NRI stands for Non-Resident Indian, which refers to an Indian citizen who resides outside of India for an extended period, typically for work or study purposes. In general, NRIs are individuals who spend less than 182 days in India in a financial year or less than 60 days in India in a financial year and less than 365 days in the preceding four financial years.
NRIs (Non-Resident Indians) should consider investing in India for several reasons. Here are some relevant data:
Fast-Growing Economy:
India’s economy is growing at a fast pace. According to the International Monetary Fund (IMF), India is projected to grow at 5.9% in 2023, making it the fastest-growing major economy in the world. The Indian government has launched the Atmanirbhar Bharat Abhiyan, a special economic package of more than $270 billion, or 10% of India’s GDP, to counter the impact of the Covid-19 pandemic, providing the required support and boost to the Indian economy.
Large Market:
India has a vast market with a population of over 1.4 billion people, providing a significant consumer base for various industries. India’s status as the world’s largest democracy and a country with a stable government provides a foundation for its economy to thrive, making it an attractive option for investment.Robust Financial System: India’s financial system is strong, with sound banking and financial institutions such as the Reserve Bank of India, Securities and Exchange Board of India (SEBI), and National
Stock Exchange (NSE):
India’s market is governed by the Reserve Bank of India and India’s Securities and Exchange Board, which oversee it diligently, contributing to its safety and stability.
High Returns:
Indian markets have delivered some of the highest returns over the past decade. According to the National Stock Exchange (NSE), the average annual return for the NIFTY 50 index (India’s benchmark index) was approximately 10% over the past ten years.
Tax Benefits:
NRIs investing in India are entitled to various tax benefits, including a lower tax rate on capital gains, dividend income, and interest income. For NRIs, the Indian market presents various tax benefits, including the Double Taxation Avoidance Agreement. This agreement helps investors avoid double taxation on their investment in both the country of investment and their country of residence. India has this agreement with many countries such as France, the USA, Italy, the UK, Canada, among others.
Ease of Investing:
The Indian government has introduced several measures to make it easier for NRIs to invest in India. For instance, they can invest in Indian mutual funds online and repatriate the funds without any restrictions.
Overall, these factors make India an attractive investment destination for NRIs, offering high returns potential and a robust financial system.
Overall, these factors make India an attractive investment destination for NRIs, offering high returns potential and a robust financial system.
Do Know What You Need To Know
For NRI investors looking for NRI Investment Options in India, and particularly looking to invest in Portfolio Management Services (PMS) and/or Alternative Investment Funds (AIF), we at PMS AIF WORLD Platform have made an endeavor to answer some Frequently Asked Questions.
A Portfolio Management Service (PMS) is a personalized investment solution for individuals with high net worth who want to invest in equity, debt, and other securities through a designated fund manager. The investment objectives of the investor are kept in mind while making any investment in PMS. Investors who desire personalized investment solutions and long-term wealth creation choose Portfolio Management Services (PMS).
Portfolio Management Services (PMS) offer tailored investment portfolios in fixed income, cash, stocks, debt, structured products, and other individual securities. These services can be customized to meet specific investment objectives. Unlike Mutual Funds (MF), where investors can only earn the units of the fund, PMS allows investors to own individual securities. PMS is a flexible investment option that can be customized to address the investor’s personal preferences and financial goals.
NRIs interested in investing in India need to have their basic KYC documents like Foreign residence proof, and PAN card, and so on, in place.
NRI investors are required to submit immigration documents to verify the last time the investor had visited the Indian soil. In normal circumstances, this is a mandatory requirement for PMS and AIFÂ investments, as these are private placement products and the documentation is expected to have happened in-person with the client. But, given the post-Covid era, this requirement has been relaxed somewhat. If the investor is outside India, he needs to send notarized or banker attested KYC documents with attestation of in-person verification done by the Notary officer or Banker.
Apart from KYC documents, NRI investors need to also open a Portfolio Investment Scheme (PIS) account as required under the RBI guidelines. All the other do’s and don’ts are applicable to NRIs under the RBI’s PIS Scheme. These include limits on the investments made in single stocks or on the procedure for investments made under repatriation & non-repatriation basis as well as those applicable for short-selling of shares.
Once the above documentation is completed and PMS is activated, funding can be done by sending money via RTGS or transferring existing shares to the PMS service provider.
| EQUITY | |||||
| Listed Equity | Unlisted Equity | ||||
| MF | PMS^ | CAT III AIF | CAT I AIF | CAT II AIF | |
| Tax on Short Term Gains on Equity* | 15% | 15% | Taxed at the fund’s level ^^ |
Taxed at the investor’s end, as per his/her tax slab | |
| Tax on Long Term Gains on Equity* | 10% | 10% | Â 20% with Indexation benefit | ||
| DEBT | |||
| MF | PMS | CAT II AIF | |
| Tax on Short Term Gains on Debt | Gains will be added to investor’s income and taxed as per income tax slab rate | Gains will be added to investor’s income and taxed as per income tax slab rate | It is a pass through structure in Cat II AIFs, hence the interest income is taxed as per the investor’s tax slab |
| Tax on Long Term Gains on Debt | |||
Differences between NRI and RI taxation may come in when the country where the NRI resides doesn’t have a Double taxation avoidance agreement(DTAA) with India. However, India has DTAA with most major countries like USA , UK, Singapore, Canada, and so on.
Pls refer to our section on country-wise taxation rules to know more.
Footnotes for Equity PMS Taxation
*Short term = Holding period <12 months in case of Listed Equity & <24 months in case of Unlisted Equity
Long Term = Holding period >12 months in case of Listed Equity & >24 months in case of Unlisted Equity
LT Gains are charged on MFs & PMSs @ 10% above Rs 1L p.a.
Non-equity Capital Gains: Added to income; ST = < 3 year holding, LT = > 3 year holding, no indexation benefit
^For the income earned in form of dividends credited in the financial year, dividend distribution tax is already deducted at the source and in the hands of investor, these dividends tax-free. But, if total income from such dividends earned in a financial year is more than 10 lacs across all investments, then additional dividend income tax is also applicable.
^^ Cat III AIFs are NOT pass-through vehicles, and thus they are taxed at the AIF level itself. The taxation rate depends on the type of income:
Business Income / Trading & Speculation / ST Capital Gains on Non-equity / Dividend
Income: 42.7%
ST Capital Gains on Equity: 15% + 15% Surcharge = 17.9%
LT Capital Gains on Equity: 10% + 15% Surcharge = 11.9%
LT Capital Gains on Non-equity: 20% post indexation + 15% Surcharge = 23.9%
Footnotes for Debt PMS Taxation
PS: For Debt MFs, amount invested before 31.03.2023 will be subject to indexation benefits on LTCG.
In case of Debt, STCG = <36 months and LTCG = > 36 months
Pls refer to our section on country-wise taxation rules to know more.
PIS account is a scheme of Reserve Bank of India ( RBI ) which enables NRIs ( Non – Resident Indians ) and OCBs( Overseas Citizens of India ) to purchase and sell shares and convertible debentures of Indian companies on a recognized Indian stock exchange by routing such purchase/sale transactions through their NRI Savings account with a designated bank branch.
There can only be one PIS account that an NRI investor can open with any bank – In fact there is an undertaking that has to be given by NRI stating that the NRI has no other PIS account(s).
All popular banks today have PIS options for their customers – like HDFC bank, ICICI bank HSBC, Standard Chartered, Kotak, SBI, etc. There are certain restrictions with PIS like on intraday trades, short selling of shares, etc are not allowed. PIS is used to purchase only listed shares and debentures.
As per the Foreign Exchange Management Act (FEMA) guidelines, it is illegal for NRIs to have domestic saving accounts in their name in India. It is mandatory that you convert all your savings to NRE or NRO account. Therefore, continuing to use the domestic savings account in the home country can attract hefty penalties.
Opening an NRE or NRO account is, hence, a viable option for Non-Resident Indians. It can help NRIs in two ways. One, they can send the money they earn abroad to India at any point of time. Two, they can also retain their income from India (via any asset sale of rent etc) in the home country itself.
Both NRE and NRO accounts are Indian rupee accounts.
NRE account is used to transfer foreign earnings to India. Money from NRE accounts is freely repatriable i.e. both the principal amount and interest earned are freely and completely transferable. You should opt for NRE account if you want to hold or maintain your overseas earnings in Indian currency.
Whereas, NRO is used to manage income earned in India. Funds from the NRO accounts can be repatriated post payment of applicable taxes with a limit of USD 1 million in a financial year. You should opt for NRO accounts if you want to save your earnings from India in Indian currency itself. These earnings could include rent, income, dividend, sale of property etc. Also under NRO accounts, interest earned on this account is taxed at the rate of 30% (plus surcharge) and other applicable taxes in India according to the ITA.
In order to take the benefit of lower rates of tax as per double taxation avoidance agreement (DTAA) entered in by India, NRIs need to submit the Tax Residency Certificate issued by Tax Authorities of the country of his residence.
Pls refer to our section on country-wise taxation rules to know more.
Only a select few Portfolio Management Services (PMSs) and Alternative Investment Funds (AIFs) accept investments of NRIs from the USA and Canada because of the cumbersome compliance requirements under FATCA or Foreign Account Tax Compliance Act.
Over years, some fund houses have consulted each other and experts on this matter, and a few of them have considered taking investments from USA and Canada based investors.
But, Under FATCA, it is compulsory for all financial institutions accepting US & Canada NRI investments, to share the details of transactions with the US Government. FATCA ensures that there is no deliberate tax evasion on income generated overseas.
India has a double taxation avoidance agreement with both the North American countries thus Investors effectively have to pay tax at a concessional rate.
There are very few Portfolio Management Services (PMSs) and Alternative Investment Funds (AIFs) from India that accept US & Canada based NRI investments. Some of the PMSs that accept investment for US & Canada based NRIs are:
Negen Capital Special Situations & Technology Fund
ITUS Capital Fundamental Value PMS
and a few more…
To know more about these and other Portfolio Management Services (PMSs) and Alternative Investment Funds (AIFs) from India that accept US & Canada based NRI investments, click here to book a 1:1 appointment with our Experts
Tax laws for US and Canada-based NRIs (Non-Resident Indians) investing in PMSs and AIFs in India:
The tax laws for US and Canada-based NRIs (Non-Resident Indians) investing in PMS (Portfolio Management Services) and AIFs (Alternative Investment Funds) in India are different and can be complex. Here is a brief overview of the tax laws for each country:
Taxation of Capital Gains:The US taxes capital gains on foreign investments, including PMS and AIFs. The gains are taxed at the applicable capital gains tax rate, which can vary depending on the investment holding period.
PFIC Rules:The US has specific tax rules for investments in Passive Foreign Investment Companies (PFICs), which could potentially include certain types of AIFs. The PFIC rules are complex and can result in high taxes and penalties for US taxpayers. NRIs investing in AIFs in India should carefully evaluate the potential impact of PFIC rules on their investments. For more details on PFIC, please click here.
Foreign Account Tax Compliance Act (FATCA):The US has implemented FATCA, which requires foreign financial institutions to report financial information about US taxpayers to the Internal Revenue Service (IRS). NRIs investing in PMS and AIFs in India are required to comply with FATCA regulations.
Double Taxation Avoidance Agreement (DTAA):India and the US have a DTAA, which provides relief from double taxation. NRIs investing in PMS and AIFs in India can claim tax credit for the taxes paid in India against their US tax liability. NRIs who wish to claim benefits under DTAA between India and their country of residence must obtain a TRC. The TRC serves as proof of their tax residency in their country of residence and can help avoid double taxation on their investment income.
Taxation of Capital Gains:Canada taxes capital gains on foreign investments, including PMS and AIFs. The gains are taxed at the applicable capital gains tax rate, which can vary depending on the investment holding period.
Foreign Income Verification Statement (T1135):Canada requires its residents to report foreign assets, including investments in PMS and AIFs, in their annual tax returns. NRIs are required to file T1135 if their foreign investments exceed a certain threshold.
Withholding Tax:India imposes a withholding tax on income earned by NRIs from investments in India, including PMS and AIFs. The withholding tax rate varies depending on the type of investment and the country of residence of the NRI. Canada and India have a tax treaty that reduces the withholding tax rate to 15% for certain types of income.
Foreign Tax Credits (FTCs):Canada allows its residents to claim FTCs for taxes paid in foreign countries, including India. NRIs investing in PMS and AIFs in India can claim FTCs for the taxes paid in India against their Canadian tax liability.
Double Taxation Avoidance Agreement (DTAA):India and Canada have a DTAA, which provides relief from double taxation. NRIs investing in PMS and AIFs in India can claim tax credit for the taxes paid in India against their Canadian tax liability. NRIs who wish to claim benefits under DTAA between India and their country of residence must obtain a TRC. The TRC serves as proof of their tax residency in their country of residence and can help avoid double taxation on their investment income.
A select few Portfolio Management Services (PMSs) and Alternative Investment Funds (AIFs) accept investments from NRIs based out of UK & parts of Europe.
Some of the PMSs that accept investment from NRIs based out of UK & parts of Europe are:
Valentis Advisors Multi Cap PMS
Valentis Advisors Rising Star Opportunity PMS
Stallion Asset Core Equity PMS
and a few more…
To know more about these and other Portfolio Management Services (PMSs) and Alternative Investment Funds (AIFs) from India that accept investment from NRIs based out of UK & parts of Europe, click here to book a 1:1 appointment with our Experts.
Tax laws for NRIs based out of UK investing in PMSs and AIFs in India:
The tax laws for NRIs based out of UK & parts of Europe investing in PMS (Portfolio Management Services) and AIFs (Alternative Investment Funds) in India are different and can be complex. Here is a brief overview of the tax laws:
Withholding Tax:India imposes a withholding tax on income earned by NRIs from investments in India, including PMS and AIFs. The withholding tax rate varies depending on the type of investment and the country of residence of the NRI. The UK and India have a tax treaty that reduces the withholding tax rate to 15% for certain types of income.
Double Taxation Avoidance Agreement (DTAA):The UK and India have a DTAA in place that helps to avoid double taxation on investment income earned by NRIs in India. The DTAA provides relief in the form of tax credits, exemptions or deductions for taxes paid in India.
Capital Gains Tax:NRIs investing in PMS and AIFs in India may be subject to capital gains tax on the profits earned from the sale of their investments. The tax rate depends on various factors, including the holding period and the type of investment. The UK has a tax treaty with India that allows NRIs to claim relief on capital gains tax paid in India against their UK tax liability.
Reporting Requirements:NRIs investing in PMS and AIFs in India must comply with various reporting requirements in the UK. For example, UK taxpayers must report their foreign income and assets on their annual tax returns and file a separate tax return if they have income or gains above a certain threshold.
A select few Portfolio Management Services (PMSs) and Alternative Investment Funds (AIFs) accept investments from NRIs based out of the Middle East.
Some of the PMSs that accept investment from NRIs based out of the Middle East are:
Stallion Asset Core Equity PMS
Valentis Advisors Multi Cap PMS
Valentis Advisors Rising Star Opportunity PMS
and a few more…
To know more about these and other Portfolio Management Services (PMSs) and Alternative Investment Funds (AIFs) from India that accept investment from NRIs based out of the Middle East, click here to book a 1:1 appointment with our Experts.
Tax laws for NRIs based out of the Middle East investing in PMSs and AIFs in India:
The tax laws for NRIs based out of the Middle East investing in PMS (Portfolio Management Services) and AIFs (Alternative Investment Funds) in India are different and can be complex.
India has signed DTAA with several Middle Eastern countries, including UAE, Qatar, Saudi Arabia, and Oman, among others. Under the DTAA, NRIs may be able to avoid double taxation on their income earned in India and their home country.
To ascertain more information on taxation for NRIs based out of the Middle East, please book an appointment with our experts.
Singapore is Southeast Asia’s largest port and one of the world’s busiest. Its expansion and wealth are due to its strategic location at the southern tip of the Malay Peninsula, where it controls the Strait of Malacca, which links the Indian and South China Seas.
Some of the PMSs that accept investment from NRIs based out of the Singapore are:
Buoyant Capital Opportunities Multi-Cap PMS
Stallion Asset Core Equity PMS
Valentis Advisors Multi Cap PMS
Valentis Advisors Rising Star Opportunity PMS
and a few more…
To know more about these and other Portfolio Management Services (PMSs) and Alternative Investment Funds (AIFs) from India that accept investment from NRIs based out of the Middle East, click here to book a 1:1 appointment with our Experts.
The tax laws applicable to them depend on the double taxation avoidance agreement (DTAA) between India and Singapore.
Under the DTAA, NRIs from Singapore are entitled to benefits such as lower tax rates on capital gains, dividends, and interest income earned from their investments in India. The tax rates may vary depending on the type of investment and the holding period of the investment.
For instance, if an NRI from Singapore invests in PMS or AIF in India and earns capital gains, they will be subject to a tax rate of 10% if the gains are long-term (held for more than 24 months) and 15% if the gains are short-term (held for less than 24 months). However, this tax rate may vary based on the provisions of the DTAA.
To ascertain more information on taxation for NRIs based out of Singapore, please book an appointment with our experts.
Disclaimer: It is important for NRIs to stay up-to-date with the latest tax laws and regulations in both India and their country of residence. Please seek professional advice from a qualified tax advisor or financial expert to understand the tax implications of investing in PMS and AIFs in India and to ensure compliance with the relevant tax laws.
Wish to make INFORMED INVESTMENTS for Long Term WEALTH CREATION
BOOK A CALL WITH OUR PMS AIF SPECIALISTS
At PMS AIF WORLD, we have a simple philosophy for NRIs looking for Investment Options in India. A very important point that needs to be understood is that there are 2 factors that determine Wealth Creation from equity investments. It is simple, but not easy. And, here it is…
Investing in a Quality Portfolio
A quality portfolio is the one that is not too diversified, & still offers the best risk-adjusted returns. Such a quality portfolio provides consistent growth which invigorates the process of compounding.
Holding it for Long Term
Long term horizon means a period of 10 years or more. This helps in reaping the benefits of compounding. It is easy to aspire for a long term horizon when making an investment, but practically very difficult to maintain given the vagaries of markets.
How?
Through HeWePro Capital Pvt. Ltd., which is our Investment Consulting Practice focused on achieving these 2 objectives for and with every client we manage.
With us, Quality Portfolio is identified through unbiased selection based on our proprietary analytics. We analyze PMS AIF investment products across 5 Ps – People, Philosophy, Performance, Portfolio, and Price through Proprietary 10 Factor Model with an endeavor to ascertain the Quality, the Risk, and the Consistency(QRC) attributes before suggesting the same to our clients. We are very selective in our approach.
With us, Long term horizon is achieved through an informed investing approach based on our proprietary content. Holding on to the portfolio requires high conviction in the portfolio at all points of time, else, one tends to exit early owing to the traps of emotions or impatience.  We do not let our clients commit a mistake of under-owning equity in the first place, nor early-exiting equity investments owing to any fear. We also do not let our clients make equity investments, beyond yardsticks of asset allocation & risk appetite.
In short, we are delivering excellent investor experience & reshaping the Wealth Management Industry, sticking to basics.
Wish to make INFORMED INVESTMENTS for Long Term WEALTH CREATION
BOOK A CALL WITH OUR PMS AIF SPECIALISTS
PMS AIF WORLD is a New Age Investment Services Company, providing analytics-backed quality investing service with an endeavor and promise for wealth creation and prosperity. Over 5+ years, we have been managing 500+ UHNI & NRI families, across 1000 CR+ assets.
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