Frequently Asked Questions (FAQ)

NRIs can invest in: Equity and Debt Mutual Funds: Through NRE/NRO accounts. Fixed Deposits: NRE and FCNR deposits are tax-free, while NRO deposits are taxed. Real Estate: NRIs can invest in residential and commercial properties, excluding agricultural land. National Pension System (NPS): Offers retirement benefits and tax advantages. For NRIs in the USA, caution is needed when investing in Indian mutual funds due to the PFIC (Passive Foreign Investment Company) rule, which can result in higher taxes and complex reporting requirements.

The PFIC (Passive Foreign Investment Company) rule applies to US taxpayers who invest in foreign mutual funds or companies. Many Indian mutual funds are classified as PFICs, leading to complicated tax filings and potentially higher taxes under the IRS rules. NRIs in the USA should consult a tax advisor before investing in Indian mutual funds to avoid harsh penalties and reporting requirements.

NRE (Non-Resident External Account): Deposits foreign earnings, repatriable, tax-free interest. NRO (Non-Resident Ordinary Account): Manages Indian income like rent, repatriable with limits, interest is taxable. FCNR (Foreign Currency Non-Resident Account): Held in foreign currency, protects against exchange rate fluctuations, tax-free interest, fully repatriable.

Yes, NRIs can invest in mutual funds through NRE or NRO accounts. However, NRIs from the USA and Canada may face restrictions due to FATCA regulations, so it’s important to choose mutual funds that comply with these rules.

Yes, NRIs are taxed on income earned or received in India, such as: Rental income from property. Interest from NRO accounts. Capital gains from investments. Income from NRE and FCNR accounts is tax-free. Double taxation can be avoided by utilizing the Double Taxation Avoidance Agreement (DTAA).

Yes, but NRIs, especially from the USA and Canada, should be cautious. Due to FATCA and the PFIC rule, investing in Indian mutual funds may lead to higher taxes and strict reporting to the IRS. It's advisable to consult a tax expert and consider alternatives like US-compliant ETFs or other investments.

Funds can be repatriated freely from NRE and FCNR accounts, including both principal and interest. NRO accounts allow repatriation up to $1 million per financial year, subject to taxes.

NRIs can claim tax deductions up to ₹1.5 lakh under Section 80C for investments like: ELSS mutual funds. Life insurance premiums. Principal repayment on home loans. Children’s tuition fees.

NRIs can leverage the Double Taxation Avoidance Agreement (DTAA) to avoid being taxed twice on the same income. The DTAA allows NRIs to either claim tax credits or exemptions depending on the type of income.

Yes, if the NRI’s taxable income in India exceeds ₹2.5 lakh in a financial year, they must file a return. Income from NRE/FCNR accounts, which is tax-exempt, does not require filing.

Yes, NRIs can buy residential and commercial properties without restriction. However, they cannot purchase agricultural land, farmhouses, or plantation properties without specific approval from the RBI.

NRIs should focus on: Diversifying their investments across Indian and global markets. Using NRE/NRO/FCNR accounts to manage Indian income. Consulting tax professionals, especially if subject to rules like PFIC in the USA. Using DTAA to avoid double taxation.