5 Reasons NRIs Prefer USD Investments Over INR

Two NRIs. Both in Dubai. Both invested ₹50 lakh in January 2020.

One chose a top-performing Indian equity mutual fund.

The other split the money: ₹25 lakh in the same fund and USD 15,000 (the equivalent of the remaining ₹25 lakh at the time) in a GIFT City USD fixed deposit.

Five years later, here's what happened.

The first NRI's full ₹50 lakh portfolio grew to approximately ₹1.05 crore. A 110% return in rupee terms. Impressive on paper.

But when she converted to dirhams to pay for her daughter's university deposit in Abu Dhabi, the rupee had fallen from ₹71 to ₹90 per dollar during those five years. Her ₹1.05 crore was worth roughly USD 116,600. Her actual dollar return: about 66%.

The second NRI's equity portion grew the same way: ₹25 lakh became ₹52.5 lakh, worth approximately USD 58,300 at ₹90.

His USD FD portion, earning around 4.5-5% annually tax-free, grew from USD 15,000 to approximately USD 18,800. Combined: USD 77,100. His dollar return: about 78%.

The NRI who diversified into USD outperformed by 12 percentage points in the currency that actually paid the tuition bill.

This isn't a cherry-picked example. We see this pattern across hundreds of portfolios at Belong.

The rupee quietly erodes what Indian markets generously deliver. And more NRIs are waking up to it every quarter.

Our WhatsApp community of NRIs discusses exactly these kinds of real-world portfolio decisions.

If you've been wondering whether your investment currency matters as much as your investment returns, this article will settle that question with data, not opinions.

The Currency Gap Nobody Shows You

Before we get into the five reasons, you need to see the number that changes everything.

The Indian rupee fell 4.8% against the US dollar in 2025 alone.

This happened even as the dollar weakened against most other global currencies (Source: UBS Report via ANI, Feb 2026). India was one of the worst-performing Asian currencies that year.

Over the longer term, the picture is even more striking. The rupee has depreciated from ₹17 per dollar in 1991 to approximately ₹90 per dollar by early 2026.

That's 34 years of losing roughly 4.5% per year on average (Source: Kotak Mutual Fund/Bloomberg, Dec 2025).

RBI Governor Sanjay Malhotra himself stated in November 2025 that annual depreciation of around 3-3.5% is broadly consistent with long-term trends (Source: UBS via The Tribune, Feb 2026).

UBS projects the rupee will depreciate another 2% to reach ₹92 per dollar by end of 2026.

SBI Funds Management echoes a similar target (Source: SBI Funds via Big News Network, Jan 2026).

For NRIs earning in dollars or dirhams, this gap between headline rupee returns and real dollar returns is the invisible cost that compounds year after year.

The MSCI India Index delivered 9.5% returns in rupee terms over the past decade.

In dollar terms? Just 5.4% (Source: Outlook Money, Nov 2024). That 4.1% annual gap is real money disappearing from your wealth every single year.

This is the context behind the five reasons we're about to cover.

None of them are abstract theories. Every one is a response to a real problem NRIs face when their investments sit in one currency and their lives happen in another.

Myth vs Reality: What NRIs Believe About USD vs INR

Before the reasons, let's clear up the misconceptions we hear most often.

Now, the five reasons driving this shift.

Reason 1: The Compounding Cost of Rupee Depreciation

Most NRIs understand depreciation in theory. Few understand how it compounds.

Here's a simple exercise. Take ₹10 lakh sitting in an NRE FD earning 7% annually. After 10 years, it grows to approximately ₹19.7 lakh. Solid growth.

Now apply the RBI Governor's own estimate of 3-3.5% annual depreciation. At 3.25% average annual decline, the rupee moves from ₹90 to approximately ₹125 per dollar over 10 years.

Your ₹19.7 lakh converts to roughly USD 15,760. Your original investment of ₹10 lakh was worth approximately USD 11,100 at ₹90. Your actual dollar return over a decade: about 3.6% annualised. Not 7%.

Now take the same money, invest it as USD 11,100 in a GIFT City USD FD earning 5% tax-free.

After 10 years: approximately USD 18,100. Your actual dollar return: 5% annualised. No currency math needed.

The difference between the two outcomes: USD 2,340. On an investment of just USD 11,100.

Over 10 years.

Scale that to a larger portfolio. On USD 100,000, the gap becomes USD 21,000.

That's a family vacation every year, a car down payment, or a semester of college tuition.

The reason this catches NRIs off guard is that depreciation is invisible in your Indian bank statement.

Your NRE FD shows a growing balance in rupees. Everything looks fine. The erosion only becomes visible when you need the money in your earning currency.

👉 Tip: Every time you check your Indian investment returns, subtract the rupee's annual depreciation rate from the number you see. That adjusted figure is your actual return. Use Belong's Rupee vs Dollar Tracker to see exactly how much the rupee has moved since you last invested. The gap between what you see and what you have is the compounding cost of depreciation.

Reason 2: A Zero-Tax Corridor That Didn't Exist Five Years Ago

This is the reason that changes the math most dramatically. And it's relatively new.

Until 2020, NRIs who wanted to stay in USD had limited options. US bank savings accounts paying 1-2%. FCNR deposits at 3-4%.

Neither was exciting enough to justify leaving India's higher-return market.

GIFT City changed the equation.

India's International Financial Services Centre in Gujarat operates under IFSCA regulations that create what we call a "zero-tax corridor" for NRIs. Interest on USD fixed deposits in GIFT City is exempt from Indian income tax.

Capital gains on GIFT City mutual funds and listed securities are also tax-free. The tax holiday extends through March 2030 (Source: IFSCA/Union Budget 2025).

For UAE-based NRIs who pay zero personal income tax, this creates a remarkable situation. Zero tax in your country of residence.

Zero tax in India on GIFT City investments. Your returns compound without any leakage on either side.

Compare that with traditional INR investment options.

Sources: Income Tax Act, IFSCA, Belong NRI FD Rates Tool

The GIFT City USD FD delivers 5-6% with no tax and no currency erosion.

The NRE FD delivers 7% but gives you only 2-4% in dollars after depreciation.

The NRO FD, after its 30% TDS and depreciation, can leave you with less than 2.5% in real terms.

Through Belong, you can currently earn up to 6% on USD FDs with our bank partners in GIFT City. Compare that against what any UAE bank is offering on a USD deposit.

👉 Tip: Check the India-UAE DTAA provisions to ensure you're claiming every tax benefit available. Many NRIs also miss filing their Indian ITR, which means TDS refunds go unclaimed. Even if your GIFT City investments are tax-free, you may still benefit from filing for refunds on your other Indian income.

A Quick Detour: When INR Investments Actually Win

We're not here to tell you everything should be in dollars. That would be bad advice.

INR investments outperform USD investments in specific scenarios that are worth understanding.

When your goal is in India.

If you're buying a flat in Pune, funding your parents' healthcare, or building a retirement corpus for settling in India, rupee investments make complete sense.

Your expense is in rupees. Your investment should be too. Currency matching eliminates risk rather than creating it.

When Indian equity markets outperform dramatically.

In years where Indian equities return 20%+ (like 2021), the returns overwhelm depreciation.

A 25% equity return minus 4% depreciation still gives you 21% in dollars. No USD fixed deposit can match that.

But this requires accepting equity volatility, and not every year delivers 20%.

When the rupee temporarily strengthens.

Short periods of rupee strength have occurred, typically during strong foreign capital inflows.

If you happened to convert during one of these windows, your rupee investments would look great in dollar terms. But timing currency markets is notoriously difficult, and the long-term trend has been one-directional.

When you're certain about returning to India within 2-3 years.

If India is your definite destination, building rupee assets makes sense. Your RNOR status after return gives you 2-3 years to restructure overseas investments tax-efficiently.

For every other scenario, especially for NRIs whose timeline, country, or plans are uncertain, a meaningful USD allocation provides insurance that INR cannot.

Read our detailed comparison of investing in India vs investing abroad for a framework that helps you decide.

Reason 3: Your Money Isn't Trapped Anymore

We've lost count of how many NRIs have told us some version of this story: "I needed USD 50,000 urgently for a property deposit in Dubai.

My money was in NRO FDs and Indian mutual funds. It took me six weeks and three visits to the bank's NRI desk to get it out."

Repatriation from INR investments is burdened with paperwork, caps and delays.

NRO account repatriation is capped at USD 1 million per financial year across all NRO accounts. You need Forms 15CA and 15CB. A Chartered Accountant certificate is required.

Banks often ask for additional supporting documents. The typical timeline: 2-4 weeks. Source: RBI/FEMA regulations

NRE account repatriation is easier. No cap, no CA certificate. But the money converts from INR to USD at the prevailing rate.

If the rupee has weakened since you invested, you're locking in the loss at the moment you repatriate. You have no control over the conversion rate.

Indian mutual fund redemption takes T+1 to T+3 days for the money to hit your NRE/NRO account. Then the repatriation process begins.

If via NRO, the USD 1 million cap applies.

Now compare that with USD investments.

GIFT City USD FDs: Your money was deposited in USD. It matures in USD. You wire it to your UAE, UK, or US bank account.

No conversion, no cap, no Forms 15CA/15CB, no CA certificate. Timeline: 1-3 business days after maturity. (Source: IFSCA, Axis Bank GIFT City)

FCNR deposits: Similar to GIFT City. Principal and interest return in foreign currency. No conversion risk. Fully repatriable without caps.

GIFT City mutual funds: Redemption proceeds return in foreign currency.

No NRO cap applies. No separate repatriation approval needed.

For NRIs who might need their Indian investments for an overseas expense, this difference between "money trapped in a process" and "money available in days" is worth more than a percentage point of extra return.

Read the complete guide on repatriation rules after selling investments in India for a step-by-step walkthrough of every scenario.

👉 Tip: If you currently have more than USD 200,000 equivalent in NRO-linked investments and foresee needing that money abroad within 3 years, start planning your repatriation now. The USD 1 million annual cap means large NRO portfolios can take multiple financial years to fully move out. Shifting future investments into GIFT City products avoids this bottleneck entirely. Compare your options on Belong's NRI FD comparison tool.

Reason 4: One Portfolio That Works in Any Country

Here's a reason financial articles rarely discuss, but it matters enormously if your life isn't anchored to one country.

Your NRI status isn't permanent. Neither is your country of residence.

An NRI in Dubai today might move to London next year. Or Singapore. Or back to India. Each move triggers a cascade of changes to your investment structure.

Move from UAE to UK: Your NRE FD interest, which was tax-free from both sides, suddenly becomes taxable in the UK under the UK's worldwide income taxation rules (the non-dom regime ended in April 2025). The India-UAE DTAA doesn't help you anymore because you're no longer a UAE resident. You need the India-UK DTAA instead.

Move from UAE to US: Indian mutual funds suddenly become PFICs (Passive Foreign Investment Companies) under US tax law, triggering complex Form 8621 reporting and potentially punitive taxation on unrealised gains. Your simple SIP portfolio becomes a compliance nightmare.

Return to India: Your NRE account must be redesignated. Your FCNR deposits can continue till maturity but can't be renewed. Your residential status shifts to RNOR for 2-3 years, then to Resident, changing how every investment is taxed.

USD investments, especially through GIFT City, sidestep most of these complications.

GIFT City operates as an International Financial Services Centre. It sits outside India's domestic tax perimeter.

Whether you're tax resident in the UAE, UK, Singapore or India, your GIFT City investments continue under the same IFSCA framework. No redesignation. No conversion. No new compliance forms triggered by your move.

This portability is especially valuable for NRIs in their 30s and 40s whose career paths are still evolving.

Rather than restructuring your entire portfolio every time you cross a border, a USD-denominated core gives you stability regardless of geography.

Read our guide on financial planning for NRIs in the UAE to understand how country-specific planning fits into a broader strategy.

The Return-to-India Question

This deserves a dedicated section because it's the most common pushback we hear: "But I'm planning to come back to India eventually. So shouldn't everything be in rupees?"

Not necessarily. And here's why.

"Eventually" is not a date.

NRIs who say they'll return "in a few years" often stay abroad for a decade or more. During that undefined period, rupee depreciation continues eroding your wealth measured in your earning currency. A meaningful USD allocation protects you during the years before your return actually happens.

Your RNOR window is your friend.

When you do return, you get RNOR status for typically 2-3 years. During this period, your overseas income and foreign assets are not taxable in India. This gives you a generous window to restructure. You can keep GIFT City investments running, gradually shift to rupee assets as your life settles, and time your conversions rather than being forced into them.

Some expenses remain in USD even after return.

Children studying abroad. International travel. Imported goods. Medical treatment overseas. Even NRIs who have returned often need dollars for specific expenses. A USD investment corpus eliminates the need to convert rupees at whatever rate happens to prevail when the expense arises.

The smart approach: Build your INR investments for India-linked goals (property, family expenses, daily living costs after return).

Build your USD investments for the transition period, international expenses, and as insurance against plans changing. The asset allocation framework we recommend at Belong suggests NRIs planning to return within 5 years hold 40-50% in USD and 50-60% in INR.

Reason 5: India's Growth Story in Your Currency

This is the reason that ties everything together. And it's only become possible in the last few years.

NRIs have always faced a contradiction.

India's economy is growing at 7-8%. Indian equity markets have delivered 12-15% CAGR over long periods.

That growth story is real and compelling. But participating in it meant converting to rupees, accepting depreciation risk, and navigating complex repatriation when you wanted your money back.

GIFT City has resolved this contradiction.

Through GIFT City mutual funds, you invest USD into funds that deploy capital into Indian equities, debt and hybrid strategies.

Your investment is tracked in USD. When you redeem, you get USD. The fund manager handles internal currency management.

The Tata India Dynamic Equity Fund, launched through GIFT City, was the first retail inbound mutual fund for NRIs from this platform. More fund houses are entering GIFT City as IFSCA continues expanding the framework.

Through GIFT City AIFs, NRIs with larger portfolios can access private equity, venture capital, structured credit and real estate strategies focused on India, all denominated in USD.

Through GIFT City exchanges, NRIs can trade the GIFT Nifty (India's benchmark index futures in dollar terms), global ETFs, and international bonds.

The traditional path was: Convert USD to INR → Invest in Indian markets → Hope the rupee doesn't fall → Redeem → Convert back to USD → File Forms 15CA/15CB → Wait for repatriation clearance.

The GIFT City path is: Invest USD → Earn returns in USD → Redeem in USD → Transfer to your overseas bank account. Done.

You still get India's growth engine. You just get it denominated in the currency you earn, spend and think in.

For a detailed comparison, read our guide on GIFT City mutual funds vs regular Indian mutual funds.

👉 Tip: Not ready for market-linked products? Start with a GIFT City USD FD. It gives you the simplicity of a fixed deposit, the safety of a major Indian bank, and the advantage of USD denomination with tax-free returns. Rates currently range from 4% to 6% depending on the bank and tenure. Check live rates on Belong's NRI FD comparison tool. Once comfortable, you can explore GIFT City mutual funds for market-linked returns in dollars.

A Decision Framework: How Much Should Be in USD?

Rather than a blanket recommendation, here's a framework based on your life situation.

Staying abroad indefinitely: 60-70% in USD investments, 30-40% in INR for India-linked obligations (parents, property, family support). Your earning currency is USD/AED. Your investment base should reflect that.

Returning to India within 5 years: 40-50% in USD, 50-60% in INR. The USD portion protects your purchasing power during the transition and funds any international expenses post-return.

Undecided: 50-50 split. Maximum flexibility. Rebalance once your plans crystallise. This is the default for most NRIs we work with at Belong, and it covers most scenarios adequately.

Already returned to India (RNOR status): Keep existing GIFT City investments running. Use the RNOR window to decide how much to bring into rupees. No rush. The tax-free treatment on GIFT City investments continues regardless of your residential status change.

For more on structuring your portfolio across currencies, read our guide on building wealth as an NRI.

What About NRIs in the UK and US?

The five reasons apply universally, but two country-specific nuances are worth noting.

UK-based NRIs: Since the abolition of the non-dom regime in April 2025, UK tax residents pay tax on worldwide income. This makes GIFT City's zero-tax treatment even more valuable because it reduces your total taxable income.

However, you should confirm with a UK tax advisor whether GIFT City income qualifies for any UK DTAA relief. Read our guide on GIFT City for UK NRIs.

US-based NRIs: PFIC rules make investing in Indian mutual funds (including some GIFT City funds) complex and potentially tax-inefficient.

However, GIFT City FDs, which are not pooled investment vehicles, are not classified as PFICs. They remain a clean, simple option for US NRIs who want USD exposure to India without PFIC headaches. Always consult a cross-border tax specialist before investing. Read our guide on avoiding double taxation.

The Shift Is Underway

The data is clear. The rupee has depreciated an average of 3-5% annually against the dollar for over three decades.

RBI doesn't target specific exchange rates. UBS, SBI Funds and every major forecaster expect continued gradual depreciation.

NRIs who hold 100% of their investments in rupees are making a concentrated currency bet, whether they realise it or not. Every year that passes without diversification compounds the gap between headline returns and real purchasing power.

The five reasons driving NRIs toward USD investments aren't theoretical.

They're practical responses to a math problem that becomes more obvious with every passing year: depreciation cost, tax inefficiency, repatriation friction, geographic inflexibility and the inability to access India's growth without currency risk.

GIFT City has given NRIs the tools to solve all five problems. Tax-free USD deposits. Dollar-denominated mutual funds.

Simplified repatriation. Global portability. India's growth engine in your currency.

Thousands of NRIs in our WhatsApp community have already started making this transition. They compare rates, share experiences with different banks, and help each other build balanced INR-USD portfolios.

If you're still at the "should I or shouldn't I" stage, that's the best place to get honest, peer-reviewed guidance.

When you're ready to take the next step, the Belong app makes it simple. Compare GIFT City FD rates across banks. Explore GIFT City mutual funds and AIFs. Track the GIFT Nifty for market signals. Complete your KYC from the UAE and start investing in minutes.

The question isn't whether to invest in USD. The question is how much of your portfolio should already be there.

Disclaimer: This article is for informational purposes only and does not constitute financial, tax or legal advice. Investment decisions should be made after consulting qualified financial advisors. Currency movements, interest rates and tax regulations are subject to change. Past performance does not guarantee future results. All data cited is from published sources as of early 2026.