NRI want to invest in India and with increase in
liberalization, more and more opportunities are available for investment in
India. With the growth of Indian Companies and Global Acquisition made by Indian
firms in last two years, many sectors emerged as an investment option in India such
as real estate etc.
In this discussion we shall first discuss the process
to be followed by NRI for investment and the area’s where NRI can make
investments.
Bank
Accounts
One of the first things you should know as an NRI is
that your existing bank accounts are no longer valid. The Foreign Exchange
Management Act (FEMA) requires you to inform all the banks where you have an
account, be it savings or deposits, about your changed residential status.
The banks will then classify your account as NRO
(Non-resident Ordinary). Except for the change in nomenclature, there is nothing
new about the account. You can continue using it as before. Payment of EMIs
(Equated Monthly Installment) can go on. You can also hold the NRO account
jointly with a resident. But the balance in the NRO account cannot be remitted
outside India.
If you want the funds in your account to be freely
repatriable outside India, an NRE (Non-Resident External) account would be
ideal. This account will be maintained in rupees and any debit or credit of
foreign exchange will be converted into rupees.
It cannot be opened jointly with a resident but you
can allow a resident to operate it on your behalf.
For example, you can authorise your local relative or
friend to make local payments or even remit money to you through this account
by giving him / her a power of attorney.
Investment
options
NRIs can invest only in five asset classes in India —
bank deposits, stocks, mutual funds, real-estate and insurance. You can also
invest in government securities and company deposits. But you cannot invest in
PPF (Public Provident Fund), or bearer instruments such as NSC (National
Savings Certificate) or Kisan Vikas Patras once your residential status
changes.
Though you are barred from making any fresh investments,
existing ones can be left undisturbed. However, they cannot be extended beyond
maturity. You can continue to make periodic contributions to the existing PPF
account even when you are abroad through your NRE or NRO account. When the
investments mature, the proceeds will be credited to the NRO account.
Banks allow NRIs to invest in deposits through FCNRB
(Foreign Currency Non-Resident (Banks) accounts. These are term deposits and
can be maintained in some currencies such as the US dollar, pound sterling and
yen etc. The funds in this account can be repatriated.
Equity
Investments
With the stock markets on a roll, you are welcome to
join the party. As an NRI, you are allowed to invest to your heart’s content in
both stocks and mutual funds.
While you can continue investing in IPOs (Initial
Public Offers) unmindful of your NRI status, there are some procedures to be
followed when investing in the secondary market. All along, as a resident, you
would have used a demat (dematerialized shares) account to buy and sell shares.
Now, this demat account has to be closed and the
shares are to be transferred to a new NRO Demat Account. After this, you can
either continue to hold those shares or sell them.
Although an NRO account means that funds are
non-repatriable, the Reserve Bank of India allows funds from the sale of
financial assets to be remitted outside India after some paperwork. Hence,
wherever you are, you can enjoy the proceeds from the sale of shares.
To invest from abroad, you need to open a fresh NRI
PINS (Portfolio Investment Scheme) demat account. PINS is a scheme of the RBI
under which NRIs can buy and sell shares by routing them through their NRE /
NRO account. (An NRE account is preferable, since you can freely transfer the
funds abroad after selling the shares). Speculative transactions are not
encouraged under PINS. Hence, you need to take / give delivery of shares.
For mutual fund investments, there are no procedural
changes. Money can either be remitted from abroad or moved out of your NRE /
FCNR accounts maintained at a local bank.
The redemption or the dividend proceeds will be
credited to the same account. Again, investments can be made both on a
repatriable and on a non-repatriable basis.
For these purposes, the PAN card you obtained when you
were a resident will hold good. You need not apply afresh.
Insurance
and Real-Estate
Presently, NRIs can invest in life insurance policies
in India without any limit on the cover. Some companies offer foreign-currency
denominated policies and also allow you to pay the premium in foreign currency.
You can also invest in residential and commercial
property in India without obtaining any special permission from the RBI.
Investment in agricultural land/plantation
property/farm house is, however, not allowed.
