This article compares 10-year CAGR returns across asset classes, explains the impact of taxation, and provides a capital allocation framework for NRIs.

📚 Table of Contents

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• Does India Give Higher Returns Than the US Market?
• 10-Year Return Comparison: India vs. US
• Key Factors for NRIs Choosing Between India and the US
  • Tax Implications: PFIC and DTAA Considerations
  • Residency Status and Its Role in Investment Strategy
• Which are the points to be kept in mind if an NRI has to choose between India and the US for investing?
• Capital Allocation Strategy: US vs. India
  • Funds for US Expenses Should Stay in the US
  • Long-Term Wealth Creation is Better in India
  • How much exemption can NRIs in the US get when they gift money to their parents in India in 2025?

Does India Give Higher Returns Than the US Market?

The short answer is “Yes, in many cases”. The slightly longer answer requires an understanding of USD/INR exchange rate movements, cross-border taxation and investor residency status.

What is the Best Investment Destination for NRIs?

For NRIs, choosing between India and the US depends on multiple factors. Historically, Indian equities have outperformed US stocks in CAGR terms. Taxation plays a crucial role, with PFIC rules affecting Indian mutual funds held by NRIs in the US. Additionally, rupee depreciation impacts overall returns. The optimal strategy is to allocate capital based on where it will be spent - keeping short-term expenses in USD while directing long-term investments to India to take advantage of higher-growth opportunities.

We will first deal with averages across four asset classes (equity, debt, gold and real estate) and also look at the effect of rupee depreciation vs. the US Dollar and the impact of taxes, specifically PFIC taxation.

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10-Year Return Comparison: India vs. US

10Y CAGR	India	US
Equities	12.39%	11.07%
Debt	7.83%	-0.35%
Gold	10.17%	8.15%
Real Estate	3.62%	6.90%

Rupee depreciation over this period is around 3.07% a year on an average.

These are point-to-point average returns from 2015-2024 for:

• India: Equity - MSCI India, Debt - Gilts, Gold - INR gold price, Real estate - NHB Residex
• USA: Equity - S&P 500, Debt - iShares 7-10 Year Treasury Bond Index, Gold - USD gold price, Real estate - Case-Shiller U.S. National Home Price Index

We need to keep in mind that these are average returns. There will always be pockets (e.g. in Real Estate) where returns will be dramatically higher (or lower). But if you aggregate the returns from say 10,000 investors, they will converge to the numbers above. Also, unless you invest in REITs, which do not exist in India in the same way they do in the US, your real estate returns will be based on the actual house or land holdings you have.

For NRIs looking at investing in real estate in India, here is a comprehensive guide:

Key Factors for NRIs Choosing Between India and the US

The answer, unfortunately, starts with tax.

Tax Implications: PFIC and DTAA Considerations

The US has a very simple taxation concept: you will always be taxed on everything you have and every cent/paisa of returns that you make:

• If you are an NRI with mutual funds or ETFs in India, you need to pay income tax on their notional gains under PFIC laws
• If you sell stocks, mutual funds, gold or real estate in India, you need to pay tax in the US
• If you have tax-free NRE FDs in India, you need to pay tax on that interest in the US
• If you have a Green Card or hold US Citizenship, then you are taxed on worldwide income whether or not you are in the US or India
• If you are coming back to India permanently, every withdrawal you make from your 401k, IRA, 529 plan etc. will have both tax and penalties on early withdrawal

The only silver lining in this gloomy story is India’s DTAA with the US.

Residency Status and Its Role in Investment Strategy

Indian taxation laws are definitely better in this respect:

• Capital gains tax is at lower rates than income tax rates for those in the higher tax brackets
• There is no tax on investors in mutual funds when stocks are sold inside the funds or when fund value increases. This benefit allows tax deferral until their sale, unlike the PFIC rules in the US
• Resident but Not Ordinarily Resident (RNOR) taxation rules cover the period when you have just returned to India and do not pay tax on your US assets and capital gains
• TDS deductions are there on every type of income except for NRE FDs. This TDS can be offset against income tax while tax return filing so it is just a cash-flow timing issue

Which are the points to be kept in mind if an NRI has to choose between India and the US for investing?

The chart below shows that there is no reasonable pattern between these asset classes over the years:

However, if you are willing to withstand some amount of volatility, e.g. 2018, then there was a good amount of money that was made in Indian mutual funds as per historical data:

Category	2024	2023	2022	2021	2020	2019	2018	2017	2016	2015
Equity: Large Cap	16.56%	25.52%	3.34%	27.59%	14.59%	12.28%	-0.28%	32.42%	5.05%	1.16%
Equity: Mid Cap	30.5%	39.11%	4.17%	46.94%	25.61%	4.85%	-10.0%	42.89%	5.35%	9.21%
Equity: Small Cap	28.39%	43.48%	2.92%	64.66%	33.39%	0.79%	-15.95%	49.99%	6.85%	11.83%

To understand which mutual funds can be suitable for wealth creation:

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Capital Allocation Strategy: US vs. India

Given the complexities of taxation and capital withdrawal in the US, it will be prudent to allocate capital as per these thumb rules:

Funds for US Expenses Should Stay in the US

If you have plans to send your children to colleges in the US (or Canada/UK, Europe/Australia etc.), this amount should be invested in the US, maybe in 529 plans for US college admission.

Similarly, mortgage payments for primary residence and real estate investments in the US will come from current income in the US.

If you have an iota of doubt that you will not settle permanently in the US, then India is the next best option for the rest of your capital.

Related:
Wall Street or Dalal Street: which is the best option for US NRIs to invest in Indian stocks based on PFIC rule?

Long-Term Wealth Creation is Better in India

The case for equity investments in India using mutual funds is extremely straight-forward in India as shown below for SIP investments:

Category	Any 5Y	Any 10Y
Equity: Large Cap	15.5%	14.16%
Equity: Mid Cap	20.9%	16.82%
Equity: Small Cap	28.27%	21.86%

The Indian real estate market is also seeing a boom in the major Tier-7 or Tier-10 cities with rupee depreciation making payments for under-construction properties becoming cheaper with time. Here is a case for NRIs looking to invest in real estate in India:

If you are funding current expenses for parents in India, you can get both an inflation-indexed income stream and capital appreciation by investing in dividend-paying stocks in India as we show in the video below:

You can transfer capital to parents and family members in India to invest for them.

How much exemption can NRIs in the US get when they gift money to their parents in India in 2025?

USD 19,000 per person is the annual Gift Tax Exemption amount for 2025 as notified by the IRS.

This amount is offset against the lifetime Gift and Estate Tax Exemption limit. This limit is currently at $13.99 million in 2025 (up from $13.61 million in 2024). If you exceed the annual exemption amount, then you need to fill Form 709 while filing your tax returns.

Read more here: How much money can NRIs in the US gift to their parents in India without paying tax?