment laws in India, investments in foreign currency by non-resident Indians are not allowed. Thus, to convert your currency into the INR and invest in the Indian market, you will need to have any one of the following bank accounts,

• Non-resident External Rupee (NRE) Account
• Non-resident Ordinary Rupee (NRO) Account
• Foreign Currency Non-resident (FCNR) Account

If you don’t have any of these accounts, you can open an NRI Savings Account with IDFC FIRST Bank and start investing in India with ease.

Taxable returns from investments
 

As per the Income Tax laws, any income from foreign investments in India is also subjected to income tax. If you’re investing in equity-based markets, your returns would be taxable as per the Short Term Capital Gains (STCG) or Long Term Capital Gains (LTCG) taxation rules.

If you invest your money in equities for less than a year, it will attract a 15% tax as per the STCG taxation rule. On the other hand, if you stay invested in equities for more than a year, the returns generated from your investments won’t attract any income tax.

Restrictions on NRI investments in India
 

As per the applicable laws related to FDI in India, NRIs are not allowed to invest in certain sectors in the Indian stock market. Additionally, NRIs are barred from investing in instruments such as currency derivatives and commodities.

Apart from these, NRIs cannot participate in intraday trading in the Indian stock markets, unlike resident Indians. They are only allowed to take the delivery of shares.

A foreign investment law in India forbids NRIs from the United States of America (USA) and Canada to invest in all mutual fund schemes in India.

Documents required to make NRI investments in India
 

As an NRI, you will need certain documents to invest in the Indian market. These may include.

• PAN card
• A recent photograph
• Your passport
• Your PIO or OCI card
• Your permanent address proof
• Bank statements

Please note that this list is indicative and you may need a few other documents along with. It is advisable to consult your investment broker or advisor for exact details.

To conclude

Investing in Indian instruments allows you to earn good returns as an NRI. If you don’t have an NRI account required to invest in India, you can open an NRI savings account with IDFC FIRST Bank in a few easy steps, and start investing and earning profits from the Indian market. 

Disclaimer

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