December 21, 2012 / 11:35 IST
Anil Rego
Right Horizons
With increasing opportunities for global careers, more and more Indians are opting to migrate to other countries in the search for greener pastures. However, being Indians we still feel the need to stay connected to the mother land and part of that is to try and make investments in India through different avenues. And why not, when investing in India is more lucrative today compared most other destinations.
If you are in India, it is raining attractive investment options. Even ‘safe’ investments like bank deposits today offer you a 9-10 per cent annual return. The Indian stock market offers attractive picks and top performing mutual funds investing in Indian stocks have recorded 12-15 per cent annual return in the last three years. Plus, there are mouth-watering opportunities like corporate deposit issue, offering 10-11 per cent interest. However, if you are a non-resident Indian (NRI) looking to pep up your portfolio, the following are the investment avenues available for you in India.
Investments in 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 investments in domestic mutual funds.
Investments in shares or convertible debentures of Indian companies:
NRIs can invest in shares using a Demat (Dematerialized Format) account. However RBI approval has to be got for each transaction. This is a cumbersome process and not worth the trouble unless the investment is large (one crore plus) and/or to acquire significant stock holding in a company. The better option is to use the mutual fund route for exposure to the stock market.
Other Avenues:
Investments in Government securities or 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 authorized 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.
Investments in 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 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.
Investment in immovable property:
Investment by NRIs in immovable property in India is permitted provided it does not fall under the definition of agricultural land. Under FEMA (Foreign Exchange Management Act), Non-resident Indians are permitted to acquire any immovable property in India, other than agricultural property or plantation or a farm-house.
Tax Benefits
India is considered a bit of a tax haven when it comes to investing in equity. The following are the four tax benefits that all investors, NRIs or Residents enjoy on their equity investments:
a) Long-term capital gains are tax-free
b) Short-term capital gains are taxed at the concessional rate of 10%.
c) Dividend is tax-free, however subject to a dividend distribution tax @15%
d) The capital is repatriable if the original investment was made through forex remitted from abroad or through NRE accounts.
If directly investing in the market is not your cup of tea, then Mutual Funds provide a very attractive alternative. Mutual Fund investments, while broadly delivering the advantages of the equity markets fairly obviate some of the pitfalls associated with it.
