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Mutual Funds
The mutual funds are investment options in which money from many investors is pooled together and invested in a mix of assets such as stocks, bonds or other securities. A professional fund manager manages these investments on behalf of the investors. The tax liability for mutual funds for NRIs are: TDS is deducted at the source, 20% for short-term equity gains and 12.5% on long-term equity gains which are above ₹1.25 lakhs annual threshold. If excess TDS is deducted, you can claim it back by filling indian return, using the DTAA. Click here to know more about DTAA.
Example: Rohan works in Dubai and runs a ₹50,000 monthly SIP in an equity fund from his NRE account. Over 10 years, he invests ₹60 lakh at an average 12% annual return, the corpus would roughly reach ₹1.16 crore. On redemption, the AMC will deduct 12.5% TDS as long-term gains before crediting the amount in his bank account, and the balance can be remitted to Dubai without any limit because the money originally came in through the NRE account.
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Fixed Deposits
Fixed deposits allow investors to deposit a lump sum with a bank for a fixed period at a predetermined interest rate. The tenures for fixed deposits range from 7 days to 10 years. For NRIs, there are 3 types of deposits:
- NRE FD: It holds foreign earnings converted into rupees. The interest is exempt from tax in India, and banks deduct no TDS. Both the principal and interest amount can be sent to abroad without any cap.
- NRO FD: This is for income earned inside India, such as rent, dividends, and pension. Interest is taxable with TDS deducted at over 30%, including surcharge and cess. Remittances are capped at USD 1 million per financial year.
- FCNR FD: The deposits under this stay in the original currency, i.e. USD, GBP, EUR, AED, etc., for 1-5 years with tax-free interest and no rupee risk.
Example: Sameer in Sharjah puts ₹20 lakh into an NRE FD for 3 years, which is compounded quarterly at 3%. At maturity, he has about ₹24.6 lakhs; the ₹4.6 lakh interest attracts no indian tax, and nothing is withheld.
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ULIPs
A Unit Linked Insurance Plan (ULIP) combines life insurance with investment. One part of the premium provides life coverage, and the remaining amount is invested in funds which are chosen by the policyholder. ULIPs are designed for long-term financial goals; they come with a 5-year lock-in period.
Example: Meera in Singapore pays ₹2 lakh a year for 10 years into a ULIP plan with ₹20 lakh life cover, investing a total of ₹20 lakhs. At about 10% a year after charge, the fund value at maturity will be close to ₹33 lakhs, and since her premium amount stayed under ₹2.5 lakhs, she has to pay no tax in India.
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National Pension Scheme (NPS)
The National Pension System (NPS) is a retirement scheme that is run under PFRDA. In NPS, you contribute through your working years, and that money is spread across equity, corporate bonds and government securities, and it stays locked until 60.
NRIs aged between 18 to 70 can open a Tier 1 account. Contribution can be made through NRE or NRO account; the minimum contribution amount is ₹500. At 60 you can take out up to 60% as lumpsum which is tax-free; the other 40% is used to buy annuity, and that pension is taxable every year in India.
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Child Plans
A child plan is a life insurance policy built around one goal: making sure a specific amount reaches your child at a specific age, whether or not you're around to fund it. Child Plans include a feature called “waiver of premium”, if something happens to the policyholder, the insurance company waives the future premiums, the policy still continues, and the child gets the maturity amount as specified in the policy.
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ELSS & Stock Market (PIS Route)
Trading individual stocks means opening a Portfolio Investment Scheme (PIS) account tied to your NRE or NRO bank account, and FEMA only allows delivery-based trades, no day trading, no short-selling, full stop. There's also a ceiling most people don't know about: a single NRI can't hold more than 5% of a company's paid-up capital through the PIS route. If tax savings matter more than flexibility, ELSS funds lock your money for three years but hand you up to ₹1.5 Lakhs in deductions under Section 80C.
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Bonds and Government Securities
Bonds and Government Securities (G-Secs) are low-risk fixed-income instruments issued by corporations or the Government of India to raise capital. As an NRI when you invest in this financial instrument, you lend money to these entities for a fixed time in exchange for regular, reliable interest payments and capital protection. These are one of the safest investment options available for investment because these have strong sovereign backing and strong corporate rating. The funds in these are parked in INR and give predictable returns that are even higher than regular bank fixed deposits.
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Gold
Gold holds value when everything else gets shaky. Most NRIs skip physical gold now (locker fees, theft risk) in favor of Gold ETFs or digital gold bought online. One catch: the RBI won't let non-residents buy new Sovereign Gold Bonds. If you already owned some as a resident though, you keep them, plus the 2.5% annual interest on top of gold's price gains.
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Real Estate
FEMA lets NRIs buy residential and commercial property in India without approval. Agricultural land, plantations and farmhouses are off limits, you can only inherit them. Payment must come through banking channels: inward remittance, or your NRE, NRO or FCNR balance. Indian banks lend to NRIs, and the EMI can be serviced from an NRE account or from the rent itself. Rental income is taxable in India, and the tenant is required to deduct TDS before paying you. Filing a return recovers the excess.
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Portfolio Management Services
PMS is a personalised equity portfolio run by a SEBI-registered manager. The shares sit in your own demat account under your name, not in a pooled fund where you hold units. The entry point is ₹50 lakhs set by SEBI, and the balance for the same has to stay above that level. NRIs can invest through NRE or NRO accounts by opening a Portfolio Investment Scheme (PIS) account. You own these securities directly; every sale the fund managers make is taxable
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Capital Guarantee & Guaranteed Return Plans
These are two related products often sold together.
A guaranteed return plan is a non-linked insurance policy where the maturity amount or income stream is written into the contract on day one. Nothing depends on market performance.
A capital guarantee plan combines a guaranteed component with a ULIP. The debt portion is sized to return your full invested capital at maturity; the equity portion depends on whatever returns the market delivers. Your original investment is returned in full, regardless of market performance, with any market-linked gains on top.
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Shariah Compliant Funds
Shariah Funds are mutual funds that screens its portfolio against Islamic investment laws before anything else. They avoid companies and financial activities that are not permitted under Sharian principles, such as businesses involving alcohol, tobacco, gambling and other conventional interest-based financial services. Like other funds, Shariah mutual funds invest in market-linked securities. For example, Tata Ethical Fund, Nippon India ETF Nifty 50 Shariah BeES etc.
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Equity Instruments
NRIs can participate in India’s growth story by investing directly in listed stocks, exchange-traded funds (ETFs), and equity mutual funds. Direct equity trading requires setting up an NRI demat and trading account via the Portfolio Investment Scheme (PIS) path for repatriable investment, or using a standard NRO account for non-repatriable investments.
NRIs are also allowed to subscribe to Initial Public Offerings (IPOs) using funds from their NRE or NRO account without needing a PIS approval. All stock market trading by NRIs on Indian exchanges is strictly based under the Foreign Exchange Management Act (FEMA).
You can link either an NRE or NRO account to your NRI Demat account based on your repatriation needs. Note that separate NRO (PIS) accounts are no longer required for non-repatriable investments, as trades can be executed directly through a standard designated NRO account.
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