As India solidifies its position as one of the fastest-growing economies globally, the Non-Resident Indian (NRI) community is increasingly aligning its investments with India’s economic growth. NRIs are diversifying their portfolios across various sectors, including real estate, equities, and alternative assets. This renewed interest is driven by India’s robust economic resilience, regulatory reforms, and the emotional ties many NRIs have with their homeland.

Tanvi Kachan, Head of NRI Business & Strategy at Anand Rathi Shares and Stock Brokers, noted that NRIs view India as a compelling long-term investment destination due to its demographic dividend and significant improvements in regulatory frameworks. The introduction of investor-friendly policies, such as the Real Estate (Regulation and Development) Act (RERA), has made investing in India more transparent and accessible.

In addition to India, NRIs commonly invest in countries like the United States, UAE, Singapore, UK, and Australia. Each of these countries offers various advantages, such as stable political environments, tax benefits, and appealing investment options. Notably, Dubai is popular among NRIs for its zero personal income tax, while Singapore is appreciated for its strong regulatory framework.

There is considerable debate about taxation, particularly regarding mutual fund gains. NRIs residing in Dubai, Singapore, and Mauritius benefit from zero taxation on these gains due to their respective tax regimes and the Double Taxation Avoidance Agreements (DTAAs) with India. Under these structures, capital gains from mutual funds are generally taxable for residents in India but can become tax-free for NRIs in these jurisdictions.

For instance, an NRI living in the UAE who invests ₹1 crore in Indian mutual funds and sees it grow to ₹2 crore would have capital gains of ₹1 crore, for which they would not pay any tax. This is possible because the India-UAE DTAA allows taxation rights to reside in the country of the investor, which in this case is the UAE, where no capital gains tax applies.

The Indian real estate market has also become increasingly attractive to NRIs, with investments projected to reach $14.9 billion in 2024 and $16.3 billion in 2025, growing at an annual rate of 9.2%. Most investments focus on major cities like Mumbai, Bangalore, and Delhi-NCR, with commercial properties yielding better returns compared to residential properties. Fractional ownership platforms are gaining traction, with NRI contributions amounting to $2.5 billion in 2024.

However, NRIs must avoid common investment mistakes when engaging with Indian markets. Many overlook crucial regulatory requirements, leading to compliance issues, while others face challenges with real estate investments, such as reliance on family members for property management and neglecting maintenance costs. Additionally, financial planning missteps and over-concentration in physical assets can hinder investment returns.

To enhance their investment outcomes, NRIs are encouraged to diversify their portfolios and consider emerging sectors like fintech, artificial intelligence, and biotechnology, which are gaining traction thanks to government incentives. As the landscape evolves, it is vital for NRIs to stay informed and adapt their strategies for effective cross-border wealth management.