NRI Investment Plan can be understood as the layout of income and expenses systematically scattered around various investments with an end objective such as wealth creation. In simpler words, it refers to sorting out your needs and requirements in the longer run focusing on the vision of a preferred lifestyle once you retire. Understanding what an NRI Investment Plan is is simple. What becomes tough is devising a well structured strategy and carrying out the execution part of the plan. In this article, let’s formulate a hypothetical NRI Investment Plan and understand the intricacies of the same.
NRI Investment Plan: A Basic Scenario
A basic scenario would consist of an NRI who is moving abroad from India in order to pursue a professional career. There are certain requirements that’d crop up around this transition from a categorical perspective. These categories would involve his/her:
Now, let’s take a look at these categories and how it would affect the individual moving abroad from India in brief:
- Banking: Banking is one of the most initial aspects that would undergo substantial changes. An NRI can’t hold a Resident Indian Savings Account. He needs to convert them to a Non Resident Ordinary (NRO) Account which is used for maintaining income generated in India. For income generated abroad, Non Resident External (NRE) Accounts need to be opened. NRE and NRO Accounts are maintained in INR. NRIs also have the choice to opt for a Foreign Currency Non-Resident (FCNR) Bank Account which is used to maintain foreign generated income in foreign currency (USD, GBP, EUR, etc.)
- Investments: Now, Investments are complex. An NRI might have some investments in India before he became an NRI and there are certain investment options [such as Public Provident Fund (PPF) or Sukanya Samriddhi Yojana] for which NRIs aren’t eligible. Handling the investments that were done as a Resident and carrying out new investment ventures as an NRI requires balance and a clear understanding of various elements which in turn give birth to the vital importance of having a well structured NRI Investment Plan. We will understand more about this planning throughout the article ahead.
- Taxation: Taxation is an underlying factor. It affects your bank accounts, investments and every other aspect that you can think of. For an NRI, the taxation is done on the format of TDS (Tax Deducted at Source). Many times, this TDS is deducted at a higher rate than the tax liable for which you need to claim the refund via filing the Income Tax Returns or opt for a lower TDS certificate. There are some asset classes (like short term capital gains on equity mutual funds) which have a fixed special TDS rate for NRIs where you can’t even claim a refund. Therefore, it becomes necessary that you educate yourself around these changes and if necessary, connect with an expert. (Use the button at the end of this article to connect with our expert directly on WhatsApp.)
- Real Estate: Real Estate is a very broad term. It involves buying, selling, renting or inheriting a property in India and the associated tax implications, legal paperwork (Power of Attorney, Gift Deeds etc.) and the works. An NRI needs to be extra aware of the rules and guidelines around Real Estate for NRIs in India. One of the most classic examples would be understanding the TDS on sale of property. Generally the buyer would deduct the TDS on the sale consideration whereas the tax liability is on the capital gains. Here, you need to obtain a lower TDS certificate or you end up in the long and tedious process of claiming refunds and as high the refund value goes, so will the complexities of the process.
- Miscellaneous: What we discussed above is just a small fragment of the changes you will encounter during the transition from a Resident Indian to an NRI. There are various other facets that are instilled in those categories and there are various other categories from the ones mentioned above. Need for services might crop up around Home Healthcare, Insurance, Retirement Planning, Child Education, Double Taxation and whatnot. Being an NRI isn’t easy. It’s easier when you plan things out.
On that note, we can come back to the NRI Investment Plan that we have been discussing so far. An investment plan would consist of evaluating a plethora of investment options in India for NRI and then selecting the ones you require as per your needs in the future. These needs basically run around our individual future plans. A person who wants to settle abroad will have a different investment plan than a person who wants to settle in India and enjoy his retirement at home. Ultimately, the retirement planning, corpus creation, investment in various asset classes, enter and exit time, capital gains, etc. will all be focused around certain objectives. Setting these objectives is the first step towards an NRI Investment Plan.
NRI Investment Plan: The Core
Our Investment Expert, Mrs. Shruti Agrawal (CFA, Co-Founder CAGR Funds) iterated in a webinar on NRI Investment that there are 3 pillars of Financial Planning:
- Emergency Funds
Now, NRI Investment Plan will be a subset of the entire financial planning. If understood briefly, you need to create an Emergency Fund for unforeseen situations (Watch Video to learn more), get individual health insurance (watch video to learn more) and sort your investments as per your end goal.
There are certain factors that influence your investment decisions. Your Financial Profile and Risk Appetite are some of them. Get your profile reviewed by our investment expert so that she can understand your needs and risk appetite and then devise the perfect investment plan for you. You can click on the button at the end of this article to get in touch with our investment expert directly on WhatsApp.
Let’s take a look at some of the investment opportunities in India and the related queries that NRIs ask all the time:
NRI Investment Opportunities in India
NRI Investors look for investment opportunities that would suit their needs. Investment by NRI in these asset classes depends on many factors such as liquidity requirements, holding period, objective of investment, return expectation, etc. Let’s take a look at at some of the investment classes and try to understand the NRI vision:
NRI Fixed Deposit
A lot of NRI Investors prefer NRI Fixed Deposits as an investment option in India as it offers no risks. Also, there are benefits associated with it. Both NRE and FCNR deposits are tax-free in India and are completely and freely repatriable. These deposits offer up to a 7%* rate of return on the funds. You can check out the latest interest rates on NRE FD and NRI savings bank accounts as well as the latest FCNR Deposit rates to select the best bank as per your needs. Our Banking expert can help you with the end to end process regarding account opening and booking a FD. Connect with our banking expert using the button at the end of the article.
There has been a surge in the number of NRIs looking to invest in Government of India Bonds and Securities. Considering the flexibility and low risk provided by these investment classes, NRIs look at them as a favorable option. You can check out the overview of NRI Investment in Bonds and NRI Investment in GOI Securities for a clearer understanding.
Can NRI invest in Indian Stock Market?
Another doubt that many NRIs investing in India have revolves around the Indian Stock Market. YES! NRIs can invest in the Indian Stock Market. Investment in Equities is risky but rewarding too and many NRIs want to explore the ambience of this asset class. They keep on searching for the requirements that include opening a PIS Bank Account, a demat and a trading account. There are certain rules and guidelines laid out by SEBI (Securities Exchange Board of India) that need to be followed in order for NRIs to invest in the secondary market in India.
What are the best Mutual Funds for NRIs?
Mutual Fund Investment for NRIs involves another layer of understanding. There are only a few AMCs that allow NRI Investment in Mutual Funds (specifically for NRIs in the US). Later on the KYC requirements and the In-Person Verification processes need to be done seamlessly in order to be investment ready. The returns are higher when compared to the traditional fixed deposit. The risk appetite of the NRI makes all the difference and his decision regarding what to choose: FD, Mutual Funds or Stocks is highly influenced by the same.
NRI Investment Options: An Overview
There are a lot of investment options for NRIs in India for each of which you might need to connect with an expert and understand the details. These investment options determine the type of investor you are. To give a list, if you want, here are the Top 10 investment options for NRIs in 2021:
- Fixed Deposits
- Mutual Funds
- Direct Equities
- Real Estate
- Unit Linked Investment Plans (ULIPs)
- Exchange Traded Funds (ETFs)
- National Pension Scheme (NPS)
- Portfolio Management Scheme (PMS)
- Bonds and Non-Convertible Debentures (NCDs)
NRI Investment Plan: The Conclusion
Strategizing an Investment Plan as an NRI requires clarity and vision. Throughout the article, we formulated a hypothetical NRI Investment Plan where we initially discussed the changes that would happen post transition. Then we took a look at how the objectives set for future affect the choices every NRI makes. Setting these objectives was the most important step as the entire plan will be made around this vision. Next we understood that the whole Investment Planning is part of a larger operative (Financial Planning and Independence) that can happen as a series of choices taken in the right direction. Finally, we concluded that there are a lot of investment opportunities in India that NRIs can choose from and operationalize their plans.
Ultimately, it’s an individual thing rather than a community drive and NRI Investment Plan includes a lot of personal influences. Every individual will have a different plan but the fundamentals will be the same. Need based planning requires special assistance from experts. Connect with our experts directly on WhatsApp using the button below. Also, visit our blog and Youtube Channel for more details.
No. An NRI can’t continue to hold his/her Resident Savings Account. They need to open an NRI Bank Account or convert their existing resident account to an NRI account.
An NRI can stay indefinitely in India. However, after 182 days they become a Resident Indian. Therefore, An NRI can stay up to 181 days in India as an NRI.
Yes. An NRI can repatriate money from India.
Yes, an NRI can invest in GOI Securities.
Yes. National Pension Scheme (NPS) is one of the top 10 investment options for NRIs in India.