NRI Investment in India

NRI Investment Options in India

NRI investment options are regulated financial products that Non-Resident Indians can access in India, including insurance, market-linked, and fixed-income instruments. This section outlines the purpose, benefits, and relevance of each option, helping NRIs choose investments based on their risk appetite, liquidity needs, and financial goals.

Making an informed decision is crucial while investing as an NRI. Here is a list of the top NRI investments in India:

1. Term Plans

Term plans are the purest forms of life insurance, providing high coverage to NRIs at an affordable price. In case of the policyholder’s unfortunate death, the beneficiaries receive the death benefit in India without any international complications.

Why NRIs should invest in term plans?

• Premium payments through NRE /NRO accounts are hassle-free.

• Ensure that the policyholder’s families in India are financially secure, even when they live abroad.

• Flexible tenure makes repaying loans, taking care of children’s education and covering dependents’ other essential expenses easy.

• Tax Benefits are available under Section 80C of the Income Tax Act, 1961, so premiums paid towards such plans are eligible for tax deductions up to overall ceiling limit of ₹1.5 Lakh.

2. Unit-Linked Insurance Plans (ULIPs)

Unit-linked insurance Plans (ULIP) are one of the best investment opportunities for NRIs in India, offering dual benefits of life insurance and investment returns. While a portion of the invested amount is covered by life insurance, the remaining part is invested in market-linked instruments. Currently, ULIPs are one of the best investment options for NRIs, offering higher returns.

Why NRIs should invest in ULIPs?

• In terms of economic growth, India ranks fourthi globally. In other words, investment instruments in India have more potential compared to those in other countries.

• NRIs have the freedom to choose among debt, equity and balanced funds based on their risk appetite.

• Fund switching benefits allow investors to reallocate their instruments and optimise returns.

• Tax deductions under Section 80C of the Income Tax Act, 1961 are applicable up to ₹1.5 lakh per financial year. Also, the maturity proceeds may be exempt under Section 10(10D) of the Income Tax Act, 1961, subject to conditions prescribed and death benefits being completely tax-free. Taxability in India also depends upon the DTAA entered between India and the resident country of the policyholder.

• ULIPs enable NRIs to keep a part of their portfolio rupee-denominated, making it easier to reallocate in the future.

3. Savings Plans

Savings plans are structured instruments which offer life cover along with a guaranteed maturity value. The maturity amount from these investment plans could help meet long-term financial goals, such as children’s education, elder support, and housing expenses.

Why NRIs should invest in Savings Plans?

• Allows NRIs to ensure a predictable income source for meeting long-term financial goals.

• Provide steady growth along with tax benefits, but attract lower returns.

• Preserves value in INR and thus works as a hedge against currency fluctuations.

• Flexible premium payments (single pay, limited term, annual) make these plans easier to maintain for the long run.

• Tax deductions under Section 80C of the Income Tax Act, 1961 are applicable up to ₹1.5 lakh per financial year. Also, the maturity proceeds may be exempt under Section 10(10D) of the Income Tax Act, 1961, subject to conditions prescribed and death benefits being completely tax-free. Taxability in India also depends upon the DTAA entered between India and the resident country of the policyholder

4. Retirement and Annuity Plans

When it comes to securing post-retirement income, there is no better alternative investment plan for NRIs than a retirement and annuity plan. These plans are especially beneficial for those NRIs who plan to return to India after retirement.

It is ideal to start investing for retirement as early as possible. That way, your investment gets enough time to grow through the magic of compounding, ensuring a substantial corpus in the future.

Why NRIs should invest in a Retirement and Annuity Plan?

• Annuity investments are not market-linked, so these remain unaffected by currency exchange rates.

• By choosing an annuity, NRIs have the flexibility to select payouts either in the form of regular, steady income or a lump sum.

• Managing and monitoring these funds from abroad is a convenient process.

1. Premiums are tax-deductible under Section 80C of the Income Tax Act, 1961 up to ₹1.5 Lakh with an additional deduction upto ₹50,000 on pension fund contributions making total deduction upto ₹2 lakh (including deduction u/s 80C). under Section 80CCD(1B)of the Income Tax Act, 1961.

• Regular Annuity payouts are taxable. However, Double Taxation Avoidance Agreement (DTAA) eliminates taxability on annuity payouts under Section 90 & 91 of the Income Tax Act, 1961.

5. Child Plan

A child insurance plan for NRIs secures a child’s future. Whether it is their marriage or education, these long-term NRI investments in India enable policyholders to save and protect simultaneously.

Why NRIs should invest in a Child Plan?

• The payouts could be linked to specific milestones. That way, ensuring funds while reaching that particular milestone becomes possible.

• Life insurance coverage in these plans ensures financial security even in the event of the policyholder's absence.

• Provide sufficient flexibility when it comes to choosing policy tenure and benefit structure.

• Enable NRIs to anchor their financial goals in India, so that their children’s educational expenses are secured, irrespective of fluctuations in the currency abroad.

• Tax deductions under Section 80C of the Income Tax Act, 1961 are applicable up to ₹1.5 lakh per financial year. Also, the maturity proceeds may be exempt under Section 10(10D) of the Income Tax Act, 1961, subject to conditions prescribed and death benefits being completely tax-free. Taxability in India also depends upon the DTAA entered between India and the resident country of the policyholder

6. National Pension Scheme (NPS)

The National Pension Scheme (NPS) is a government-backed investment option in India that enables NRIs to allocate funds in equity, debt, and hybrid instruments, providing them with sufficient flexibility, stability, and tax efficiency. It is mandatory to have an NRE (Non-Resident External) or NRO (Non-Resident Ordinary) bank account before investing in NPS.

Why Should NRIs Invest in the National Pension Scheme (NPS)?

• It is a transparent, secure, low-cost pension plan regulated by PFRDA (Pension Fund Regulatory and Development Authority).

• Tax deduction up to ₹1.5 Lakh available under 80C of the Income Tax Act, 1961, and an additional deduction of ₹50,000 applicable under Section 80CCD(1B) of the Income Tax Act, 1961, making the total benefit available up to ₹2 lakhs.

• One of the most reliable plans that helps to align India’s regulated framework with its retirement savings.

• Offers flexibility when selecting funds.

• NPS allows 60% of the fund to be withdrawn as a lump sum at maturity and the remaining 40% to be invested to buy an annuity.

• Annuities received from NPS are subject to DTAA (Double Taxation Avoidance Agreement).

7. Mutual Funds

Mutual funds refer to pooled investments across various debt, equity and hybrid schemes. While investing, NRIs need to adhere to the regulations of FEMA (Foreign Exchange Management Act) and KYC norms. Since finance professionals manage these funds, they allow proper diversification of funds. It is important to note that NRIs living in Canada and the USA have restrictions.

Why Should NRIs Invest in Mutual Funds?

• These funds provide full or partial liquidity, enabling NRIs to adjust their portfolios according to market conditions or emergency requirements.

• Wealth creation and diversifying assets over time.

• Exposure to Indian economic growth sectors through investing in SIPs.

• Potential foreign exchange gains since NRIs can offset currency rate changes.

• Tax deduction up to ₹1.5 Lakh available under 80C of the Income Tax Act, 1961 are available for ELSS plan only

8. Fixed Deposits

A fixed deposit, or FD, is a type of NRI investment policy in India where NRIs deposit a specific amount of money through NRE (Non-Resident External), NRO (Non-Resident Ordinary), and FCNR (Foreign Currency Non-Resident Bank) accounts for a predetermined period. This is a popular investment tool for conservative NRI investors because they are risk-free and provides guaranteed returns.

Why Should NRIs Invest in Fixed Deposits?

• Although these deposits are maintained in Indian currency, they can be funded using foreign currency earnings, such as those from NRE FDs.

• Higher interest rates compared to savings accounts.

• Interest earned from NRE FDs is completely tax-exempt under Section 10(4)(ii) of the Income Tax Act, 1961.

• NRO FDs are term deposits where NRIs invest from their Indian income, such as from rents and pensions, which are taxable under the Income Tax Act, 1961.

• In FCNR FDs, NRIs deposit in a foreign currency, making the investment secure from currency fluctuations, and the earned interest is tax-free in India as per section 10(15)(iv)(fa) of the Income Tax Act, 1961.

• FDs allow NRIs to add beneficiaries, so that, in the event of their untimely demise, the invested amount is distributed to the beneficiaries.

• The flexibility to choose between cumulative and non-cumulative options enables NRIs to receive their income either periodically or in a lump sum.

9. Equity Investments

The purchase of ownership stakes in a company through stocks and shares is known as equity investment. This NRI investment in India enables NRIs to become partial owners of the company. Since these are market-linked, they have high risk and the potential to provide higher returns. According to RBI rules, NRIs must own a demat or trading account linked to their NRE or NRO bank accounts to invest in equity.

Why Should NRIs Invest in Equities?

• Perfect investment tools for long-term wealth creation and portfolio diversification.

• Diversified exposure to Indian equities through index funds and ETFs, without dealing with the unnecessary complexity of direct stock ownership.

• Dividend earnings and capital appreciation enable them to get a regular income.

• High liquidity helps with the convenient buying and selling of holdings.

• Tax exemption available due to DTAA under Section 90 & 91 of the Income Tax Act, 1961.

10. Public Provident Fund or PPF

The Public Provident Fund (PPF) is a government-backed, long-term investment scheme offering stable returns. NRIs invest in such funds primarily to safeguard their principal amount for a prolonged period. Although NRIs cannot invest in a new PPF after leaving the country, they can continue to contribute to their existing PPF using NRE, NRO and FCNR accounts until maturity.

Why Should NRIs Invest in Public Provident Fund (PPF)?

• As per Section 10(11) of the Income Tax Act, 1961 interest earned from PPF is tax-free in India; however it may be taxable in the country of residence of the assessee.

• It is a safe asset in a diversified portfolio that offers 7.1% annual interest.

• After 15 years, NRIs can withdraw the entire principal and the interest amount from their PPF.

• PPF safeguards NRI investments against fluctuations in global markets, making it a secure asset.

11. Bonds

Bonds are loans that promise to repay any borrowed money with interest. These are fixed-income securities since they offer regular interest payments until maturity. NRIs invest in government bonds without any ceiling limit for 5, 10 or 20 years. For investors with a moderate risk appetite, these are ways to grow NRI savings while contributing to India’s economic development. Before investing in government bonds, it is essential to assess the bond issuer’s credit rating and interest rates.

Why should NRIs invest in Bonds?

• Predictable interest, risk-free and ensures complete return of principal.

• Serve as a diversification tool that balances both equity exposure and stable fixed-income returns.

• Seamless repatriation makes it easier for NRIs to transfer their earnings back to their foreign accounts.

• During emergencies, government bonds can be sold or used as collateral to borrow funds.

12. Non-Convertible Debentures (NCDs)

Non-convertible Debentures (NCDs) are fixed-income instruments that help raise long-term capital. The interest incurred from these instruments is higher than that from convertible debentures and bank deposits. NRIs seeking a higher fixed income than traditional deposits must adhere to the RBI (Reserve Bank of India) and SEBI (Securities and Exchange Board of India) regulations when investing in NCDs.

Why Should NRIs Invest in NCDs?

• NCDs are listed on the stock exchange, offering more liquidity than fixed deposits.

• Tenure of NCDs ranges from 90 days to 30 years.

• Interest payouts can be made on a monthly, quarterly, semi-annual, or annual basis.

• Secured NCD issuers offer NRIs specific assets as collateral, allowing them to ensure their investments.

Why Is Investing in India a Good Option for NRIs?

Here are some of the key reasons why NRIs should consider investing in India:

1. Rapid Economic Growth

According to a Morgan Stanley report, by 2028, India is expected to become the world’s third-largest economy, with a GDP of $10.6 trillion^^. This macroeconomic expansion is creating investment opportunities for NRIs across various sectors, including equities, infrastructure, and digital industries.

As a consequence, long-term investors can achieve capital appreciation through linking portfolios to India’s economic momentum. Overall, NRIs are benefiting from exposure to a growing domestic consumption market.

2. Better Returns

Compared to many developed countries, India provides higher returns to its investors. Instruments such as equity mutual funds, bonds, IPOs, and FDs come with higher interest rates and returns. Returns are supported by economic stability and a regulatory framework that protects investor interest. Since higher returns come with potential risks, NRIs need to match their investment choices with their risk appetite.

3. Financial Safety

For NRIs whose families reside in India, investment tools such as term and pension plans help ensure financial security. Financial security in this context refers to protecting dependents against sudden financial stress and income disruptions. These products help them to get safety as well as predictable payouts.

4. Portfolio Diversification

Diversification refers to distributing financial instruments across various geographies and currencies to mitigate risk. It helps to balance risks in case one economy underperforms. Investing in Indian assets enables NRIs to gain exposure to INR-denominated returns, in addition to foreign currency assets.

NRIs can make a resilient portfolio by combining Indian equities, insurance and bonds with various foreign holdings.

5. Build a Retirement Corpus

When it comes to building a strong retirement corpus, investing in Indian products such as National Pension Scheme (NPS), retirement savings plans, and annuity plans is beneficial. These instruments help ensure a larger retirement corpus that is well-aligned with rupee-denominated living expenses.

6. Tax Benefits

Tax incentives are a key reason for NRI investment in India, though benefits depend on the investment type and the NRI’s country of residence. The DTAA under Section 90, 90A & 91 of the Income Tax Act, 1961 prevents double taxation.

Under Section 80C, instruments such as pension plan, life insurance, and specific savings schemes are eligible for deductions of up to overall ceiling limit of ₹1.5 lakh, while Section 10(10D) exempts life insurance maturity proceeds from tax subject to prescribed conditions whereas the death benefits are completely tax free as per the Income Tax Act, 1961. Additionally, Section 10(4)(ii) provides tax exemption on interest earned from NRE deposits, and Section 10(15)(iv)(fa) exempts interest from FCNR deposits. For Public Provident Fund (PPF) accounts opened before attaining NRI status, Section 10(11) ensures that the interest remains tax-free in India as per the sections of the Income Tax Act, 1961. NRIs should verify tax rules in both India and their country of residence to assess returns accurately.

When Should NRIs Start Investing in India

Besides family protection, starting early investment will maximise returns through compounding and tax efficiency.

Here are some insights regarding when NRIs should start investing in India:

1. Investing with Family Responsibilities in India

NRIs with dependents living in India should start investing as soon as they plan for a family. To eliminate the financial pressure of children’s education, healthcare, or elder care, investing in life insurance, child plans, and long-term savings plans, such as FDs, at this stage of life is ideal.

Planning at this stage will ensure that even if NRI income abroad gets disrupted, their loved ones in India are financially protected.

2. Preparing Before Returning to India

NRIs planning to spend their golden years in India should start investing in annuity or pension plans at least 2 to 3 years before their return. These plans will provide stable income and long-term financial security.

Starting early will help accumulate sufficient assets to ensure liquidity for relocation, housing, lifestyle adjustments, or future financial needs.

3. Investing During High-Earning Years Abroad

NRIs should capitalise on their peak earning years, typically between 35 and 50, by investing aggressively. It will build strong long-term assets without affecting ongoing family or lifestyle expenses abroad. Not only that, the surplus income during this period will enable NRIs to allocate a higher percentage towards equities, real estate, and mutual funds.

4. Starting Early with Stable Income in Your 20s and 30s

During the 20s or 30s, when NRIs start to receive a steady overseas income, they can begin to invest a small portion of their earnings in SIPs and ULIPs. This is considered an ideal age to start since it leads to the longest compounding effect. It also lays a strong foundation for purchasing a property in India, funding children’s education, or retirement.

Eligibility Criteria for NRIs to Invest in India

Before investing, NRIs must meet specific legal and procedural requirements, including recognition as an NRI under Indian law and compliance with relevant documentation and bank account procedures.

1. Conditions to Qualify as an NRI

Indian authorities define NRI status based on two conditions: spending less than 182 days in India during the previous financial year, or less than 60 days in the last year and 365 days in the preceding four years. Meeting either condition legally establishes NRI status. This recognition is essential, as only NRIs are eligible to invest through designated NRI investment routes in India.

2. Requirements for NRIs to Start Investing in India

NRIs must be between 18 and 60 years of age and hold a PAN card (or submit an alternative declaration if PAN is unavailable). An NRE or NRO bank account is required to route investments and repatriate funds. PAN ensures tax compliance, while bank accounts manage the flow of funds. Fulfilling these requirements ensures that investments remain valid under FEMA regulations, thereby protecting NRIs from compliance issues.

Key Considerations Before Investing as an NRI

NRIs must consider dual-country obligations, repatriation rules, and currency fluctuations when selecting investment instruments to ensure compliance with their obligations.

1. Aligning Investments with Financial Goals in India and Abroad

Mapping financial goals in India, such as retirement, property, or family support, against overseas obligations is crucial. Align investment types with timelines and expected returns to balance dual-country needs. For example, ULIPs are suitable for long-term wealth creation in India, while maintaining sufficient liquidity abroad helps meet short-term expenses and emergencies.

2. Repatriation and Account Choice 

NRE accounts allow full repatriation, whereas NRO accounts have limits on principal transfer, though interest can be fully repatriated. Some instruments, such as fixed deposits or government bonds, require additional documentation. Planning repatriation ensures liquidity for overseas expenses and aligns the account type with the NRI’s residency and investment goals.

3. Aligning Investments with Overseas Obligations 

NRIs must consider their overseas needs, such as family support, mortgage payments, or retirement funding, when determining investment amounts in India. Choosing liquid instruments or staggered investments helps meet international obligations and avoids forced premature withdrawals from Indian plans; ensuring financial goals in both countries are met efficiently.

4. NRI-Specific Tax Planning 

NRI investments are subject to TDS under Section 195 of the Income Tax Act, 1961 on interest, capital gains, and life insurance maturity, unlike resident Indians. Understanding exemptions, DTAA benefits, and tax-efficient instruments like NRE, NRO accounts, or certain ULIPs can maximise post-tax returns. Without strategic planning, NRIs risk lower effective returns and complicated tax filing in both India and their country of residence.