Following is the recommended list of foreign Investments suited for US Citizens/Residents to save on taxes and add protection against a general downward drift in the value of the US dollar without affecting the RBI guidelines on Repatriation of Funds to and from India/US:
1) Mutual funds - For mutual fund investing, due to issues we have discussed in other articles, we recommend purchasing a fund that operates in the USA and invests in India.
Here is an article about tax aspects of direct Mutual Fund Investments in India when owned by US Taxpayers.
2) Direct Equity – One can consider the following options:
a) Purchasing Indian Stocks in the USA – These are known as ADRs or American Depositary Receipts and represent share ownership of non US companies that trade on US Stock Exchanges. They are issued through US depositary banks. Four major commercial banks provide these services - JPMorgan, Citibank, Deutsche Bank and the Bank of New York Mellon.
Indian Stocks currently trading on the NYSE, as of June 17, 2010.
HDFC Bank (HDB)
ICICI Bank (IBN)
Infosys Technologies (INFY)
Mahanagar Telephone Nigam (MTE)
Rediff.com (REDF)
Dr. Reddy’s Laboratories (RDY)
Patni Computer Systems PTI)
Satyam Computer Services (Mahindra Satyam) (SAY)
Sify Limited (SIFY)
Sterlite Industries India (SLT)
Tata Communications (TCL)
Tata Motors (TTM)
Wipro Limited (WIT)
WNS (WNS)
b) Company Shares/Debentures - NRIs are permitted to make direct investments in proprietary/partnership concerns in India as also in shares/debentures of Indian companies. They are also permitted to make portfolio investments i.e. purchase of shares/debentures of Indian companies through stock exchange/s in India. These facilities are granted both on repatriation and non-repatriation basis.
c) Multinational Firms - One can invest in multi-national firms or firms that get most of their income by selling outside the US. These companies will benefit from the lower value of the dollar, and this gets reflected in their earnings, and hence on their share price.
3) Government Securities/Mutual Funds/ National Savings Certificates in India
investing-in-india for NRIs NRIs are freely permitted to invest their funds in Government securities, Indian mutual funds and certain other investments such as the National Savings Certificate (NSC). Investments in NSC can be made by NRIs subject to certain terms and conditions. However, NRIs are not permitted to invest in bearer securities like Kisan Vikas Patra, Public Provident Fund (PPF) etc.
If such investments are purchased out of funds remitted from abroad or out of NRE/FCNR accounts, the maturity proceeds can be repatriated. However, the maturity proceeds of investments purchased out of funds in NRO accounts can only be credited to NRO accounts and cannot be repatriated abroad.
4) Immovable Property
Reserve Bank of India has granted general permission to foreign citizens of Indian origin, whether resident in India or abroad, to purchase immovable property in India for their bona fide residential purpose. They are, therefore, not required to obtain any prior permission of Reserve Bank. Further, the Reserve Bank has granted general permission for sale of such property without its permission.
5) CD or similar account
At privately-held holding companies in the amount of $10,000 or more denominated in a foreign currency such as Euro/Canadian Dollar/Australian Dollar or in a basket of other foreign currencies.
6) Mutual funds that invest in bonds of European countries
German, Swiss, Sweden and so forth - these bonds are denominated in foreign currencies, and the interest on these investments accrues in the foreign currency as well, and gives the investor general protection against a downward swing in the dollar.
This information prepared with the expertise of Advantage One Tax Consulting, Inc., www.aotax.com, clientservices@aotax.com.
1) Mutual funds - For mutual fund investing, due to issues we have discussed in other articles, we recommend purchasing a fund that operates in the USA and invests in India.
Here is an article about tax aspects of direct Mutual Fund Investments in India when owned by US Taxpayers.
2) Direct Equity – One can consider the following options:
a) Purchasing Indian Stocks in the USA – These are known as ADRs or American Depositary Receipts and represent share ownership of non US companies that trade on US Stock Exchanges. They are issued through US depositary banks. Four major commercial banks provide these services - JPMorgan, Citibank, Deutsche Bank and the Bank of New York Mellon.
Indian Stocks currently trading on the NYSE, as of June 17, 2010.
HDFC Bank (HDB)
ICICI Bank (IBN)
Infosys Technologies (INFY)
Mahanagar Telephone Nigam (MTE)
Rediff.com (REDF)
Dr. Reddy’s Laboratories (RDY)
Patni Computer Systems PTI)
Satyam Computer Services (Mahindra Satyam) (SAY)
Sify Limited (SIFY)
Sterlite Industries India (SLT)
Tata Communications (TCL)
Tata Motors (TTM)
Wipro Limited (WIT)
WNS (WNS)
b) Company Shares/Debentures - NRIs are permitted to make direct investments in proprietary/partnership concerns in India as also in shares/debentures of Indian companies. They are also permitted to make portfolio investments i.e. purchase of shares/debentures of Indian companies through stock exchange/s in India. These facilities are granted both on repatriation and non-repatriation basis.
c) Multinational Firms - One can invest in multi-national firms or firms that get most of their income by selling outside the US. These companies will benefit from the lower value of the dollar, and this gets reflected in their earnings, and hence on their share price.
3) Government Securities/Mutual Funds/ National Savings Certificates in India
investing-in-india for NRIs NRIs are freely permitted to invest their funds in Government securities, Indian mutual funds and certain other investments such as the National Savings Certificate (NSC). Investments in NSC can be made by NRIs subject to certain terms and conditions. However, NRIs are not permitted to invest in bearer securities like Kisan Vikas Patra, Public Provident Fund (PPF) etc.
If such investments are purchased out of funds remitted from abroad or out of NRE/FCNR accounts, the maturity proceeds can be repatriated. However, the maturity proceeds of investments purchased out of funds in NRO accounts can only be credited to NRO accounts and cannot be repatriated abroad.
4) Immovable Property
Reserve Bank of India has granted general permission to foreign citizens of Indian origin, whether resident in India or abroad, to purchase immovable property in India for their bona fide residential purpose. They are, therefore, not required to obtain any prior permission of Reserve Bank. Further, the Reserve Bank has granted general permission for sale of such property without its permission.
5) CD or similar account
At privately-held holding companies in the amount of $10,000 or more denominated in a foreign currency such as Euro/Canadian Dollar/Australian Dollar or in a basket of other foreign currencies.
6) Mutual funds that invest in bonds of European countries
German, Swiss, Sweden and so forth - these bonds are denominated in foreign currencies, and the interest on these investments accrues in the foreign currency as well, and gives the investor general protection against a downward swing in the dollar.
This information prepared with the expertise of Advantage One Tax Consulting, Inc., www.aotax.com, clientservices@aotax.com.
