India continues to attract significant interest from Non-Resident Indians (NRIs), not just because of its long-term growth potential but also due to the tax efficiencies available under certain Double Taxation Avoidance Agreements (DTAAs).
One such provision, which has sparked considerable discussion on social media, allows eligible NRIs residing in countries such as Dubai (UAE), Singapore and Mauritius to pay no capital gains tax in India on mutual fund investments, subject to the provisions of the applicable tax treaty.
In this edition of ETMarkets Smart Talk, Sreepriya NS, Co-founder and Director, Entrust Family Office, explains the legal framework behind this tax treatment, why mutual fund units are treated differently from company shares under DTAAs, and discusses how NRIs are approaching India as a long-term investment destination.
She also shares insights on portfolio diversification, the growing appeal of REITs and fractional real estate, common investment mistakes to avoid, and why goal-based planning is becoming increasingly important for global Indian investors. Edited Excerpts –
Q) How are NRIs looking at India as a long-term investment destination? And what are the other hot countries which they invest in?
A) NRIs continue to view India as a compelling long-term investment destination, driven by its strong domestic consumption, demographic dividend, and a rapidly formalising economy.
Many are drawn not just by the potential for financial returns, but by the emotional and strategic value of investing in their country of origin — whether that’s through real estate, startups, listed equities, or legacy planning.
Simultaneously, NRIs are increasingly diversifying their portfolios across geographies. Countries like Singapore, the UAE, the US, and the UK remain attractive due to their stable financial ecosystems, regulatory ease, and access to global investment opportunities.
In particular, Singapore and Dubai are emerging as investment hubs due to their tax efficiency, business-friendly environments, and proximity to India. Additionally, many NRIs with family or business linkages abroad invest in local real estate and private funds, aligning these investments with their global lifestyle.
There is also a growing trend of tactical investments in emerging markets such as Vietnam, Indonesia, select African nations, and parts of Eastern Europe, offering high-growth potential.
This trend reflects a balanced strategy: India continues to represent ‘roots and returns’, while global markets provide ‘reach and resilience’.
Key Statistics (as of Dec 2024):
• Mutual Fund Investments by NRIs: Approx. USD 18–20 billion (~INR 1.6 lakh crore)
• NRI Bank Deposits: Approx. USD 162 billion (~INR 13.7 lakh crore) across FCNR, NRE, and NRO accounts
Q) There is big debate on social media about taxation. Help us understand why NRIs In Dubai, Singapore & Mauritius have to pay zero tax on mutual fund gains?
A) In case of Mutual funds, (which as per SEBI regulation, are established as a trust) the gains from sale of a unit cannot be treated the same as gains from sale of share of a company.
Hence, under the Article 13 (5) of the DTAA with the above countries, the gains are taxable only in the country of residence of NRIs of such countries, and not in India.
Q) How much money is moving in real estate/REIT/fractional investment? Is the right way?
A) While specific data on NRI investments into REITs and fractional ownership models in India remains limited, the broader trend in real estate investment is significant.
NRIs invested approximately USD 3.1 billion (INR 26,000 crore) in Indian real estate during the first half of 2024, following a total investment of around USD 13 billion in 2023.
The growing interest in REITs and fractional ownership platforms reflects a shift toward more structured, accessible, and diversified real estate investment opportunities.
These models offer NRIs the advantage of transparency, liquidity, and lower ticket sizes — making real estate participation more feasible without the operational complexities of direct ownership.
While not a one-size-fits-all approach, REITs and fractional investments are increasingly seen as efficient, regulated, and scalable avenues for NRIs to participate in India’s real estate growth story.
Many NRIs continue to hold significant real estate assets in India, despite having settled abroad for decades. At Entrust, we’ve supported families like one from Hyderabad, now in the U.S. for over 35 years, with managing their residential and commercial properties.
The real challenge often lies with the next generation, who face the burden of inheritance, tenant management, and compliance from afar. As a bespoke family office, we help simplify this complexity—offering peace of mind and practical solutions so they can focus on their lives overseas.
Q) What are the big mistakes which NRIs should avoid when making investment in India?
A) One of the biggest mistakes NRIs often make when investing in India is approaching it with the same mindset or assumptions they use in their resident countries. India is a dynamic, high-growth market — but it also comes with its own set of regulatory, taxation, and liquidity nuances.
The foremost important thing to consider while investing in India is to have clarity about the purpose of such investments. This determines further requirements - such as cash flows, inheritance/estate planning, repatriation etc. from such investments.
It also simplifies the asset allocation decision and the selection of products/vehicles. In the absence of such clarity, one gets caught in the ‘latest’ trend of investment products, or the preferred options of the dealer/distributor.
A few common pitfalls to avoid:
1. Lack of Clarity on Objectives
2. Overexposure to Real Estate
3. Ignoring Tax Implications
4. Using Informal Channels(Investing through family or friends without a proper legal or advisory framework can result in misaligned decisions and, in some cases, loss of control or transparency)
5. One-Size-Fits-All Approach: Assuming what works for resident Indians will work for NRIs can be misleading. NRIs have access to different investment opportunities and risks, and need tailored strategies that factor in currency exposure, repatriation rules, and global asset allocation.
The key is to approach India with professional guidance, clear intent, and a balanced view — combining emotional connection with financial discipline.
