Top 7 tax-saving investment options for Non-Resident Indians

For all those Non-Resident Indians (NRIs) who love to splurge on wishes but pinch pennies when it comes to taxes, this blog post is specially for you. From the allure of stock market investments to the rock-solid

security of FDs, we’ll reveal the most effective NRI tax saving investments and tips to safeguard your earnings and build a prosperous financial future. Hop in!

In this article, we will cover…

Best investment in India for NRIs (Non-Resident Indians) 

  1. Fixed Deposits
  2. Government Securities
  3. Real Estate Investments
  4. Public Provident Fund
  5. National Pension Scheme
  6. Stock Market Investments
  7. Unit Linked Insurance Plans
  8. Other NRI tax-saving investment tips
1. Fixed Deposits:

Bank FDs are mostly considered as the safest NRI tax saving investment option. NRIs can have FDs in their FCNR, NRO, or NRE accounts. Here, the interest earned in NRE and FCNR accounts is tax-free.

2. Government Securities:

NRIs can consider investing in PSU bonds, Non-convertible Debentures (NCDs), Bharat Bond Exchange Traded Funds (ETF) and Fund of Funds (FoF). NRIs can claim deductions by investing in Capital Gain Bonds issued by REC and NHAI under Section 54(EC).

3. Real Estate investments:

Investing in Indian real estate is a good option for NRI investment in India as the country is expected to see massive development in this sector in the coming years. However, one must analyze their requirements and risk profile before deciding to invest in Indian real estate. NRIs can claim deductions on the long-term capital gains made on the sale of their property in India under section 54, 54EC, and 54F.

4. Public Provident Fund (PPF):

As per current norms, NRIs can’t open a new account under PPF but if you had a PPF account before becoming an NRI, it is advisable to keep investing in it as it is a good and safe option with a high interest rate of more than 7%. However, note that the PPF investments have a 15 years lock-in time.

5. National Pension Scheme (NPS):

An NRI between the age of 18-60 years can invest in NPS. NRIs open an NPS account with the bank where they have their NRO or NRE account for convenience. Investors will have the option to choose from equity, corporate bonds, and government debt. NRIs can claim deduction up to the ₹1.5 lakhs limit of section 80C with an additional ₹50,000 deduction can be claimed under section 80CCD 1(B) for this particular investment.

6. Stock Market Investments:

Yet another best investments in India for NRIs is in Indian stock market directly under the Portfolio Investment Scheme (PIS) of RBI. For this, NRIs must have an NRE/NRO bank account, a Demat account, and a trading account. Equity investments in Indian companies are a good way to generate long-term capital gains, which are tax-free for NRIs subject to certain conditions. However, equity investments are high in risk. Investors seeking safer options should go for investments in debt instruments.

Another best investment in India for NRI is in mutual funds. There are many asset management companies in India offering a wide variety of mutual fund schemes. Mutual fund returns depend on the type of fund (debt, equity, and hybrid) and the scope of investment. Here, NRIs can also consider investing in the Equity Linked Savings Schemes (ELSS), which are tax-saving mutual funds investing primarily in equity shares (qualifying for Section 80C tax deductions).

7. Unit Linked Insurance Plans (UIP):

ULIPs are insurance products that offer the best of both worlds: insurance and investment by splitting your investments into two parts: 1. Premium for life insurance coverage 2. Capital investment in debt and equity funds. It is a good option for investors with moderate to high risk endurance.

Other NRI tax-saving investment tips
  1. NRIs don’t need to pay tax on LTCGs from listed equity shares and equity-oriented mutual funds.
  2. NRIs can claim a deduction for home loan principal repayment for up to ₹1.5 lakh under the overall limit of section 80(C) and deduction of up to ₹2 lakh on the interest of home loan EMI under section 24.
  3. All life insurance premiums and children tuition fees are deductible under section 80(C).
  4. Deductions are available for health insurance premiums paid by NRIs for themselves and their families up to ₹50,000 under section 80(D).
  5. Section 80(E) offers deduction to NRIs on interest paid for educational loan while 80(G) offers deduction for donations made to eligible charitable institutions.
  6. Under section 80TTA, one can claim deductions of up to ₹10,000 on interest income from savings accounts.

These best investments in India for NRIs can help you minimize your tax liability while maximizing your returns. This is not only about saving money but also about optimizing your investments, ensuring financial security, and achieving your long-term goals. So, remember to stay aware, keep proper records, and seek professional advice when needed. May your bank balance always have more digits than the wishes on your wish-list!