Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) can invest in India through various routes governed by FEMA 1999. Understanding the account types, investment restrictions, and repatriation rules is essential for NRIs managing cross-border finances.
NRI Account Types
| Feature | NRE Account | NRO Account | FCNR(B) Account |
|---|---|---|---|
| Currency | INR (held in India) | INR (held in India) | Foreign currency (USD/GBP/EUR etc.) |
| Source of funds | Foreign income remitted | India-sourced income | Foreign income remitted |
| Repatriation | Fully repatriable (principal + interest) | Up to USD 1M/year (after tax) | Fully repatriable |
| Interest tax in India | Exempt | Taxable (TDS at 30%) | Exempt |
| Exchange risk | NRI bears INR/foreign exchange risk | NRI bears INR/foreign exchange risk | No exchange risk (held in foreign currency) |
NRI Investment in Capital Markets (Portfolio Investment Scheme)
- NRIs can invest in listed Indian equities through SEBI-registered brokers using PIS
- Must designate a single PIS bank (scheduled commercial bank) for PIS transactions
- Purchase on repatriation basis: from NRE account; sales proceeds go back to NRE
- Purchase on non-repatriation basis: from NRO account; proceeds credited to NRO
- Ceiling: Individual NRI holding ≤ 5% of paid-up capital; aggregate NRI holding ≤ 10% (can be enhanced to 24% by company resolution)
- Capital gains tax applies (same rates as resident Indians for equity; DTAA may reduce)
FDI by NRIs
NRIs can invest in Indian companies as Foreign Direct Investment (FDI) under the NRI scheme (not the general FDI policy). Key features:
- NRI investment treated at par with domestic investment (not subject to sectoral FDI caps in most sectors)
- NRI FDI allowed in sectors where general foreign FDI is allowed — no additional restrictions
- Investment through NRE/FCNR(B): repatriable; through NRO: non-repatriable
Property Investment by NRIs
- Can buy any number of residential and commercial properties in India without RBI permission
- Cannot purchase: Agricultural land, plantation property, farmhouse (except by inheritance from resident Indian)
- Funds for purchase: from NRE/NRO account or inward remittance through banking channels
- Home loan from Indian banks for NRI property purchase: permitted
- Rental income: credited to NRO account; taxable in India at 30%+cess; TDS at 30% by tenant
- Sale proceeds: credited to NRO; repatriable up to USD 1 million/year (Form 15CA/15CB required)
Tax Implications for NRIs
Income Tax Residency
- NRI status for FEMA: not present in India for 182+ days in FY
- NRI status for Income Tax: under ITA 2025 — not present in India for 60+ days in current year AND 365+ days in preceding 4 years (or not present 182+ days in current year)
- High-income NRIs (deemed resident): Indian citizen with income > Rs.15 lakh and not paying tax in any country — taxed on India-sourced income only
TDS on NRI Income
| Income Type | TDS Rate (ITA 2025) |
|---|---|
| Interest on NRO account | 30% + cess |
| Rental income from Indian property | 30% + cess (Section 195) |
| Capital gains (STCG equity) | 20% |
| Capital gains (LTCG equity > Rs.1.25L) | 12.5% |
| Dividend from Indian company | 20% (or DTAA rate) |
NRIs with lower tax liability can file ITR in India to claim refund of excess TDS. DTAA (with 90+ countries) may reduce rates significantly.
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