Indian industries and markets today have become one of the major forces to reckon with in the global economy. It is one of the fastest growing economies in the world and is ranked even above developed countries like the UK, Russia and Italy. NRI Investment in India is a positive step taken by our government to stabilize the national economy. The Reserve Bank of India has permitted the NRIs to make direct investments in the companies that have India origin. This is in alignment with the Automatic Route purchase of shares under the Portfolio Investment Scheme. In fact, this facility is extended to the companies which have partnership or proprietorship concerns as well.

Investment in Indian Companies by NRIs

Non-Resident Indians (NRIs) are allowed to invest in the primary and secondary capital markets in India through the portfolio investment scheme (PIS). Under this scheme NRIs can acquire shares/debentures of Indian companies through the stock exchanges in India. The laws applicable for incorporating a company in India include the Indian Companies Act of 1956, read with Companies (Central Governments') General Rules and Forms,1956, the Indian Income Tax Act, and other laws & regulations. The Foreign Exchange Management Act of 1999 is applicable for foreign investments and transactions. The Reserve Bank of India monitors the ceilings on NRI investments in Indian companies on a daily basis. For effective monitoring of foreign investment ceiling limits, the Reserve Bank has fixed cut-off points that are two percentage points lower than the actual ceilings. The cut-off point, for instance, is fixed at 8 per cent for companies in which NRIs can invest up to 10 per cent of the company's paid up capital. The cut-off limit for companies with 24 per cent ceiling is 22 per cent and for companies with 30 per cent ceiling, is 28 per cent and so on. Similarly, the cut-off limit for public sector banks (including State Bank of India) is 18 per cent.

NRIS can invest in following sectors in India, through FDI:

·         Petroleum Refining and its Products

·         Coal & Ignites

·         Power

·         Drugs & Pharmaceuticals

·         Hotels & Tourisms

·         Mining

·         Pollution Control Management

·         Infrastructural Project

Eligibility for NRIs to invest in India:-

As per the Section 2(V) of Foreign Exchange Management Act 1999, the following three rules are applicable for NRIs who are eligible to invest in India:-

·         A person who resides outside India or has taken up employment outside India;

·         Conducting business activities outside India

·         Staying outside India for an indefinite or uncertain time period

·         A person has been in possession of his Indian passport (provided he is not a citizen of Pakistan or Bangladesh)

·         Either of his parents or grandparents were Indian citizen (as per the Indian Constitution/ Citizenship Act of 1955).

Income Tax Filing Rules & Laws in India for NRIs

Indian economy is growing rapidly and hence there is a surge of NRI wants to invest or even return to India. For them, the primary worry is the Indian tax system and structure as they do not want to lose too much of the money they made abroad. But over the years the Indian government has simplified tax rates and as a non resident Indian you can avail of several benefits upfront, including a lot of tax exemptions for NRIs.

Benefits for NRIs:

There are many categories for tax payments required by NRI’s, but on the whole, they have to pay tax to the Indian income tax authorities if their income, allowance or salary originates in Indian soil. It is nearly the same as those living in India and is known to be permanent residents. But all NRI’s have to pay tax if the income was earned from any business dealing with India or from any buying and selling of real estate. If the government pays any interest or royalty, tax is to be paid on that as well as on income from fees earned from technical services. According to the income tax law in India, a NRI is not liable to pay tax if he or she runs a news agency or magazine and income is earned form news and views collection with the sole aim of relaying them outside India. If a film is not shot in partnership and does not have an affiliate as an Indian citizen, tax is not liable. But non resident Indians can benefit from loads of provisions like joint holdings, exemptions from investments income and their remittances are more simplified than that of others. For many types of incomes, NRI’s are allowed concessions for their tax calculation.

Various Promising Sectors in India:

Investment in New Issues of Indian companies under 40% Scheme:

Indian companies engaged in the following activities are allowed by Reserve Bank of India to issue shares/debentures to NRIs with repatriation benefits to the extent of 40% of the new issue.

1. Industrial and Manufacturing Units.

2. Hotels with 3, 4, or 5 Star Category.

3. Hospitals and Diagnostic Centres.

4. Shipping Companies.

5. Development of Computer Software.

6. Oil Exploration Services.

For NRIs, India is an attractive destination for investment. According to World Bank, Indian economy will become one of the largest by 2050 AD. The healthy growth of the Indian economy also becomes evident from the inflow of the foreign direct investment (FDI). Investment opportunities in India are plentiful. It becomes evident with the numerous MNC's not only trailing their products and services into the Indian markets but also coming forward to set up their manufacturing units in India.

The vast investment opportunities available and the positive investment climate in India have become a part of every business entrepreneur's life. The Ministry of Overseas Indian Affairs has set up an Overseas Indian Facilitation Centre (OIFC) as a not-for-profit-trust, in partnership with Confederation of Indian Industry (CII) to promote investment opportunities amongst the overseas Indians.