Which Are The Best Investments in India? A Guide for NRIs

You've built a career abroad. You've saved diligently in dirhams, dollars, or pounds. 

Now you're asking the question every NRI eventually faces: Should I invest this money back in India?

We've been helping NRIs answer this question for years. 

As the founder of Belong, I've seen the confusion firsthand. The conflicting WhatsApp forwards. 

The uncle who swears by real estate. The friend who lost money in a "guaranteed" scheme.

This guide cuts through the noise. 

I'll walk you through every major investment option available to NRIs, explain what actually works, and help you avoid the traps I've watched others fall into.

Why Should NRIs Even Consider Investing in India?

Before we discuss where to invest, let's address why.

India's economy grew at 8.2% in FY 2023-24, making it one of the fastest-growing major economies globally. For NRIs earning in stronger currencies, this creates a compelling opportunity. Your dollars or dirhams stretch further in Indian markets.

Here's the reality: Fixed deposits in the UAE offer 4-5% returns. In India, you can earn 7-8% on rupee FDs and 5-6% on tax-free USD deposits through GIFT City.

But returns aren't the only reason.

Many NRIs plan to return to India eventually. Building assets early-whether through real estate, mutual funds, or fixed deposits-gives you a financial foundation for retirement. The lower cost of living in India means your corpus goes further.

👉 Tip: Before investing anywhere, determine your residential status using our free calculator. This affects your tax obligations and which investment options are available to you.

Understanding NRI Accounts: Your Gateway to Indian Investments

You cannot invest in India directly from a foreign bank account. Every investment requires routing funds through specific NRI accounts. Here's what you need to know:

NRE Account (Non-Resident External)

This account holds your foreign earnings converted to Indian rupees. The key benefit: both principal and interest are fully repatriable. Interest earned is tax-free in India.

Use NRE accounts when you want to invest money earned abroad and might want to take it back someday.

NRO Account (Non-Resident Ordinary)

This account holds income generated in India-rental income, dividends, pension, or proceeds from asset sales. Interest earned is taxable at 30% in India. Repatriation is limited to USD 1 million per financial year.

Use NRO accounts for managing Indian-source income.

FCNR Account (Foreign Currency Non-Resident)

These accounts let you hold deposits in foreign currencies (USD, GBP, EUR, etc.) for 1-5 years. You avoid currency conversion risk entirely.

👉 Tip: Compare NRE and NRO account features carefully. Opening the wrong account type for your goals can cost you thousands in taxes and repatriation hassles. Read our detailed guide on NRE vs NRO vs FCNR accounts.

Fixed Deposits: The Foundation of NRI Investments

Fixed deposits remain the most popular investment choice for NRIs. They're predictable, safe, and easy to understand. But not all FDs are created equal.

NRE Fixed Deposits

Interest rates range from 6.25% to 7.50% depending on the bank and tenure. Interest is completely tax-free in India. Both principal and interest can be repatriated without any limits.

The catch: You bear currency risk. If the rupee depreciates against your home currency before maturity, your effective return drops.

NRO Fixed Deposits

These offer slightly higher interest rates (up to 7.25%) but interest is taxable at 30% plus surcharge and cess. After tax, your effective return often falls below NRE FD rates.

FCNR Fixed Deposits

If you want to avoid currency risk entirely, FCNR deposits let you invest in USD, GBP, EUR and other currencies. Current USD FCNR rates range from 4.5% to 5.5% for a 1-year tenure.

GIFT City USD Fixed Deposits

This is what I recommend to most NRIs in the UAE who want dollar-denominated returns.

GIFT City operates as India's International Financial Services Centre. Banks here offer USD fixed deposits with rates around 5-6%. The interest is tax-free in India (you only pay tax in your country of residence). There's no TDS deduction. And since you're investing in dollars, you have zero rupee depreciation risk.

Compare this to UAE bank FDs offering 4-5%-the math speaks for itself.

FD Rate Comparison (December 2025)

Sources: SBI Bank FD Rates, ICICI Bank, HDFC Bank

👉 Tip: Use our NRI FD Comparison Tool to compare rates across NRE, NRO, FCNR and GIFT City fixed deposits from all major Indian banks.

Mutual Funds: Participate in India's Growth Story

If fixed deposits feel too conservative, mutual funds offer higher return potential-with higher risk.

NRIs can invest in Indian mutual funds through NRE or NRO accounts. The investment must be in Indian rupees. You have access to equity funds, debt funds, hybrid funds, and more.

The returns can be significant. Equity mutual funds have historically delivered 12-15% CAGR over long periods, though past performance doesn't guarantee future results.

The US/Canada Problem

If you're based in the United States or Canada, investing in Indian mutual funds becomes complicated.

FATCA (Foreign Account Tax Compliance Act) requires financial institutions to report accounts held by US persons. Many Indian fund houses stopped accepting investments from US and Canada NRIs to avoid compliance burden.

Currently, around 10-15 AMCs accept investments from US/Canada NRIs. These include Nippon India Mutual Fund, UTI Mutual Fund, SBI Mutual Fund, ICICI Prudential, Aditya Birla Sun Life, and a few others.

Even among these, many require offline transactions with additional declarations. Online investing is restricted.

For US-based NRIs, there's another complication: Indian mutual funds are classified as Passive Foreign Investment Companies (PFICs) under US tax law. This creates complex reporting requirements and potentially punitive taxation.

👉 Tip: If you're in the US or Canada, consider GIFT City AIFs as an alternative. They offer exposure to Indian and global markets with simpler tax treatment and dollar-denominated investing.

Mutual Fund Taxation for NRIs

For a complete guide, read our article on mutual fund taxation for NRIs.

Real Estate: The Emotional Favorite

Let me be direct: real estate is the most emotionally driven investment I see NRIs make. And that emotion often leads to poor decisions.

Yes, NRIs can buy residential and commercial property in India. Under FEMA regulations, you can purchase as many properties as you want-except agricultural land, farmhouses, and plantations.

Property prices in cities like Mumbai, Bangalore, and Hyderabad have appreciated well over the past decade. Rental yields add 2-4% annually.

But here's what the property brokers don't tell you:

The hidden costs are substantial. Registration fees, stamp duty, maintenance charges, property taxes, and management fees (if you hire someone to handle tenants) eat into returns. Many NRIs underestimate these by 3-5% annually.

Remote management is painful. Dealing with tenant issues, maintenance problems, and property disputes from Dubai or London is frustrating. More than half of NRIs cite property management as their biggest challenge.

Liquidity is terrible. Selling property takes months, sometimes years. If you need money urgently, real estate won't help.

The new capital gains tax hurts. Properties sold after July 2024 face a 12.5% long-term capital gains tax without indexation benefits. For properties purchased before this date, you can choose between the old 20% rate with indexation or the new 12.5% rate-whichever is lower.

For detailed guidance on buying and selling property as an NRI, read our FEMA rules and real estate guide.

👉 Tip: Before buying property, verify the land-use classification. Many "farmhouses" near cities are marketed to NRIs but are built on agricultural land. Such purchases violate FEMA rules and risk confiscation.

GIFT City: The Tax-Efficient Gateway

I've mentioned GIFT City several times already. Let me explain why it deserves special attention.

Gujarat International Finance Tec-City (GIFT City) is India's first International Financial Services Centre (IFSC). It's designed to compete with Singapore, Dubai, and Hong Kong as a global financial hub.

For NRIs, GIFT City offers something remarkable: offshore-style tax benefits while investing in an Indian-regulated environment.

What Can NRIs Invest in Through GIFT City?

USD Fixed Deposits: Tax-free interest in India, no TDS, fully repatriable. You can open deposits for 7 days to 5 years in multiple currencies.

Alternative Investment Funds (AIFs): These pool money from sophisticated investors to invest in private equity, venture capital, real estate, and complex strategies. Minimum investment is typically $150,000. Many funds offer tax-exempt returns under specific conditions.

Global Equities: Through NSE IFSC, you can trade Apple, Amazon, Tesla, and hundreds of other global stocks-all without opening a US brokerage account.

Mutual Funds: GIFT City funds allow dollar-denominated investing in Indian and global markets.

Tax Benefits Summary

• No Securities Transaction Tax (STT)
• No Commodity Transaction Tax (CTT)
• No stamp duty on IFSC transactions
• Concessional 10% tax on dividends (vs 30% in mainland India)
• Capital gains exemption on certain securities traded on IFSC exchanges
• Tax-free interest on offshore deposits

For the complete breakdown, read our GIFT City tax benefits guide.

👉 Tip: If you're investing more than $50,000 and want tax efficiency, GIFT City deserves serious consideration. Our team at Belong can help you navigate the options-download the app to get started.

National Pension System (NPS): For Retirement Planning

NRIs between 18-60 years old can invest in the National Pension System. It's a long-term retirement savings scheme regulated by PFRDA.

The minimum annual contribution is ₹6,000. You can invest through NRE or NRO accounts. The funds get invested across equity, corporate bonds, government securities, and alternative assets based on your choice.

The Good

Tax deduction up to ₹50,000 under Section 80CCD(1B). Professional fund management. Diversification across asset classes.

The Bad

Your money is locked until age 60. At maturity, you must use at least 40% of the corpus to buy an annuity. The pension is paid in Indian rupees only.

Who Should Consider NPS?

NRIs who are certain they'll retire in India. If you're undecided about where you'll spend your retirement, the illiquidity and rupee-only payments become significant drawbacks.

Stocks: Direct Equity for Experienced Investors

NRIs can invest in Indian stocks through the Portfolio Investment Scheme (PIS). This requires opening a PIS-linked NRE or NRO account and a demat account.

Important restrictions apply:

• You can only trade on delivery basis (no intraday trading)
• Futures & Options are allowed only through NRO accounts, on non-repatriable basis
• You cannot trade in currency derivatives or commodities
• Overall NRI investment in any Indian company is capped at 10% (can be raised to 24% with company approval)
• Certain sectors like railways and tobacco are off-limits

For most NRIs, I recommend mutual funds over direct stocks. Unless you have the time and expertise to track Indian markets closely, professional fund management delivers better risk-adjusted returns.

If you do want to invest directly, read our guide on best shares in India for NRIs.

Government Securities and Bonds

For conservative investors seeking stability, government securities and corporate bonds offer alternatives to fixed deposits.

Treasury Bills: Short-term instruments (91 days to 1 year) issued by the Government of India.

Government Bonds: Longer-term securities with periodic interest payments. These are considered virtually risk-free.

Corporate Bonds: Higher yields than government securities, but with credit risk. Stick to AAA-rated issuers for safety.

PSU Bonds: Bonds issued by Public Sector Undertakings offer government-backed safety with slightly higher yields.

NRIs can invest in bonds through their demat accounts. GIFT City also offers rupee-denominated bonds listed on IFSC exchanges with concessional tax rates.

For details, read our guide on investing in bonds for NRIs.

Gold: The Traditional Store of Value

Gold has cultural significance for Indians. Many NRIs want gold exposure in their portfolio.

Physical Gold: You can buy gold in India and store it in bank lockers. The hassle of storage, insurance, and making charges makes this least efficient.

Gold ETFs: Exchange-traded funds that track gold prices. You need a demat account to invest. Returns mirror gold price movements without storage hassles.

Gold Mutual Funds: These invest in Gold ETFs, allowing SIP-style investments without needing a demat account.

Sovereign Gold Bonds: Here's the catch-NRIs cannot invest in Sovereign Gold Bonds. This is explicitly prohibited under FEMA regulations. If you see someone suggesting otherwise, they're wrong.

For comprehensive coverage, read our gold investment guide for NRIs.

Investment Comparison: Which Option Fits Your Goals?

Common Mistakes NRIs Make (And How to Avoid Them)

In my 12 years of advising NRIs, I've watched the same mistakes repeat:

Mistake #1: Chasing high FD rates without checking the bank's stability

That small finance bank offering 9% interest? Ask why it needs to offer rates so much higher than SBI or HDFC. Sometimes the extra 1-2% isn't worth the counterparty risk.

Mistake #2: Ignoring currency risk

An 8% return in rupees means nothing if the rupee depreciates 5% against your home currency during the investment period. Factor in expected depreciation (historically 3-4% annually against USD) when comparing returns.

Mistake #3: Not updating residential status

Your investment restrictions, tax obligations, and account types depend on your residential status. If you've returned to India or changed countries, update your KYC immediately. Using incorrect status can trigger penalties and compliance issues.

Use our Compliance Compass to check if you're following all the rules.

Mistake #4: Buying property on emotion

That ancestral village land. Your childhood apartment complex. The "farmhouse" a friend recommended. Emotional purchases rarely make financial sense. Evaluate property purely on returns, liquidity, and management feasibility.

Mistake #5: Forgetting about DTAA benefits

India has Double Taxation Avoidance Agreements with many countries. If you're paying tax on Indian investments, you may be entitled to relief in your country of residence. Many NRIs overpay because they don't claim these benefits.

Read our DTAA guide for India-UAE or explore the complete list of DTAA countries.

Building Your NRI Investment Portfolio: A Framework

Here's a simple framework I use with clients. Adjust based on your age, risk tolerance, and India return plans:

Conservative (Capital Preservation)

• 60% Fixed Deposits (split between GIFT City USD and NRE)
• 20% Debt Mutual Funds
• 20% Gold ETFs

Balanced (Growth + Safety)

• 40% Fixed Deposits (GIFT City USD for dollar portion)
• 30% Equity Mutual Funds
• 20% Debt Mutual Funds
• 10% Gold ETFs

Aggressive (Long-Term Growth)

• 20% Fixed Deposits
• 50% Equity Mutual Funds
• 15% Direct Stocks
• 15% GIFT City AIFs (if eligible)

👉 Tip: Review your portfolio annually. Indian markets, tax laws, and your personal circumstances change. What worked last year may need adjustment.

Next Steps: Getting Started

If you've read this far, you're serious about investing in India. Here's your action plan:

1. Determine your residential status using our Residential Status Calculator

2. Open the right NRI accounts if you don't have them. Check our guides on best NRI accounts and Indian banks in UAE

3. Complete your KYC with updated NRI documentation. Learn about PAN cards for NRIs and Aadhaar for NRIs

4. Compare investment options using our tools: NRI FD Rates Comparison, GIFT City AIFs Explorer

5. Track currency movements with our Rupee vs Dollar Tracker

6. Stay compliant using our Compliance Compass

Final Thoughts

Investing in India as an NRI isn't complicated-but it does require understanding the rules. The biggest returns come not from chasing the highest interest rate, but from making tax-efficient choices that match your goals.

Whether you're building a retirement corpus, planning your return to India, or simply diversifying your global portfolio, India offers genuine opportunities. The key is approaching them with clear eyes and proper planning.

At Belong, we've built tools specifically for NRIs to make these decisions easier. From comparing FD rates to understanding GIFT City options, we're here to help you invest smarter.

Join our WhatsApp community to connect with other NRIs and get your questions answered: Join Here

Download the Belong app to access all our tools and start your investment journey: Download Now

Sources:

• Reserve Bank of India (RBI) - Foreign Exchange Management Act Guidelines
• Securities and Exchange Board of India (SEBI) - NRI Investment Regulations
• International Financial Services Centres Authority (IFSCA) - GIFT City Regulations
• Income Tax Department of India - NRI Taxation Rules
• ICICI Bank, HDFC Bank, SBI - Official NRI Services Pages

Disclaimer: This article provides general information and should not be considered personal financial advice. Investment decisions should be based on your specific circumstances. Consult a qualified financial advisor before investing.