Things NRIs Should Consider Before Investing In India (Part 2)

Strategic Risks NRIs Overlook While Investing in India

Part 1 covered residency, account routing, TDS, and compliance.

That determines entry.

But once capital scales, risks shift — operational, tax-driven, jurisdictional.

These are not beginner errors.
They are structural blind spots.

1. Real Estate Is Illiquid When It Matters Most

Buying is simple. Exiting is layered.

A sale may trigger:

• 12.5%–30% TDS on sale value (12.5% for long-term gains post July 2024, 30% for short-term)

• Capital gains filing

• USD 1 million annual repatriation cap

• 15CA / 15CB per transfer

Large exits often stretch across financial years.

Liquidity stress usually appears when funds are urgently needed.

What To Do

• Apply for a lower TDS certificate before sale.

• Plan repatriation timelines in advance.

• If capital may be needed soon, prefer financial assets over property.

2. Mutual Fund Access Depends on Where You Live

Access varies by jurisdiction.

Some AMCs restrict US and Canada-based NRIs.
For US residents, Indian mutual funds may be treated as PFICs — often leading to punitive taxation without early elections.

The same fund can behave differently depending on residency.

What To Do

• Confirm fund eligibility for your country first.

• If US-based, evaluate PFIC impact before investing.

• File Mark-to-Market elections in year one if required.

3. A Nominee Is a Trustee — Not the Legal Heir

A nominee receives assets but does not become the owner.

Succession determines ownership — and cross-border cases can take 12–24 months or more.

Delays usually arise when access is needed most.

What To Do

• Use “Anyone or Survivor” holding where suitable.

• Align nomination with your Will.

• Revisit structures if heirs live abroad.

4. DTAA Relief Must Be Claimed Properly

Treaty relief is not automatic.

Without a valid TRC and Form 10F, TDS may default to higher rates and foreign tax credit may be denied.

The bigger risk is misalignment between Indian and foreign filings.

What To Do

• Obtain TRC before income is credited.

• File Form 10F proactively.

• Reconcile income reporting across jurisdictions annually.

5. Residency Can Change — Structures May Not

Many NRIs return, relocate, or change tax status.

When that happens:

• NRE savings accounts require redesignation

• Treaty benefits shift

• Tax efficiency may change

Structures built for one jurisdiction may not remain optimal.

What To Do

• Model relocation scenarios in advance.

• Identify accounts requiring redesignation.

• Simplify structures if mobility is likely.

The Pattern

These risks are not about asset selection.

They are about structural design.

And they remain invisible — until they become expensive.

Strategic investing means designing for complexity before deploying capital.