Investment Options in India for NRIs

For Non-Resident Indians (NRIs) looking for options to invest, INDIA offers a host of benefits that makes it an attractive investment destination

  • Stable Government,
  • On-going structural reforms,
  • Falling interest rates,
  • Dominant position in local geopolitics,
  • Higher than average GDP growth rate,
  • Rising interest of foreign investors,
  • Conducive tax laws,
  • Increasing composition of the organised economy,
  • Attractive demographics leading to rising income levels, & rising consumer demand
  • Extremely vigilant regulators like SEBI, and RBI.

INDIA is poised to double its GDP in the next 5 – 6 years & what that means is there will be a whole lot of industries and companies that will gain disproportionately from this shift making investing in this environment very attractive and thus in our view INDIA should not be a miss in your investment portfolio if you are looking at multiyear wealth creation.

So especially for NRI investors looking for Investment Options in India, and particularly looking to invest in Portfolio Management Services and/or Alternative investment funds, we at PMS AIF WORLD Platform have made an endeavor to Answer 10 Frequently Asked Questions.

Most Mutual Funds, Portfolio Management Services and Alternative Investment Funds ( MFs, PMS, and AIFs ) do not accept investments of NRIs from the USA and Canada because of the cumbersome compliance requirements under FATCA or Foreign Account Tax Compliance Act.

But, over years, some fund houses have consulted each other and experts on this matter, and a few of them have considered taking investments from USA and Canada based investors.

But, Under FATCA, it is compulsory for all financial institutions accepting US & Canada NRI investments, to share the details of transactions the US Government. FATCA ensures that there is no deliberate tax evasion on income generated overseas.

India has a double taxation avoidance agreement with both the North American countries thus Investors effectively have to pay tax at a concessional rate

For Canada based investors, options are more broad-based than the USA based NRI investors.

There are many Mutual Fund AMCs that accept Canada based NRI investments.  

And, here are a few examples from the list of some of the PMS & AIF product options/names, for Canada based NRI investors to consider: –

Ambit Coffee CAN
Ambit Good & Clean
Carnelian Capital Compounders
IIFL Multi-Cap

For US NRIs, investment options are quite limited as the SEC (securities and exchange commission ) has very stringent compliance laws for AMCs to take in clients from American soil.

There are some Mutual Fund AMCs that accept US-based NRI investments like ICICI Prudential, Birla Sunlife,  SBI AMC, etc.

However, there are very few PMS and AIFs from India that accept US-based NRI investments.

One such example is AlfAccurate Advisors Portfolio

Another structure for US-based NRI investors to invest in the INDIAN market is the off-shore route whereby the Indian funds are domiciled out of any geography other than India, which can comply with SEC laws.

US NRIs can also consider and explore advisory services in this regard.

One such example is Purnartha Investment Advisors

For NRI investors residing in geographies apart from USA & Canada, the universe of investable products is much larger and almost similar to that of any resident Indian.

Most fund managers today across product categories like MFs, PMS and AIFs accept money from NRI investors.

And, here are a few examples from the list of some of the PMS & AIF product options/names, for NRI investors to consider Few Good PMS options, in this regards: –

ASK India Entrepreneurial Portfolio

IIFL Multi-cap Portfolio

Marcellus Consistent Compounders 

Ambit Coffee CAN

Stallions Asset Core Fund

NRIs interested in investing in INDIA need to collect basic KYC documents like Foreign residence proof, Identity proof other than PAN, and PAN card.

Then NRI investors are required to submit immigration documents to verify the last time the investor had visited Indian soil. In normal circumstances, this is a mandatory requirement for PMS and AIF  investments, as these are private placement products and the documentation is expected to have happened in-person with the client. But, given the lock-down period, this requirement has been relaxed somewhat. If the investor is outside India, he needs to send notarized or banker attested KYC documents with attestation of in-person verification done by the Notary officer or Banker.

Apart from KYC documents, NRI investors need to also open a Portfolio Investment Scheme (PIS) account as required under the RBI guidelines. All the other dos and don’ts are applicable to NRIs under the RBI’s PIS Scheme. These include limits on the investments made in single stocks or on the procedure for investments made under repatriation & non-repatriation basis as well as those applicable for short-selling of shares.

Once the above documentation is completed and PMS is activated, funding can be done by sending money via RTGS or transferring existing shares to the PMS service provider.

For Equities as well as Debt Investments, the capital gains tax rates for NRIs and Resident Indians are the same.

On Equity LTCG tax is 10% on long term capital gains above 1 lac per year, and STCG tax is 15% on short term capital gains. There is no indexation applicable in the case of Equity. And, the Long term is considered more than 1 year, and anything lesser than 1 year is considered short term.

On Debt, LTGC tax is 20% with indexation on long term capital gains and STGC is as per FY year’s taxable income which mostly would be 30% on short term capital gains (assuming NRI investors comes in highest tax brackets as per Indian income tax slabs ). Here the long term is considered as more than 3 years and anything lesser than 3 years is considered a short term.

Apart from capital gain tax, health, education cess, and STT is also applicable.

One difference here is that for NRIs, tax is deducted at source and TDS is charged at the time of redemptions/sale / exiting the investment.

On Equity, TDS on short term gains of equity is 15% and on the long term, gains are 10%

On Debt, TDS on short term gains is 30% and on long term gain from debt is 20% with indexation. So, TDS here is basically deducted at the highest applicable rate assuming NRI comes under the highest income tax slab, but, if NRI falls in lower tax slab, he/she is eligible for refund when he files his returns.

Another difference between NRI and RI taxation comes when the country where the NRI resides doesn’t have a Double taxation avoidance agreement(DTAA) with India. However, India has DTAA with most major countries like USA , UK , Singapore, Canada Etc

As per the Foreign Exchange Management Act (FEMA) guidelines, it is illegal for NRIs to have domestic saving accounts in their name in India. It is mandatory that you convert all your savings to NRE or NRO account. Therefore, continuing to use the domestic savings account in the home country can attract hefty penalties.

Opening an NRE or NRO account is, hence, a viable option for Non-Resident Indians. It can help NRIs in two ways. One, they can send the money they earn abroad to India at any point of time. Two, they can also retain their income from India (via any asset sale of rent etc) in the home country itself.

Both NRE and NRO accounts are Indian rupee accounts.

NRE account is used to transfer foreign earnings to India. Money from NRE accounts is freely repatriable i.e. both the principal amount and interest earned are freely and completely transferable. You should opt for NRE account if you want to hold or maintain your overseas earnings in Indian currency.

Whereas, NRO is used to manage income earned in India. Funds from the NRO accounts can be repatriated post payment of applicable taxes with a limit of USD 1 million in a financial year. You should opt for NRO accounts if you want to save your earnings from India in Indian currency itself. These earnings could include rent, income, dividend, sale of property etc. Also under NRO accounts, interest earned on this account is taxed at the rate of 30% (plus surcharge) and other applicable taxes in India according to the ITA.

In order to take the benefit of lower rates of tax as per double taxation avoidance agreement (DTAA) entered in by India, NRIs need to submit the Tax Residency Certificate issued by Tax Authorities of the country of his residence.

PIS account is a scheme of Reserve Bank of India ( RBI ) which enables NRIs ( Non  – Resident Indians ) and OCBs( Overseas Citizens of India ) to purchase and sell shares and convertible debentures of Indian companies on a recognized Indian stock exchange by routing such purchase/sale transactions through their NRI Savings account with a designated bank branch.

There can only be one PIS account that an NRI investor can open with any bank – In fact there is an undertaking that has to be given by NRI stating that the NRI has no other PIS account(s).

All popular banks today have PIS options for their customers – like HDFC bank, ICICI bank  HSBC, Standard Chartered, Kotak, SBI, etc. There are certain restrictions with PIS like on intraday trades, short selling of shares, etc are not allowed. PIS is used to purchase only listed shares and debentures.

PIS is not required for Mutual Funds. Nor is PIS required for Alternative Investment Funds. This is because, both these structures operate on the concept of pool vehicles, whereby the investment is held at a fund level and investors are allocated units and not securities.

Only in case of Portfolio Management Services, the PIS account becomes a mandatory requirement as in this case, pool structure is followed, and enhanced structure is made available whereby every investor owns his own securities, and here in the PIS account becomes significant for holding these securities, whereby portfolio manager operates this account as per the discretion provided on the power of attorney contract signed between the portfolio manager and investor.

Let us tell you that Wealth Management Industry is not designed to be fair, especially to the NRI investors.

Every investor is different, with different financial goals, different tolerances to risk, and different personal situations. Some investors are cautious, & some are high-risk takers, some are emotional, & some are informed, some are casual, & some are technical, some have time to spare, & some are time-constrained. We first understand your unique investment objectives and constraints and then act. We also regard your emotional mindset while investing in your own country, and offer the right consulting that is empowered with rational thinking. This is unlike other wealth management companies, who take advantage of your time constraints & emotional state of mind and often sell you locked-in products like Insurance or closed-ended investment portfolios.

Over 2 years, we manage more than 130 HNI and NRI families across 550 crores of assets. Our clients say,  “we’re creating an eco-system of informed, happy & successful investors”.

Here is the link to Clients Testimonies

We have a simple philosophy

For NRIs looking for Investment Options in India, a very important point that needs to be understood is that there are 2 factors that determine wealth creation from equity investments. It is simple, but not easy. And, here it is…

  • Investing in a Quality Portfolio

A quality portfolio is the one that is not too diversified, & still offers the best risk-adjusted returns. Such a quality portfolio provides consistent growth which invigorates the process of compounding. 

  • Holding it for Long Term

Long term horizon means a period of 10 years or more. This helps in reaping the benefits of compounding. It is easy to aspire for a long term horizon when making an investment, but practically very difficult to maintain given the vagaries of markets. 

How ?

Through AdviceSense Wealth Management, which is our Investment Consulting Practice focused on achieving these 2 objectives for and with every client we manage.

With us, Quality Portfolio is identified through unbiased selection based on our proprietary analytics. We analyze PMS AIF investment products across 5 Ps – People, Philosophy, Performance, Portfolio, and Price through Proprietary 10 Factor Model with an endeavor to ascertain the Quality, the Risk, and the Consistency(QRC) attributes before suggesting the same to our clients. We are very selective in our approach. 

With us, Long term horizon is achieved through an informed investing approach based on our proprietary contentHolding on to the portfolio requires high conviction in the portfolio at all points of time, else, one tends to exit early owing to the traps of emotions or impatience.  We do not let our clients commit a mistake of under-owing equity in the first place, nor early-exiting equity investments owing to any fear. We also do not let our clients make equity investments, beyond yardsticks of asset allocation & risk appetite. 

In short, we are delivering excellent Investor experience & reshaping the Wealth Management Industry sticking to basics. 

It’s easy to socialize & sell, which is what drives most wealth management companies, but difficult to maintain insight & integrity which drives us

Wish to make INFORMED INVESTMENTS for Long Term WEALTH CREATION

Do Not Simply Invest, Make Informed Decisions

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