Long and Short-Term NRI Investment

On May 21, 2015, the Union Cabinet gave its approval for amending the definition of Non-Resident Indians (NRIs) in the Foreign Direct Investment (FDI) Policy and to clarify that investments made by NRIs on non-repatriable basis shall be treated at par with domestic investments

(G )   Direct Equity – Shares

NRIs can invest in Indian shares through Portfolio Investment Scheme (PIS) of the Reserve Bank of India (RBI). Each transaction through the PIS account is reported to the RBI.

Long term capital gains made on the sale of shares after 1 year from the date of purchase are tax-free Short term capital gains, profits on sale within one year of date of purchase, are subject to a TDS of 15%. 

(H)   Real Estate

Investing in real estate is easy for NRIs under the ambit of Foreign Exchange Management Act (FEMA). An NRI or a Person of Indian Origin (PIO) can invest in both residential and commercial properties in India. But they are not allowed to invest in agricultural land, plantation property and farm house. They can own such properties only if it is gifted to them or inherited.

 (I )  Public Provident Fund (PPF)

PPF is a 15 year scheme of the government with an option to extend it after 15 years in blocks of 5 years. It allows tax benefits under Section 80C and the maturity amount is also tax free. This is a good option for debt investing and can be used as a retirement tool to ensure tax free withdrawal.

NRIs can’t open a PPF account. But those who opened a PPF account before they actually got NRI status can continue the account until it matures. But they cannot extend it after 15 years. On maturity, either, they can close the account or can keep it there and enjoy tax free interest till they close the account. It is recommended that you open a PPF account before becoming an NRI.

 ( J )   National Pension System (NPS)

NPS is an easily accessible, low cost, tax-efficient and flexible retirement savings account. Under the NPS, the individual contributes to his retirement account. NPS is designed on defined contribution basis wherein the subscriber contributes to his own account. The benefit subscribers ultimately receive depends on the amount of contributions, the returns made on the contributions and the period of contributions. 

—The author is Founding and Managing Partner of Anand Law Practice. He can be reached at KamalKAnand@yahoo.com, kkanand_6@yahoo.co.in


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