Equity has historically benefitted patient long-term investors – be it in India or elsewhere in the world. It is arguably the best long term focused asset class providing annualised growth of 10-12 % in the past for the Indian investors. As an NRI, you might be wondering if , and how much, you need to invest in Indian equity. 

The following factors will help you with the decision-making:

1. Retiring in India or abroad

Are you planning to spend your retirement years in India or abroad? If you are planning to stay in the US, then save for your retirement kitty in dollar terms and in terms of existing lifestyle there. However, if you are planning to ultimately come back to India, invest predominantly in Indian equity funds as you would ultimately be spending it in rupee terms. Investing abroad while planning to retire in India will otherwise expose you to the risk of currency fluctuations. 

If the retirement decision is far into the future and you are unsure of it now, diversify your portfolio. However, stick only to liquid investments such as mutual funds in both countries. Refrain from buying any long-term retirement products (with lock-ins) or illiquid assets such as real estate. 

2. Timeline

At what age do you want to retire? Usually, ex-pats in the private sector in UAE can work only till the age of 65 years. It is relatively lower at 60 years for those working in Saudi Arabia, Kuwait and Oman. Perhaps you might want to retire early. Figure out the retirement age and how many years you are away from it.

As a thumb rule, invest in equities only if you have another seven years or more to go. After all, equities could be very volatile over the short term.

Nevertheless, various studies have shown that having exposure of up to 50% in equities even after retirement have paid off well – in terms of superior returns – for its investors. So, continue to keep the equity exposure even after your retirement. 

3. DTAA arrangement

Akin to local investors, any redemption made within a year of purchasing equity funds attracts Short-Term Capital Gains (STCG) tax of 15 per cent. And if it is sold after a year, Long-Term Capital Gains (LTCG) over and above Rs 1 lakh (in a financial year) are taxed at 10 per cent without indexation benefit. While there is no TDS for local investors, TDS for NRIs is at the highest applicable tax rate.

However, if the TDS amount is more than the actual tax liability, you will get a tax refund after you file your returns. If you reside in one of 90 countries that have a DTAA (Double Tax Avoidance Treaty) with India, you would avoid being taxed doubly. In case of a treaty, income tax is payable at the rate provided under the Income Tax Act, 1961 or the rate provided in the said agreement, whichever is more beneficial to the NRI investor.  

While domestic equity mutual funds can work very well for NRIs in most parts of the world, US-based NRIs might find it less tax efficient due to adverse tax treatment in that country. So, don’t ignore the tax implication of buying and selling Indian equity funds from your country. 

A well-diversified global portfolio will be incomplete without investing in the Indian equity market – irrespective of whether you want to finally settle down in India or any other country.

4. KYC and fund choices

Many mutual fund houses are currently not allowing NRIs in the US and Canada to invest in their schemes due to stringent laws in these countries. And those who are allowing insist on certain requirements or additional documentation. You need to complete an elaborate KYC process to invest. Some fund houses might also insist on in-person verification.  If you are giving POA (Power of Attorney) to someone to operate investment procedures on your behalf, signatures of both the investor and POA are needed on the KYC documents. 

Also, to invest on a repatriable basis, you need to have an NRE bank account in India, while NRO bank accounts are subject to annual repatriation limits of $ 1 mn. 

5. Diversification

In the past, Asian economies of Japan, South Korea, China and many others have grown at a fast rate (7% or more) for a long period of time on the back of demographic advantages – more and more youngsters joining their workforce and boosting national income. India is currently one of the fastest-growing economies which are still reaping the ‘demographic dividend’.

A well-diversified global portfolio will be incomplete without investing in the Indian equity market – irrespective of whether you want to finally settle down in India or any other country. 


NRIs should look towards an equity exposure in India to gain from its demographic advantages and its potential to earn 9-11% annually in the future. Invest more so if you are young and planning to return to India after retirement.