Every week, someone in our Belong WhatsApp community asks a version of this question: "I'm earning in dirhams. Should I invest back home in India or keep my money here?"
It's not a simple question. The answer depends on where you plan to retire, how long you'll stay abroad, your tax situation, and honestly, your comfort level with managing investments across borders.
At Belong, we've spent years helping NRIs navigate this exact decision. Here's what we've learned: it's rarely about choosing one over the other. It's about understanding the trade-offs and building a portfolio that serves both your present and future.
This guide breaks down everything: returns comparison, currency impact, tax implications, country-specific restrictions, and practical allocation frameworks. By the end, you'll have clarity on what makes sense for your situation.
The Real Question: Where Will You Spend This Money?
Before comparing interest rates or stock returns, ask yourself one question: where will you eventually use this money?
If you're planning to retire in India, building wealth in rupees makes strategic sense. You'll spend in rupees. Your healthcare, housing, and daily expenses will be in rupees.
If you're settled abroad permanently, keeping most investments in your local currency reduces conversion risk when you need the funds.
If you're uncertain (like many NRIs), a split approach works best. You hedge both scenarios.
This simple framework shapes everything else we'll discuss.
India vs Global Markets: How Do Returns Actually Compare?
Let's address the elephant in the room. Indian markets have delivered impressive returns over the past two decades. But how do they stack up against developed markets like the US?
Raw Numbers Look Great for India
The Nifty 50 has gained over 1,000% in the past 20 years (July 2005 to July 2025). The S\&P 500 returned around 400% in the same period. Source: 24/7 Wall St.
A study by Motilal Oswal found that the Nifty 500 delivered 16% CAGR over 10 years (2013-2023), beating the S\&P 500's 15.4% returns. Source: Business Standard
Over 25 years, one analysis suggests nearly 700% returns for Nifty 50 in dollar terms versus 321% for S\&P 500. Even after adjusting for currency, India still outperforms. Source: Weekend Investing
But Currency Changes Everything
Here's what most articles miss. When you convert returns to dollar terms, the gap narrows significantly.
The Indian rupee has depreciated roughly 38% against the US dollar over the past decade. It fell from around Rs 62 per dollar in March 2015 to Rs 87 per dollar in March 2025. Source: Upstox
In 2025 alone, the rupee lost approximately 5%, making it Asia's worst-performing currency. It recently breached the Rs 90 mark. Source: CNBC
Let's do the math with a real example:
You invested Rs 1 lakh in Nifty 50 in 2015 when the exchange rate was Rs 61.65 per dollar (worth about $1,622).
Today, that investment grew to Rs 2.66 lakhs in rupee terms (165.6% return).
But in dollar terms? That Rs 2.66 lakhs is worth only $3,043 at Rs 87.5 per dollar.
Your actual dollar return? About 10.25% annualised, not the 12-15% headline figure.
👉 Tip: Always calculate your real returns in the currency you'll eventually spend. A 15% rupee return with 4% annual depreciation nets you around 11% in dollar terms.
The Currency Tailwind for NRIs
Here's the flip side. If you're investing dollars into India, rupee depreciation works in your favour while you're investing.
When the rupee weakens, your dollars buy more rupees. Your purchasing power in India increases. If you plan to eventually spend in India, this is actually beneficial during your accumulation phase.
The problem arises only if you need to convert back to dollars later.
Investment Options: What's Available in India vs Abroad?
Let's compare what NRIs can access in each geography.
Investing in India
Investment Type | Expected Returns | Tax for NRIs | Repatriation |
|---|---|---|---|
NRE Fixed Deposits | 7-8% p.a. | Tax-free in India | Fully repatriable |
NRO Fixed Deposits | 7-8% p.a. | Taxable (30% TDS) | Up to $1M/year |
Equity Mutual Funds | 12-15% historical | 12.5% LTCG, 20% STCG | Via NRE route |
Direct Stocks | Variable | 12.5% LTCG, 20% STCG | Repatriable |
Real Estate | 8-15% (city dependent) | 12.5% LTCG (>24 months) | Up to 2 properties |
GIFT City FDs | 4.5-5.0% (USD) | Tax-free | Fully repatriable |
You can compare FD rates across banks using Belong's NRI FD comparison tool.
Investing in UAE (For Dubai-Based NRIs)
Investment Type | Expected Returns | Tax | Notes |
|---|---|---|---|
UAE Stocks (DFM/ADX) | Variable | Tax-free | No capital gains tax |
UAE National Bonds | 4-6% | Tax-free | Government-backed, Sharia-compliant |
UAE Real Estate | 6-9% rental yield | Tax-free | Golden Visa benefits |
UAE Bank FDs | 3-4% (USD) | Tax-free | Lower than India |
Global ETFs via UAE brokers | Variable | Tax-free in UAE | Easy access to US markets |
The Key Differences
India offers higher nominal returns on fixed income (7-8% vs 3-4%). India's equity markets have historically outperformed on a pure return basis.
But UAE offers zero tax on investment income. No capital gains tax. No dividend tax. This tax efficiency can offset lower nominal returns.
For a UAE-based NRI, a 4% tax-free return equals a 5.7% pre-tax return if you were paying 30% tax.
👉 Tip: Don't just compare headline returns. Compare after-tax returns in your currency of spending.
The Currency Risk Reality: Should You Worry?
Historically, the rupee has depreciated at an average of 3-4% annually against the US dollar. Source: FundsIndia
This isn't random. It's driven by:
- Inflation differential: India's inflation typically runs 2-3% higher than the US
- Trade deficit: India imports more than it exports, creating dollar demand
- Capital flows: Foreign investor sentiment affects currency
What This Means Practically
If you invest Rs 10 lakhs in India today and it grows to Rs 15 lakhs in 5 years (8.4% CAGR), but the rupee depreciates from Rs 90 to Rs 110 per dollar (4% annual depreciation), your dollar value barely changes.
You started with $11,111 (at Rs 90). You end with $13,636 (at Rs 110). That's only 4.2% annualised in dollar terms.
How to Protect Against Currency Risk
FCNR Deposits: Keep foreign currency deposits in India. Your principal and interest remain in USD/EUR/GBP.
GIFT City USD Fixed Deposits: Earn tax-free returns in USD with full repatriation flexibility. Currently offering 4.5-5.0%.
Split your portfolio: Keep some investments in local currency (where you live) and some in India.
Track how the rupee is performing against the dollar using Belong's Rupee vs Dollar Tracker.
Tax Implications: The Hidden Cost of Cross-Border Investing
Tax can eat into your returns faster than market volatility. Here's what NRIs face.
Investing in India (For UAE-Based NRIs)
Fixed Deposit Interest:
- NRE FD: Tax-free in India
- NRO FD: 30% TDS from the first rupee (no basic exemption for NRIs)
- FCNR FD: Tax-free in India
Mutual Fund Gains:
- Equity funds (held >12 months): 12.5% LTCG above Rs 1.25 lakh
- Equity funds (held \<12 months): 20% STCG
- Debt funds (held >24 months): 12.5% without indexation
- TDS applies at source
Property Sales:
- 20% TDS on capital gains
- Can claim exemption under Section 54/54F by reinvesting
- Forms 15CA/15CB required for repatriation
Since UAE has no income tax, you don't pay tax again there. But ensure you have proper documentation of your tax residency to avoid complications.
Learn more about DTAA benefits for UAE NRIs.
The US NRI Problem: PFIC Rules
If you're a US-based NRI (or planning to move there), this is critical.
Indian mutual funds are classified as Passive Foreign Investment Companies (PFICs) by the IRS. This triggers punitive taxation:
- Annual reporting required on Form 8621 for each fund
- Default taxation at highest marginal rates plus interest penalties
- Tax on unrealised gains each year (Mark-to-Market election)
- Even zero growth can trigger tax liability
US-based NRIs face effective tax rates exceeding 50% on Indian mutual fund gains in some cases. Source: Arthgyaan
What's exempt from PFIC? Direct stocks, NRE/NRO FDs, real estate, PPF/EPF/NPS, and Category II AIFs.
👉 Tip: US NRIs should avoid Indian mutual funds entirely. Use direct stocks or GIFT City funds instead, which have cleaner US tax treatment.
GIFT City: The Best of Both Worlds?
GIFT City has emerged as a game-changer for NRI investments. It's India's first International Financial Services Centre, and it bridges the gap between investing in India and abroad.
What Makes GIFT City Special?
Tax Benefits:
- 100% tax exemption on derivative income
- Capital gains taxed at just 9% (vs 20-30% on mainland India)
- Dividend income taxed at 10% (vs 20% elsewhere)
- No Securities Transaction Tax, no stamp duty, no GST
Currency Protection:
- Transact entirely in foreign currencies (USD, EUR, GBP, etc.)
- No mandatory rupee conversion
- Full repatriation flexibility
Access to Global Markets:
- Trade Apple, Amazon, Tesla through NSE IFSC
- Access to global ETFs and funds
- Both Indian and international exposure
As of 2025, GIFT City hosts 32 banks, 337+ capital market intermediaries, and 272+ Alternative Investment Funds. Source: Kotak Bank
GIFT City Investment Options for NRIs
- USD Fixed Deposits: 4.5-5.0% tax-free returns, fully repatriable
- GIFT City Mutual Funds: From $500 minimum, USD-denominated
- AIFs: Minimum investment reduced to $75,000 (from $150,000 in Feb 2025)
- Global Equities: Trade international stocks on NSE IFSC
At Belong, we've made investing in GIFT City simple. Download our app to explore USD FDs and mutual funds.
Recommended funds available on Belong:
The Allocation Framework: How Much in India vs Abroad?
There's no universal answer, but here's a framework based on your plans.
Scenario 1: Planning to Return to India (Within 5-10 Years)
Recommended Split:
- 60-70% in India (rupee-denominated)
- 30-40% in foreign currency investments (for flexibility)
Why: You'll spend most of this money in rupees. Currency risk works both ways, but since your expenses will be in India, rupee investments make sense. The foreign currency portion protects you if plans change.
Where to Invest in India:
- Equity mutual funds (no capital gains tax for NRIs through GIFT City)
- NRE Fixed Deposits for safety
- REITs for real estate exposure without hassle
Learn about financial planning for returning NRIs.
Scenario 2: Staying Abroad Permanently
Recommended Split:
- 30-40% in India
- 60-70% in country of residence
Why: Your retirement expenses will be in local currency. India allocation provides diversification and potentially higher growth, but shouldn't be your core portfolio.
Where to Invest in India:
- GIFT City USD FDs (tax-free, no currency risk)
- GIFT City mutual funds (USD-denominated)
- Real estate only if you have specific plans (family visits, rental income)
Scenario 3: Uncertain About Future Plans
Recommended Split:
- 50% in India
- 50% in foreign currency
Why: Maximum flexibility. You're hedged for either outcome.
Where to Invest:
- Mix of NRE FDs and GIFT City USD FDs for fixed income
- Combination of Indian equity funds and global ETFs for growth
- Avoid illiquid investments like real estate until plans are clearer
Use Belong's Residential Status Calculator to understand how your status might change.
👉 Tip: Review your allocation annually. Life circumstances change. Your investment split should evolve too.
Common Mistakes NRIs Make
Having advised many NRIs, we see these patterns repeatedly.
1. Ignoring Currency Risk Until It's Too Late
Many NRIs focus only on rupee returns. A 12% return feels great until you realise the rupee dropped 5% that year. Always think in terms of your spending currency.
2. Keeping Too Much in Low-Yield Savings
NRIs often park money in UAE savings accounts earning 1-2%. That same money could earn 7-8% in NRE FDs (tax-free) or 4.5-5% in GIFT City USD FDs (also tax-free).
Compare rates using our FD comparison tool.
3. Buying Real Estate Emotionally
Property in India feels tangible. But managing property remotely is a nightmare. Rental yields are 2-3.5% after expenses. REITs offer better returns with zero hassle.
Read about common real estate mistakes NRIs make.
4. Not Understanding Tax Implications
US NRIs holding Indian mutual funds face PFIC penalties. UK NRIs need to track reporting requirements. UAE NRIs think everything is tax-free (but India still taxes certain incomes).
Get your taxes right with Belong's NRI tax filing service.
5. Over-Concentrating in One Geography
Some NRIs put everything in India. Others avoid it entirely. Both are risky. Diversification across geographies protects against country-specific risks.
What We Recommend at Belong
Based on our experience helping NRIs, here's a practical allocation for UAE-based NRIs with moderate risk tolerance:
Asset Class | Allocation | Vehicle | Purpose |
|---|---|---|---|
Safety (30-40%) | 20% | GIFT City USD FD | Tax-free, currency protected |
10-20% | NRE FD (India) | Higher yield, rupee exposure | |
Growth (50-60%) | 30-40% | India growth story | |
10-20% | Global ETFs (via UAE) | Diversification | |
Alternative (10-20%) | 10% | Gold (SGBs/ETFs) | Inflation hedge |
5-10% | REITs/InvITs | Real estate exposure |
This gives you exposure to India's growth, protection against currency risk, and global diversification.
Explore your options:
Making Your Decision: A Simple Checklist
Ask yourself these questions:
Where will I retire? If India, lean more towards rupee investments.
When will I need this money? Short-term needs should stay in your current currency.
What's my tax situation? US NRIs have different considerations than UAE NRIs.
How comfortable am I with currency fluctuations? If it keeps you up at night, use FCNR or GIFT City USD products.
Do I have family obligations in India? Parents' expenses, children's education, or property maintenance might need rupee funds.
What's my risk tolerance? Conservative investors should favour fixed deposits over equity.
Check your compliance status with Belong's Compliance Compass.
The Bottom Line
Investing in India versus abroad isn't an either-or decision. It's about finding the right balance for your unique situation.
India offers higher potential returns and makes sense if you'll eventually spend there. Your country of residence offers currency stability and simpler tax compliance. GIFT City bridges both worlds with tax efficiency and currency flexibility.
The ideal portfolio includes both. The exact split depends on your timeline, risk appetite, and life plans.
What matters most is having a clear strategy and sticking to it. Don't let currency movements or market headlines push you into emotional decisions.
At Belong, we've built tools specifically to help NRIs make these decisions confidently. Our WhatsApp community is full of NRIs navigating similar questions. Join us to learn from each other.
Ready to start building your cross-border portfolio? Download the Belong app to explore tax-efficient investment options.
Sources:
- Business Standard: Nifty 500 vs S\&P 500 comparison study
- CNBC: Rupee performance analysis 2025
- Upstox/FundsIndia: Currency depreciation historical data
- Kotak Bank: GIFT City statistics 2025
- Arthgyaan: PFIC taxation for US NRIs
- 24/7 Wall St.: Long-term index comparison
