What are the options as an NRI to invest in India? I would like to do periodic investment and would like options where I can transfer the money back to dollars if needed without huge tax or penalty.

A research paper can definitely be written on this topic if not a book. I'll try to summarize the options and based on your response we could possibly go into more details.

I'm assuming that you want to invest in Indian Equity Market and are willing to take the risk which comes with equity investments.

* You could invest in India based Mutual funds in US like MINDX & IFN. http://finance.yahoo.com/q?s=IFN

* You could directly buy stocks of Indian companies. If you don't feel very comfortable picking Indian stocks you could limit youself to stocks included in 2 major indexes of India Sensex & Nifty. (More info about indexes at http://www.nseindia.com/ , http://www.bseindia.com/about/abindices/bse30.asp) You will have to open a demat a/c and a/c with a broker to do the trading.

* You could invest in Indian Mutual Funds. This is the most preferred way for normal Indian investors. But NRIs have to deal with some taxation issues.

http://en.wikipedia.org/wiki/Passive_foreign_investment_company

Indian MFs do allow periodic investments on monthly & quarterly basis using Systematic Investment Plan. They also allow money to be repatriated.

If you are planning to return back to India in future or you are OK with churning your portfolio every year and paying normal income tax on that in US (some workaround for PFIC) , Indian MFs are worth considering, specially with the kind of returns they have offered in last few years. (Check out our Mutual Fund section).

Hope this helps .

 

Regards,

Rupali

ULIPs (Unit Linked Insurance Plans) are a possible way for NRIs to gain exposure to Indian market.

Their expenses are higher compared to Mutual Funds but being insurance plans they avoid some of the PFIC issues.

 http://in.biz.yahoo.com/nri/nri7.html

 

-Rupali

For a long term investor seeking Growth or regular income there are a few options.

 

1. Mutual Funds in India:

You can open a NRI/NRO account in India(any bank can do this) and if you have a PAN card, you can invest in mutual funds. 

For this, you can directly contact the mutual fund company and send the application. Other option is doing thru online website. I recommend FundsIndia.com as their process is simplified and i am happy with the service. Please note you have to send KYC application first time.

 Pl note funds can be repatriated if you do all transactios thru an NRE account. 

For equity based schemes there is no tax if you hold the fund for more than 3 years

For debt based funds there is tax(if you hold more than 3 yrs, you get indexation benefit)

2. US based ETFs/Funds:

If you are US NRI, you can invest in ETFs that trade in US market or mutual funds(Mathews has the best India fund)

 

One of my relatives is an NRI in US. He has not opened any NR accounts in India. He transfers funds to his existing resident account, and invests in banks.At present his income in India does not exceed the taxable limit .

Is it compulsory that he should have an NR account?

If his income exceeds the taxable limit, can he make investments to avail the benefits of sec 80c?

When his income gets taxable, can he file return here

as any other resident?

Could you please clarify these doubts?

Thank you

sobhana

Hi all I am new to this forum. can you please suggest me whether mutual fund is a good option to investt in india for nris.

Arpit,

Investing in mutual funds depends on the amount of risk you can take. If you have a good risk appetite, then investing in a mutual fund is advisable as it offers you diversification and better growth. Moreover you can even avail Tax benefits.
If you feel you are not ready to take any investments risks then avail NRI investment options offered by banks, such as nre account, foreign currency deposits, fcnr account, etc.

Arpit_sharma:

Hi all I am new to this forum. can you please suggest me whether mutual fund is a good option to investt in india for nris.

 

Arpit,
Investing in mutual funds depends on the amount of risk you can take. If you have a good risk appetite, then investing in a mutual fund is advisable as it offers you diversification and better growth. Moreover you can even avail Tax benefits.
If you feel you are not ready to take any investments risks then avail NRI investment options offered by banks, such as nre account, foreign currency deposits, fcnr account, etc.