NRIs would loosely stand for non-resident Indians. In other words, those individuals who have left the country say for some reason. By definition, an NRI would be an Indian citizen who:
- has resided in India for less than 182 days over the previous financial year; or
- has left India for employment; or
- has left India for business/ vocation outside India; or
- has left India with the intention of staying outside India
While there are many advantages of working abroad, one such advantage is the purchasing power parity that most NRIs would like to exploit by making investments back at home. Currently, India is a very lucrative market that has managed to attract substantial foreign investment in foreign direct investments (FDIs) and NRIs. Under the given circumstances, the NRIs can choose from a flock of investment options like equity, real estate, government securities, PPF, and many more.
The real estate market of India has been on a boom for a while now. This lays a captivating opportunity for all NRIs to invest in the restates. While the value of properties in major metro cities like Delhi, Mumbai, Bengaluru, and Pune has plunged high, it\’s also provided investors with an ocean of varieties.
On the other hand, NRIs can invest in agricultural lands only if it is passed on as inheritance or gift. NRIs need to bear in mind the mode of payment used by them while making the purchase and sale of their properties.
To invest in the Indian stock market, NRI would need a Demat account, a trading account, a Portfolio Investment Scheme account (PIS account), and an NRE/NRO account. While the Indian stock market has exponentially grown in the recent past, investors have cautioned that an equity market can be violated.
Unlike high-risk equity, mutual funds can be better planned by creating a portfolio that has a balanced risk palate through the introduction of debt-oriented mutual funds along with equity-oriented mutual funds. Such a portfolio aims to secure you some regular income in the form of debt interest along with dividends and capital growth from your equity portion.
Mutual funds are a better option for NRIs, as it\’s the most professionally managed investment, and you need an NRE, NRO, or FCNR account in India. You are advised to make only such investments that fit your risk-return expectations.
Fixed deposits (FDs) being one of the most popular investment options in general, it is also NRIs\’ most favourite one. It offers a no-low risk with average returns, wherein the interest rate depends upon the bank, the amount invested, and the tenure of FD. Any NRI can invest in FDs through NRE, NRO, or FCNR account in India.
PPF, ULIP & ELSS
While an NRI cannot open a new PPF account, he can most definitely continue any existing PPF account up to its maturity of 15 years. ULIPs, on the other, have a lock-in period of 5 years. It is a hybrid investment option where a portion of your investment is invested into life cover and the balance into various other financial instruments.
Investing in ELSS tax-saving MF would earn you good returns and provide you with tax benefits. All these options, PPF, ULIP, and ELSS, are eligible investments to claim deduction under section 80C of the Income-tax Act, 1961.
National Pension Scheme (NPS)
Retirement planning is an essential aspect of future planning. NPS is a government-backed scheme that allows the investors to claim a deduction under sections 80C and 80CCD(1B) to the extent of INR 2 lakhs.
Anyone between 18 – 60 years can make an NPS contribution and plan their future. NRIs can contribute to this scheme through any of their accounts and open an E-NPS account with a valid PAN or Aadhaar card.
G-Secs or Government Securities are a low-risk option offered by the government. Usual options of a G-Sec investment would be treasury bills, bonds, certificate of deposits, amongst many more. These options may have a fixed or a floating interest rate with the tenure ranging from 7 days to 1 year. Since these options are tradeable options, their market values might fluctuate based on the market factors. But as it\’s a government scheme, you are guaranteed to receive at least the principal amount upon maturity.
Like the well-known English proverb goes, \”Don\’t put all your eggs in one basket\”. We advise you to create an appropriate portfolio to satisfy your needs. Consider what you want for your future and evaluate your risk appetite and accordingly make your investments.