India’s
Growth story making the headlines every day and more and more NRIs (Non
Residential Indians) are wanting to be the part of it. And why not? While
Foreign Institutional Investors (FII) are pumping money into this economy and
Foreign Direct Investment are coming in, there are ample opportunities for NRIs
to invest in the homeland.
NRIs are
allowed to invest in the Indian Stock Markets, and many are already investing
regularly. The paperwork and the formalities are a little burdensome, but once
all the setup is done, the fruits are sweet.
There are
three major ways to invest in Indian stock market: India based ETFs, Direct
Equity & Mutual Funds.
1. India Based ETFs:
ETFs (Exchange Traded Funds) are traded in
respective countries’ stock exchange in respective currencies. through and bank
or broker, avoiding a lot of documentations. These can be traded just like any
other stocks. You can invest in these stocks without the hassles of going
However a major point to note is that, these
ETFs will be affected by fluctuation in the exchange rate. So not only there
will be an impact of market but also the value of Rupee as against the host
currency.
2. Directly in Indian Stocks:
After going
through the initial setup of opening few accounts, NRIs can invest directly in
Indian Stocks.
Primarily,
you need either a NRO (Non ResidentOrdinary) or NRE (Non Resident External) bank account. Then you need an approval
under PIS (Portfolio Investment Scheme) which allows you to invest in Indian
stock market. Finally you will need a Demat and Trading account. Any major bank
can help you with setting up of all the above accounts and getting a PIS
approvals.
When you
have all this done, you can invest in Indian stocks but not all stocks are
eligible for NRI investment. RBI publishes a list that shows you which stocksare or aren’t eligible for NRI investing.
3.
Mutual Funds:
NRIs can
invest in Indian Mutual Funds through their NRE or NRO account. Demat account
is not mandatory and PIS account is not required. However, there are certain restriction
on the funds available depending upon the country of residence.
Investing
through a mutual fund advisor would place you better as they are aware of all
the regulations and restrictions governing NRIs investments in mutual funds.
Be Mindful of
taxation:
Overall the
provisions pertaining to tax liability of capital gains provisions remain the same
for residents and non-residents.
However,
many countries have a double tax avoidance agreement with India and this will
come into play while determining the overall tax liability of income earned
through investments made in India.
For any
queries regarding NRI investment and financial planning please write to the
author Akshay Suvarna at akshay.suvarna@ymail.com and also visit the
website www.mymoneymanager.net
to know more about mymoneymanager.
