How To Create A Tax-Smart Portfolio With NRI Real Estate Investments

India emerged as one of the world's fastest-growing economies, resulting in appealing investment opportunities for Canadian NRIs in India. While living in a distant nation, many Indian migrants want to invest their money in India. It is impossible to deny that they are emotionally tied to their homeland, thus they want to lay a foundation for retiring and developing their financial capital.

Share on facebook
Share on twitter
Share on linkedin
Tax-Smart Portfolio For NRI Investments

Equity has generally rewarded diligent long-term investors, whether in India or abroad. It is perhaps the greatest long-term-oriented asset class, historically producing an annualized gain of 10-12 percent for Indian investors. As an NRI, you may be thinking if and how much you should invest in Indian stock.

An investment plan is a strategy for allocating money to future-generating activities such as bonds, equities, real estate holdings, or businesses. The investor thinks that through investing in an asset, his or her money will increase or improve in value in the future.

Investment options for NRI investors

There are several investment choices available in India for NRIs based on their needs and financial objectives. Here are just a few examples:

1. Fixed-Income Investments

This is the most prevalent type of investment among Canadian NRIs. The investor may keep his money secure for an indefinite amount of time while earning average returns. The bank determines the interest rate, the term of the FD, and the amount of something like the deposit. Fixed deposits could be opened using an NRE, NRO, or FCNR account.

Also Read: RBI Guidelines For NRI Investments In Real Estate

2. Investing in mutual funds

To participate in mutual funds in India, an NRI must have an NRE or NRO account. For NRIs, investing in mutual funds is indeed a cost-effective alternative. However, because of rigorous requirements imposed by the Foreign Account Tax Compliance Act, several mutual funds do not accept applications from NRIs resident in the United States and Canada (FATCA).

Non–resident and ordinary Indian investors face the same tax rates. Short-term capital gains from stock and equity-oriented hybrid funds are taxed at 15%, whereas long-term capital gains above Rs 1 lakh are taxed at 10%.

Non-equity fund short-term capital gains are added to the personal income tax rate at a flat rate. After indexation, the tax for long-term capital gains is 20%. TDS is levied on NRI investments when mutual funds are redeemed. The TDS on long-term capital gains from equities and equity-oriented hybrid funds is 10%. Similarly, the TDS for debt funds including hybrid plans with debt-oriented assets is 20%.

3. Scheme National de Pensiones (NPS)

Canadian NRIs can invest in stock, debt, or a mix of the two under this plan. An NRI can register an NPS account provided he is between the ages of 18 and 60 and has an Aadhaar card and a PAN card. An NRI must have an NRE or NRO account.

Also Read: All The Banking Details To Know For NRI Investments In India Real Estate

4. Direct Investment

Portfolio Investment Scheme (PIS) allows NRIs to invest inside the National Stock Exchange of India Ltd and earn better returns. To engage in the stock market, the investor must maintain a constant eye on the market condition, which can be tumultuous at times. NRIs can invest in the stock market if they have a Demat and trading account, an NRE, an NRO account, and a PIS account.

NRIs can buy equity instruments without any limitations, either on the stock market or outside of it, subject to some sectoral limitations and non-repatriation.

5. Real Estate

Real estate has traditionally been the greatest investment choice for non-resident Indians (NRIs) in India. There are several real estate investment possibilities accessible, including plots, villas, independent houses, and social apartments. The value of the rupee versus the dollar, however, and the Indian real estate market, dictate the returns and assessments.

Rental income from property in India is taxed, and a standard deduction of 30% is made. The remainder is added to the total personal income tax rate at ordinary rates. NRIs must file Form 15CA to remit rental income.

6. Securities issued by the federal government

Government Securities (G-Secs) are indeed a risk-free investment for NRIs since the government guarantees both the interest and principal amount. Through the Fully Accessible Route, NRIs may invest in this plan (FAR). NRIs can invest in the Government of India’s 5-, 10-, and 30-year bonds beginning in fiscal year 20-21.

Also Read: Documents Required For PIO, OCI, NRI Investments In India

7. PPF (PPF)

A PPF account cannot be opened by anyone with NRI status. If you held a PPF account before leaving India and are now an NRI, you can keep it. An NRI visiting Canada can spend up to 1.5 lakh dollars every fiscal year now and continue to do so till the investment matures. He will be unable to extend the account after it has reached maturity. If an NRI files I-T returns in India, he is entitled to Section 80C income tax deductions for PPF deposits.

The NRI must provide the PPF withdrawal form, picture identity card, and PPF bank passbook if they want to cancel the PPF account. They must also present a canceled cheque from his NRO account, which will be credited with the PPF amount. The bank manager must certify all papers. If the account holder is unavailable to complete all procedures, they can submit an authorization letter to a home branch through their agent.

Important Considerations for Non-Resident Indians

  • NRIs should bear in mind that they must create an NRE and NRO account before any transactions may take place.
  • Foreign currency Non-Resident accounts should be formed to prevent volatility in the exchange rates of foreign money earned.
  • When purchasing real estate, an NRI should examine if it’ll be owned by the joint owner or a single owner, as tax responsibility is borne by the first owner.
  • To make investments in India, NRIs must obtain a Permanent Account Number (PAN card).
  • An NRI must get a Portfolio Investment Scheme (PIS) letter from the Reserve Bank of India before investing in the Indian equities market under the PIS scheme.
  • Although NRIs have various investment alternatives open to them, including mutual funds, bonds, or direct equity, they need to educate themselves on the schemes first.
  • NRIs must be aware of the rules governing repatriation. According to FEMA guidelines, in the case of a real estate purchase, repatriation of sale profits is limited to a maximum of $1 million every fiscal year. They may, however, repatriate over $1 million per year if it is property being donated.

These are the numerous investment opportunities available to NRIs in India. They can weigh the advantages and downsides and use their judgment before investing in one or both of those possibilities.

Assetmonk is the fastest-growing wealth-tech platform in India, specializing in commercial property investments. Assetmonk caters to investors from all around the world. It also provides high-quality investment possibilities at low costs through fractional ownership. NRIs can have access to grade-A assets without any time-consuming obstacles. Assetmonk offers investment options based on risk tolerance and individual investor objectives such as passive income, capital appreciation, and risk control.

FAQ'S On Tax Saving Portfolio With NRI Investments

To lower the TDS on the sale of property by an NRI, the NRI must make an application on Form 13 with the Income Tax Department for the issuing of a Certificate for Nil/Lower TDS Deduction.

To avoid paying a large TDS, an NRI should create a Non-Resident Ordinary Rupee Account (NRO), a Foreign Currency Non-Resident Account (FCNR), and a Non-Resident External Account (NRE).

Tenants paying rent on NRI-owned properties are expected to subtract 31.2 percent tax at the source and submit the whole amount to the tax authorities. Following payment, the renter must complete Form 15CA and send it electronically to the tax department.

If an NRI sells property in India, the buyer must deduct TDS at a rate of 20% in the event of long-term capital gains. If the property is sold within two years, TDS at the rate of 30% is deducted as both a short-term capital gains tax.

Related Articles

istockphoto 1312767508 612x612 1

What is National Securities Depository Limited (NSDL)

NSDL or National Securities Depository Limited is a financial institution that was established to keep securities like shares, bonds, etc in the shape of non-physical or physical certifications, that is in demat format. The securities are maintained in deposit accounts, which are similar to funds in bank accounts. It allows for quick securities transfer because ownership gets transferred merely by ledger entries. This is frequently done digitally, saving the extra time required in the previous practice of exchanging physical certificates once a deal was concluded. India’s capital market, which has been around for almost a century, has always been quite active. But, due to settlements that are based on paper, it had significant flaws such as poor delivery, prolonged transference execution, and so on.  To address these concerns, the Depositories Act 1996 was enacted and went into effect on Sept 20, 1995. This legislation mandated the Security Depositories establishment in India to manage securities.  Security is a financial asset that…

Read more
istockphoto 1176996544 612x612 1

Step-by-Step Process for Income Tax Login

Income Tax Login step-by-step process? To finish the E-filing of IT Returns, you must first successfully finish the registration procedure and connect to the IT E-filing site. You may utilize the e-filing site and a variety of services related to tax by finishing the income tax login process. The steps below will walk you through the process of finishing the income tax E-filing site login. Also, read Tax Saving via Deductions Under Section 80C 80CCC 80CCD and 80D. How To Do Income Tax Login? Step 1: Navigate to the Income Tax e-filing website. Select the “Login Here” option in the upper right-hand side of the site.   Step 2: After clicking the “Login Here” option, you will be sent to the Income Tax Login webpage.   Step 3: Also on the login screen, enter your User ID, which is your Permanent Account Number or PAN. Enter the password you created when you registered for your IT e-filing account. After you’ve…

Read more
istockphoto 1252264724 612x612 1

Everything about CSC Digital Seva Portal

CSC Digital Seva Portal is a gateway that provides info on numerous firms and electronic governance to inhabitants in remote and rural areas of India. A CSC facility’s full name is Jan Seva Kendra or Common Service Center. Common Services Centers or CSC is a network based in India that aims to transform India into a digitalized country. CSC Scheme 2.0 got started in Aug 2015 for improving accessibility to digital and technological services for citizens in remote and rural areas of India. The CSC Digital Seva Portal’s Goals Connect 2.5 lacs of Gram Panchayats in India. Citizens of India should access trustworthy and up-to-date info. In villages, all basic services are given in a single place. Deliver low-cost, services that are of high quality to average people. Governmental welfare and social assistance programs are promoted. Develop new rural jobs and promote rural entrepreneurship. Registration for the CSC Digital Seva Portal To commence the registration process, one must comply with…

Read more

Pradhan Mantri Vaya Vandana Yojana (PMVVY)

PMVVY is an Open-ended Deferred Pension Plan. The scheme offers guaranteed return of 8% per annum for 10 years. Minimum pension amount is Rs. 1,000/ month and maximum pension amount is Rs. 10,000/ month depending on purchase price. Returns will be paid on a monthly basis. On maturity, the entire pension wealth will be paid in lump sum and no annuity will be offered thereafter by the Pension Fund Regulatory and Development Authority (PFRDA). The first installment of 5% or 50% whichever is lower is payable within 2 years from the time when account balance reaches Rs 1lakh/- which will happen after completion of 10th year under this scheme i.e before 2040s for most of us today! PMVVY is an Open-ended Deferred Pension Plan PMVVY is an open-ended deferred pension plan that provides guaranteed return of 8% per annum for 10 years. The scheme offers minimum pension amount of Rs. 1,000/ month and maximum pension amount of Rs. 10,000/ month…

Read more
EPFO KYC update for UAN

How to update KYC for EPF UAN?

KYC is being adopted by most of the government and private sector organizations for maintaining the proper records of official matters. The Indian government has already made it mandatory for employees as well as consumers to link their Aadhar card with various types of accounts and digital entities. Therefore, it is also compulsory for you to link your EPF with your Aadhar as well as other important digital documents. Don’t know how to do it? Don’t worry, we have got your back! In this article, we’ll learn how to update KYC for the EPF’s UAN and also go through the basics. Stay tuned until the end to understand it better.  What are the advantages of updating your EPF’s KYC details? A wide range of benefits can be reaped by updating the KYC on your EPF account. Some of those benefits are: You can make online withdrawal claims, which happen only after you link/seed your Aadhar with the UAN The transfer…

Read more
istockphoto 1353920585 612x612 1

EPF Form 10C – Benefits, Eligibility & Documents

EPF Form 10C is used to request a reimbursement of the employer share, the withdrawal benefit, and the scheme certificate for membership retention. An Employees’ pension fund (EPF) or Employers’ Pension Scheme is a retirement plan that EPFO enfranchises for employees working in organized sectors. Both the employer and employee contribute to EPF during a person’s employment period at that company. UAN – This unique number is assigned to each member of EPFO. It consists of 12 digits. An EPF certificate gives information about the employee’s employment, including the service period and the family members that will be able to benefit from the scheme in the event of death. Individuals can choose to continue their work after they retire from a company. You can either transfer the company to your next one or withdraw it. In case of withdrawal, the person must file EPF Form 10C.  Filling EPF Form 10C   Online and offline filings of Form 10C are possible. These…

Read more