In this article
Regulatory reference date: 23 October 2026. Indian income tax for tax years starting 1 April 2026 is governed by the Income-tax Act, 2025, subject to applicable provisions and transition rules. For earlier income periods, the Income-tax Act, 1961 must be examined.
NRIs and Overseas Citizens of India (OCIs) can invest in several categories of Indian assets, including permitted bank deposits, mutual funds, listed shares, eligible debt instruments, the National Pension System, residential and commercial property, and interests in Indian businesses. Each category has its own eligibility and transaction conditions.
Permission to acquire an investment, permission to fund it, taxation of income from it, and permission to transfer its sale proceeds abroad are separate questions. An investment may be permitted without every account or remittance route being permitted on the same terms.
Can NRIs and OCIs invest in India?
Yes, subject to the conditions applicable to the investor and the investment. Indian exchange-control rules distinguish financial deposits, non-debt instruments, debt instruments, property and specified pension arrangements. A permission for one asset is not a general permission for every product labelled an “NRI investment”.
The principal options are:
| Category | General availability | Main condition to understand |
|---|---|---|
| NRE, NRO and FCNR(B) deposits | Available under different account schemes to eligible persons | Currency, permitted credits, residence, interest and repatriation differ |
| Indian mutual funds and ETFs | Eligible schemes under relevant investment rules | Equity-oriented and debt-oriented classifications, onboarding and funding route |
| Listed Indian shares | Permitted through prescribed routes | June 2026 Schedule III framework, investor limits and designated banking arrangements |
| Government securities and other debt | Specified instruments are eligible | Not all corporate bonds or debt products share one permission |
| National Pension System | Eligible Indian citizens living abroad and OCIs may open Tier I | PFRDA eligibility, withdrawals and Tier II restrictions |
| PPF | Not an unrestricted new NRI investment | Opening and continuation of an existing account are different issues |
| Residential and commercial property | Generally permitted for eligible NRIs and OCIs | Restricted property categories, payment and transfer conditions |
| Indian company, LLP and eligible investment vehicles | Permitted under relevant routes | Investor status, sector restrictions, classification and reporting |
This comparison identifies categories rather than recommending a fund, security, deposit or business investment.
Which residential status determines eligibility?
Under the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, NRI means an individual resident outside India who is an Indian citizen. OCI refers to an individual resident outside India registered as an OCI cardholder under the Citizenship Act, 1955. An OCI card does not confer Indian citizenship.
The expression person resident outside India must be assessed under FEMA. Purpose, duration and circumstances of residence can matter, not merely the number of days spent outside India. A person may also have a different residential classification under the Income-tax Act. Indian tax residence determines the scope of taxable income; it does not, by itself, decide which investment or bank-account route FEMA permits.
For example, an Indian citizen working in Dubai should not use the label “NRI” as a substitute for confirming the relevant FEMA position. Similarly, an OCI living in London should not assume that every permission available to an NRI is identical for every product. The applicable instrument must be examined.
What are the principal investment categories?
NRE, NRO and FCNR(B) deposits
The RBI Foreign Exchange Management (Deposit) Regulations, 2016 prescribe different schemes. NRE accounts are rupee-denominated accounts under a prescribed non-resident scheme. Principal and interest in a validly maintained NRE account are generally repatriable, subject to the account’s eligibility, permitted credits and other RBI conditions.
NRO accounts generally accommodate permissible India-linked receipts and have different outward-remittance arrangements. NRO interest ordinarily enters the Indian income-tax analysis, and an NRO bank balance does not create an unrestricted right to remit its entire value abroad.
FCNR(B) is a permitted foreign-currency deposit scheme. It is not simply an NRE deposit denominated differently. Eligibility, currency risk, maturity and Indian tax treatment must be examined under their applicable conditions.
Interest on a qualifying NRE account receives a specific conditional Indian income-tax exemption. Under the 1961 Act this was section 10(4)(ii); the exemption is retained under Schedule IV to the 2025 Act. A bank’s NRE label alone does not establish that the holder satisfies the statutory conditions.
Indian mutual funds and ETFs
Eligible NRIs and OCIs may acquire domestic mutual-fund units through applicable permitted routes, subject to scheme and intermediary requirements. FEMA distinguishes units of mutual funds or ETFs investing more than 50% in equity, treated as non-debt instruments, from fund categories governed by debt-instrument rules.
For equity-oriented domestic mutual funds, Schedule III of the NDI Rules specifically permits qualifying NRI/OCI investment on a repatriation basis; Schedule IV deals separately with qualifying non-repatriation purchases. Fund KYC, the correct account and the fund house’s onboarding process are separate from that underlying permission. A fund house may apply additional compliance checks to investors based in the United States or Canada. It is inaccurate to say that all such investors are universally eligible or universally excluded.
Dividends or distributions, redemptions and capital gains must be classified under the applicable income-tax provisions for the relevant year. Foreign-country reporting or taxation may arise independently.
Listed shares and equity securities
The listed-share rules changed materially in June 2026. The RBI-hosted Non-Debt Instruments Rules, consolidated to 2 September 2026 incorporate the Third Amendment Rules dated 12 June 2026, which broadened the Schedule III repatriation-basis listed-equity route to eligible individual persons resident outside India, including NRIs and OCIs. RBI’s 13 June 2026 payment-regulation amendment and 15 June 2026 directions accompany that change.
Under the NDI Rules consolidated through 2 September 2026, a purchase or sale through the Schedule III stock-exchange route must use the prescribed designated authorised-dealer arrangement. The individual holding must be less than 10% of the relevant equity capital or series, with an aggregate 24% limit for holdings under that Schedule, subject to the operative rule’s detailed treatment of breaches, reclassification and other restrictions. Certain ownership or control situations involving a country that shares a land border with India also require prior government approval under the applicable rule. These are specific Schedule III limits, not a universal ceiling on all non-resident investments.
The rules also continue to provide a distinct Schedule IV non-repatriation route for eligible NRIs and OCIs. The same Indian company’s shares may therefore appear in holdings acquired under different legal routes. A demat statement identifies securities holdings but does not necessarily prove the applicable acquisition and repatriation classification.
Keep the account records, trade confirmations, acquisition basis and subsequent sale records. They may matter later when establishing how proceeds can move.
Government securities and other debt instruments
Specified government securities, eligible debt-oriented mutual funds and ETFs, and particular debt instruments fall under the Foreign Exchange Management (Debt Instruments) Regulations, 2019 and related directions. Do not treat every instrument marketed as a “bond” or “fixed-income investment” as automatically available on the same terms.
Eligibility depends on the exact issuer, instrument type, investor category, prescribed acquisition route and remittance rules. Financial risks such as interest-rate, credit and currency exposure are also distinct from legal eligibility.
National Pension System and PPF
PFRDA identifies eligible non-resident Indian citizens and OCI cardholders as potential subscribers to the NPS Tier I account, subject to its enrolment and KYC conditions. Its current All Citizen Model guidance says NRIs and OCIs with Tier I accounts cannot activate Tier II. NPS exit, withdrawal, annuity and taxation must be assessed under their own rules, not those for an ordinary bank deposit.
PPF is different. The Government Savings Promotion General Rules, 2018 distinguish opening an account from continuing an account when its holder subsequently becomes non-resident. Under rule 4, a qualifying holder who becomes NRI during the account’s term may continue it until maturity on the prescribed non-repatriation basis, but cannot extend it beyond maturity, and no interest is payable after maturity under that provision. Account operations are also governed by the Public Provident Fund Scheme, 2019 and applicable amendments. An NRI should not assume that a new PPF account can be opened on the same terms as an NPS Tier I account.
Immovable property
Eligible NRIs and OCIs can generally purchase residential and commercial property in India under the NDI Rules, subject to prescribed funding and acquisition conditions. Ordinary purchase permission excludes agricultural land, plantation property and farmhouses. Inheritance and other permitted methods of acquisition have separate conditions, so a purchase restriction is not automatically a prohibition on every route to ownership.
At sale, legal title, acquisition history, Indian capital-gains computation, purchaser withholding and repatriation of proceeds have to be addressed separately. Registration and bank credit do not alone establish that the full proceeds can be sent abroad.
Indian businesses, REITs, InvITs and IFSC investments
An NRI or OCI may be able to acquire equity in an Indian company, contribute capital to a qualifying LLP, or hold eligible units in an investment vehicle, depending on the route. Schedules I, IV, VI and VIII of the NDI Rules cover materially different situations. Schedule IV includes restrictions for specified activities, including Nidhi companies and certain agricultural, plantation and real-estate businesses.
REITs and InvITs are regulated investment vehicles, not equivalent to ordinary bank deposits. An IFSC instrument also requires its own regulator, investor-eligibility, funding and tax checks. Being located in GIFT IFSC does not create a blanket Indian or overseas exemption. These subjects warrant separate detailed guides rather than a product catalogue here.
What is the difference between repatriation and non-repatriation?
Broadly, investment on a repatriation basis means sale or maturity proceeds, net of applicable taxes, are eligible to be transferred outside India under the relevant route. Investment on a non-repatriation basis carries restrictions imposed by its particular rules and payment regulations. Both classifications may be permissible for eligible transactions; neither is determined solely by the name of the bank account used.
Consider a hypothetical Indian citizen resident in London who makes two legally permitted purchases of Indian-company shares. One acquisition is properly recorded under the relevant repatriation-basis listed-equity route. The second is properly recorded under the NRI/OCI non-repatriation route. Assume both are funded from otherwise permissible NRE money.
The original bank debit does not make both purchases identical. For the specified Schedule IV investment, the RBI payment regulations require sale or maturity proceeds to be credited only to NRO, irrespective of whether the original consideration was paid through NRE, FCNR(B) or NRO. The same rules restrict repatriation of the capital and appreciation under that route. The first acquisition follows the different, permitted Schedule III proceeds arrangements. The illustration assumes compliant acquisitions and makes no assertion about the investor’s personal tax liability.
Does the USD 1 million NRO remittance facility override these restrictions?
No automatic override follows. RBI separately provides a conditional facility under its Remittance of Assets framework for eligible NRIs/PIOs to remit specified balances or asset proceeds up to USD 1 million per Indian financial year, subject to the applicable conditions, documentation and taxes. This general facility cannot simply be assumed to neutralise a specific Schedule IV non-repatriation restriction. The source, legal character of the proceeds, original investment schedule and precise later remittance permission must be tested separately.
The important distinction is between an investment’s original classification and any later independent legal basis for transferring money. Do not collapse the two into a single “NRE money can go back” or “NRO money can never go back” rule.
Which accounts and documents are needed to invest?
No single account package is mandatory for every Indian investment. The required funding account, trading or demat arrangement, KYC, PAN and intermediary forms depend on the investor and instrument. The June 2026 Schedule III framework includes a designated repatriable rupee-account arrangement for that route; it should not be confused with a general permission to use any account for any investment.
The normal process is to establish the investor’s FEMA status and eligibility, identify the exact instrument and investment route, use the prescribed bank or remittance arrangement, complete the applicable KYC and intermediary process, and preserve the acquisition records. Relevant documents commonly include passport or OCI proof, residence/address evidence, PAN where required, permitted bank account records, investment applications, contract notes or folio/demat records and source-of-funds evidence.
A securities intermediary may request additional records under its own compliance obligations. SEBI announced KYC relaxations for individual persons resident outside India in August 2026. Applicable operational directions and intermediary procedures govern the onboarding process.
How does India tax these investments?
Indian income-tax treatment depends on the investor’s tax residence, income category and tax year. For income periods through 31 March 2026, use the Income-tax Act, 1961. For tax years beginning on 1 April 2026, use the Income-tax Act, 2025, with applicable transition and savings rules. Section 5 of the 1961 Act and section 5 of the 2025 Act set out the broad scope of total income, including a different rule for non-residents and a limited foreign-income treatment for residents who are not ordinarily resident.
A qualifying NRE-interest exemption has conditions distinct from the conditions governing NRO interest or FCNR(B) interest. Income from dividends, bonds, mutual-fund distributions and property cannot all be treated as deposit interest. Likewise, taxable capital gains on a share or property sale are not necessarily equal to the gross sale proceeds credited by the bank.
Withholding and final Indian income-tax liability are different. The payer’s deduction obligation may be affected by the asset, income character, residential status, applicable domestic provisions, documentation and a properly established treaty claim. A DTAA does not automatically eliminate withholding, nor does payment of Indian tax establish what the investor must report in the country of residence.
For example, an Indian investment held by a resident of Dubai and the same investment held by a resident of London may raise different treaty or overseas-tax questions. Foreign-country law needs its own examination. US taxpayers considering certain Indian mutual funds should seek qualified US tax advice on potential PFIC and Form 8621 issues; Indian law alone cannot answer those questions.
What happens if you return to India?
A return can change FEMA residence, bank account eligibility and income-tax residential status at different times or under different tests. Existing NRE, NRO and FCNR(B) arrangements may require redesignation or other handling under RBI rules. Trading accounts, KYC and future investment transactions may also need updating.
The change does not erase the historical acquisition route of shares or funds already held. Preserve the original records while applying the rules that govern future income, transfers and disposals. When a person becomes resident and ordinarily resident for income-tax purposes, the tax and foreign-asset reporting analysis may extend to overseas holdings as well.
A return to India is therefore a reason to review accounts and holdings, not an automatic requirement to sell every investment.
What should you establish before choosing a route?
Before choosing any category of Indian investment, be clear about your Indian citizenship or OCI status, FEMA residence, exact instrument, permitted acquisition and funding arrangement, repatriation classification, available records, likely income events and country-of-residence tax/reporting position. If a return to India is planned, include the residence-transition implications.
The Compliance Highway Rule™, developed by CA Sagar Soman and discussed in What NRIs Are Not Told About India, provides a useful educational distinction here: identify which legal question is being answered before relying on a conclusion reached under another system. The framework is not legal authority and does not replace the instrument-specific rules.
What you may buy, how you may pay for it, what India taxes and what you may remit abroad are four separate questions. A correct investment decision begins by answering each under the relevant law.
This article provides general educational information about India-side rules and is not individual tax, FEMA, legal or investment advice. It does not recommend securities or funds, or determine a reader’s eligibility, tax liability or remittance entitlement. Tax, legal and reporting consequences outside India should be examined by an appropriately qualified professional in that country.
Official sources for further reading
- RBI-hosted Foreign Exchange Management (Non-debt Instruments) Rules, 2019, consolidated to 2 September 2026
- RBI Foreign Investment in India Master Direction, updated to 15 June 2026
- RBI Mode of Payment and Reporting of Non-Debt Instruments Regulations, amended through 13 June 2026
- RBI Deposit Regulations, amended through 29 June 2026
- PFRDA NPS All Citizen Model
- National Savings Institute, Government Savings Promotion General Rules, 2018
- Income-tax Act, 2025 and related official resources
- IRS Instructions for Form 8621, US-law awareness
Sources and review
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