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Investments in India by NRIs — FEMA, RBI & Tax Compliance Guide

Complete Advisory for NRI Investors on Stocks, Real Estate, Mutual Funds, Fixed Deposits, and Repatriation Under FEMA and Income Tax Laws

Non-Resident Indians (NRIs) have a wide range of investment options available to them in India — from equity and mutual funds to real estate, fixed deposits, and government securities — but each investment category is governed by distinct rules under FEMA (Foreign Exchange Management Act, 1999), RBI regulations, and the Income Tax Act. Getting the investment structure right from the outset is essential: using the wrong account type, investing in a prohibited category, or failing to comply with reporting requirements can lead to FEMA contraventions, tax notices, and restrictions on repatriation of funds back abroad.

NRI investments in India are primarily routed through three types of bank accounts: NRE accounts (for repatriable foreign earnings converted to INR), NRO accounts (for income earned in India), and FCNR (B) accounts (foreign currency deposits). Equity investments on Indian stock exchanges require a Portfolio Investment Scheme (PIS) account designated by an RBI-approved bank. Returns on NRI investments — dividends, interest, rent, and capital gains — have specific tax treatment, including higher TDS rates, with relief potentially available under applicable DTAAs. Repatriation of investment proceeds and income is permitted subject to FEMA limits and tax compliance — and connects to the LRS framework for reverse remittances back to India. For US-based NRIs, investments in Indian mutual funds may trigger PFIC reporting obligations in the USA.

Our NRI Investment Advisory Services

Portfolio Investment Scheme (PIS) Advisory

Advising NRIs on setting up a PIS account with an RBI-authorised bank, understanding purchase and sale limits under Schedule 2 of FEMA (Transfer or Issue of Security by a Person Resident Outside India) Regulations, and complying with SEBI disclosure requirements.

NRI Real Estate Investment Compliance

Advising on FEMA-permissible real estate purchases for NRIs — residential and commercial property — including funding requirements, TDS compliance for buyers and sellers, rental income taxation, and sale proceed repatriation.

Mutual Fund & FD Investment Advisory

Reviewing mutual fund investment compliance for NRIs, including KYC requirements, NRE vs NRO account funding, FATCA/CRS self-certification, and tax treatment of capital gains and dividends from Indian mutual funds.

Capital Gains Tax Planning

Computing and planning capital gains tax on sale of Indian shares, mutual funds, and property — including availability of LTCG exemption under Section 54/54F, indexation benefits, and DTAA capital gains provisions for NRI investors.

FEMA Compliance & RBI Reporting

Ensuring all NRI investments comply with FEMA Schedule 2, 3, and 4 regulations, filing required RBI reports for FDI or other special category investments, and rectifying past FEMA contraventions through the LRS or compounding process.

Repatriation of Funds from India

Advising on repatriation procedures from NRO accounts (up to USD 1 million per year with Form 15CA/CB), repatriation from NRE accounts (fully repatriable), and obtaining CA certificate for tax-compliant repatriation of sale proceeds.

Key Facts About NRI Investments in India

  • NRIs can invest in most Indian investment instruments — equity shares (via PIS), mutual funds, government securities, NRE/NRO fixed deposits, real estate (residential/commercial, not agricultural land or farmhouse)
  • Portfolio Investment Scheme (PIS): NRIs must designate one bank for PIS and route all secondary market equity purchases and sales through this bank to comply with SEBI and RBI regulations
  • TDS on NRI income is higher than for residents: interest on NRO accounts — 30%; dividend income — 20%; short-term capital gains on listed shares — 15%; long-term capital gains — 10% or 20% depending on asset type
  • NRE account interest is fully exempt from Indian income tax and fully repatriable — making it the preferred account for parking foreign earnings in India
  • Repatriation from NRO accounts is limited to USD 1 million per financial year after payment of applicable taxes, with Form 15CA/CB certification required from a CA
  • NRIs are permitted to invest in National Pension System (NPS) — but contributions must be from NRE/NRO accounts and repatriation of NPS proceeds is subject to FEMA rules
  • NRIs can take a home loan in India in INR — repayments must come from NRE/NRO accounts or inward remittances; the loan amount cannot be credited to an NRE account
  • DTAA benefits on Indian-source income (dividends, interest, capital gains) can significantly reduce TDS for NRIs — requiring TRC and Form 10F submission to the Indian payer

Frequently Asked Questions

Can NRIs invest in Indian stock markets?
Yes. NRIs can invest in Indian stock markets (equity shares and convertible debentures listed on recognised stock exchanges) through the Portfolio Investment Scheme (PIS) under Schedule 2 of the FEMA (Non-Debt Instruments) Rules, 2019. NRIs must designate one specific bank branch as their PIS bank — all equity purchase and sale transactions on Indian exchanges must flow through this designated PIS account. Purchases are subject to individual and aggregate NRI holding limits for specific companies (typically 10% individual limit and 24% aggregate limit, extendable by companies to 49%). PIS does not apply to direct purchase of unlisted shares, which is governed by FDI regulations.
What is the Portfolio Investment Scheme (PIS) for NRIs?
The Portfolio Investment Scheme is an RBI scheme that allows NRIs and PIOs (Persons of Indian Origin) to purchase and sell shares and convertible debentures of Indian companies on a recognised stock exchange through a designated bank account. To invest through PIS, an NRI must: (a) open an NRE or NRO account with an RBI-authorised PIS bank; (b) get a PIS permission letter from the bank; (c) open a separate PIS-designated demat and trading account; and (d) ensure all secondary market transactions are executed through this designated account. Profits from NRE PIS are repatriable abroad without restriction; profits from NRO PIS are repatriable up to USD 1 million per year after payment of applicable taxes.
Can NRIs buy property in India?
Yes, with certain restrictions. NRIs can purchase residential and commercial properties in India without any prior RBI approval. However, they cannot purchase agricultural land, plantation property, or farmhouses without special RBI approval (which is rarely granted). The purchase must be funded through: (a) remittances received in India through normal banking channels; (b) funds in NRE, NRO, or FCNR accounts; or (c) home loans from Indian housing finance companies or banks (repayable through NRE/NRO accounts or inward remittances). Sale proceeds of property can be repatriated abroad — up to the original cost of acquisition from NRE accounts for properties purchased from NRE funds, or up to USD 1 million per year from NRO accounts for other properties, subject to tax compliance.
How is NRI rental income from India taxed?
Rental income received by an NRI from Indian property is taxable in India under the head "Income from House Property." The tax is computed after allowing a standard deduction of 30% of net annual value and deducting interest on housing loan (without any monetary limit for let-out property). The tenant (if a company or business entity) must deduct TDS on rent paid to an NRI at 30% (plus surcharge and cess) under Section 195. Individual tenants, though not legally obligated to deduct TDS, may still face TDS obligations in specific circumstances. If the NRI is a resident of a treaty country, the applicable DTAA may reduce the withholding rate on rental income — requiring the NRI to furnish a TRC and Form 10F to the tenant. Rental income received in India can be credited to the NRI's NRO account.
What are the repatriation limits on NRO account funds?
The repatriation of funds from an NRO account is limited to USD 1 million (or equivalent foreign currency) per financial year (April to March), inclusive of the proceeds from the sale of immovable property held in India. To remit funds from the NRO account: (a) the NRI must have paid all applicable Indian taxes on the income (TDS may already have been deducted, or self-assessment tax must be paid); (b) a Form 15CA (online declaration by the remitter) and Form 15CB (CA certificate certifying tax compliance) are typically required by the remitting bank; and (c) the bank processes the remittance after verifying documentation. There is no repatriation limit on funds in NRE accounts — these are fully repatriable at all times, which is why keeping foreign earnings in NRE accounts rather than NRO accounts is generally advisable from a flexibility standpoint.

Invest in India Smartly — With Full FEMA & Tax Compliance

PIS advisory, real estate compliance, capital gains planning, NRO repatriation, and DTAA benefit optimisation for NRI investors.

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