There are over 3 crore NRIs (Non-Resident Indians) abroad. Middle east has the most number of NRIs at 1 crore, followed by US-Canada at 45 lacs & UK at 18 lacs. The wealth of India’s NRI population is estimated at $1 Trillion (Rs.73 Lac crores), which is 40% of India’s GDP.
When an Indian leaves his/her homeland and stays abroad for more than 182 days in a year, he/she becomes a Non-Resident Indian (NRI). The NRIs have been given special economic status and they enjoy certain benefits but are also restricted from availing others. There are several aspects of finance that NRIs need to focus when investing their earnings in India. This is in addition to dealing with earnings, investments & tax in their country of residence, making it complex for NRIs to deal with two sets of systems & rules.
1. Earnings All incomes earned outside India by an NRI/OCI (Overseas Citizen of India) are neither required to be reported nor taxable in India. But all incomes earned in India by an NRI/OCI, are taxable in India. Such incomes include rents, capital gains from sale of property, plot of land, gold, shares, mutual funds etc and interest income from fixed deposits.
2. Banking With respect to bank accounts, the main difference for NRIs is the type of accounts held, below rules apply.
a. NRIs holding resident bank accounts (single or primary holder) -Not allowed, re-designate to NRO account
b. NRIs joint holding resident savings account (but not as a primary a/c holder)
-RBI permits close relative NRIs to be joint holders in resident savings account only on a “former or survivor” basis. Such NRI close relatives are however not eligible to operate the account during the life time of the resident account holder. In this case, aadhar of NRI is not mandatory.
c. Both NRO & NRE accounts are exempted from linking with Aadhar
3. Investing NRIs/OCIs may invest in almost all assets at par with resident Indians except in agricultural land. Typically NRIs make an investment by moving money from abroad to India, a process called remittance. All non-US based NRIs are free to invest in most financial products in India. However, the avenues for investing in capital market products differs for US based NRIs.
4. Insurance Some NRIs may have bought insurance policies while they were resident in India. They may have become NRIs and some may have even changed their citizenship. The first question that arises for this category of NRIs is whether their existing policies in India are affected due to their citizenship change. Such policy holders would not be affected and a claim could still be made on their policies, except health policies in which case, claim is allowed only if treatment is taken in India.
5. Taxation Refer here:
Another common question in most NRI’s mind is whether they could remit money to their spouse’s accounts in India and invest through her account. While this is technically possible, it also allows the Income Tax department to invoke the clubbing clause and tax the NRI, as the spouse may not have any sources of income on her own.
6. Repatriation Repatriation is the opposite of remittance – it is moving money from India to abroad by an NRI. If an NRI wants to sell some assets or inherits sale proceeds of ancestral property, they are required to pay all taxes due, obtain a certificate from a chartered accountant and submit it to their bank for transfer of funds to their overseas accounts.
Make the most use of NRI-advantage!
As NRIs have a higher income earning potential for a limited 10-20 years time period, they could best utilize the time & money to create a secured financial position for themselves through proper goal based planning. The approach to investing is no different for an NRI compared to a resident Indian, but a higher net disposable income would certainly help them attain their goals quickly, if planned well.