India’s $1 Trillion FDI Milestone: Essential Banking & Investment Changes for New NRIs

India has reached a significant milestone in its economic growth, with total gross foreign direct investment (FDI) inflows surpassing $1 trillion since April 2000. This achievement was driven by a nearly 26% increase in FDI, reaching $42.1 billion in the first half of FY 2025.

As per news reports, the Reserve Bank of India (RBI) plans to double the investment cap for individual foreign investors in listed companies to 10% to enhance capital inflows. Additionally, the central bank will increase the total holding limit for all overseas individual investors in an Indian listed company from the current 10% to 24%.

If you have recently attained Non-Resident Indian (NRI) status, it is crucial to update your banking and investment accounts to comply with Indian regulations. The change in residential status impacts the way you manage your finances, including bank accounts, fixed deposits, mutual funds, stocks, and other investments. Here’s what you need to know.

1. Update Your Bank Accounts

As an NRI, you can no longer operate a regular savings account in India. You must inform your bank about your new residential status and convert your existing savings account into one of the following:

• Non-Resident External (NRE) Account: Allows you to deposit foreign income in Indian rupees. It is tax-free and fully repatriable.
• Non-Resident Ordinary (NRO) Account: Used to manage income earned in India, such as rent, dividends, or pension. Interest earned is taxable in India.
• Foreign Currency Non-Resident (FCNR) Account: A fixed deposit account in foreign currency that protects against exchange rate fluctuations.

2. Update Your Fixed Deposits

If you have fixed deposits linked to your resident savings account, you must either close them or transfer them to an NRO or FCNR deposit, depending on whether the funds are sourced in India or abroad. Interest on NRE and FCNR deposits is tax-free in India, whereas interest on NRO deposits is subject to TDS.

3. Changes in Mutual Fund Investments

Most Indian asset management companies (AMCs) allow NRIs to invest in mutual funds, but you must update your KYC details, including your NRI status, overseas address, and tax residency.

• Repatriable Investments: Invested through an NRE account, allowing you to repatriate the funds freely.
• Non-Repatriable Investments: Invested through an NRO account, limiting the repatriation amount.
• If you are a US or Canada-based NRI, some AMCs may restrict investments due to compliance regulations under Foreign Account Tax Compliance Act (FATCA).
  

4. Stock Market Investments

As an NRI, you can continue investing in the Indian stock market but must do so through a Portfolio Investment Scheme (PIS) account regulated by the RBI.

• You must open a PIS-linked NRE or NRO account with a designated bank to trade in Indian equities.
• You can continue holding existing shares but must update your depository and broker with your new NRI status.

5. Real Estate Holdings

If you own property in India, there are no restrictions on holding or selling it as an NRI. Rental income from property must be credited to an NRO account and is subject to Indian taxation.

6. Taxation Changes

As an NRI, your income earned in India (such as rent, dividends, or capital gains) is taxable in India, while foreign earnings are not taxed. You must check the Double Taxation Avoidance Agreements (DTAA) between India and your country of residence to avoid paying taxes twice.

Conclusion

Becoming an NRI requires financial restructuring. Updating your banking, investments, and taxation ensures compliance and smooth financial management while living abroad.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.