India has seen massive industrial development over the past two decades. As a result, the country is attracting foreign direct investment (FDI). This has prompted the non-resident Indians (NRIs) to consider India as a viable destination to invest in and earn profits.
The Indian Government is making the country more conducive for business each day. With various options to invest in, NRIs are finding it difficult to sort out the best options for them. Considering the returns, the following investment options are the best for NRIs in 2022:
Fixed Deposits (FDs) are not only popular among the resident Indians, but also among the non-resident Indians (NRIs). Bank FDs are considered the safest investment option as there are hardly any instances of banks defaulting on them. NRIs can start FD through their FCNR, NRO, or NRE accounts. The rate of interest depends on the bank, amount, and the tenure of the deposit.
Fixed deposits in the NRE account:
You may consider opening an NRE account in Indian Rupees. The interest you earn is tax-free, but you may be taxed in your country of residence. The interest rate ranges from 5%-7% depending on the tenure of the deposit.
Fixed deposits in the NRO account:
You may use the NRO account to control your Indian income. For instance, you may receive rental income or dividends from shares and mutual funds that can be paid into the NRO account. You can remit a maximum amount of $1 million from your NRO account after producing the relevant documents.
Fixed deposits in FCNR account:
You can open the FCNR (Foreign-Currency Non-Resident Account) in any foreign currency. It may have a tenure of one to five years. The interest you earn is tax-exempt. Moreover, foreign exchange fluctuations have no impact on the deposits in the FCNR account.
An NRI between the age of 18 years to 60 years can open an NPS account with a POP (Point of Presence) in India. You may also open an eNPS account if you have a PAN card or an Aadhaar Card. You may consider using your NRO or NRE bank account to invest in the National Pension System.
You may opt for the active choice where you decide on the asset allocation in Equity (E), Corporate Bonds (C) and Government Securities (G). However, you can allocate a maximum of only 75% towards equities. You may also opt for the auto choice where asset allocation is done according to life stages (age) if you cannot decide on the right investment proportions.
If you withdraw from NPS before 60 years you can withdraw only 20% of the accumulated corpus. You must compulsorily annuitise the remaining 80% of the corpus. If you are 60 years of age or older at the time of withdrawal, you can withdraw 60% of the corpus and the remaining 40% must compulsorily be used to buy an annuity plan
You may open an NPS account with the bank where you have your NRO or NRE account for convenience. Moreover, the pension from the National Pension System will be paid in Indian Rupees.
You can consider investing in equity if you are an aggressive investor, and are ready to take some risk in the stock market. NRIs can invest in the Indian stock market directly under the Portfolio Investment Scheme (PINS) of RBI. NRIs are mandated to have an NRE/NRO bank account, a Demat account, and a trading account to invest in the Indian stock market.
Real estate in India is booming. The real estate prices in major Indian cities such as Delhi, Mumbai, Bengaluru, and Pune have skyrocketed over the past decade. Many NRIs are purchasing houses in India to let out on rent. There are a plethora of options to choose from such as developed plots, villas and apartments among others.
You need to analyse your requirements and risk profile before deciding to invest in Indian real estate. Investing in real estate in India is a good option as the country is expected to see massive development over the next decade. However, NRIs cannot invest in agricultural land and plantations in India.
You may invest in mutual funds if it matches your investment objectives and risk profile. Mutual funds are capable of offering much higher tax-efficient returns than bank FDs. There are various mutual fund houses offering a plethora of mutual fund schemes. However, some AMCs have restrictions on NRI investments from the USA and Canada.
NRIs can invest in mutual funds only through their NRO or NRE accounts. You need to invest in Indian Rupees (INR) and not in foreign currency. The rate of return you get from mutual funds depends on the type of fund (debt, equity, and hybrid) and your investment horizon. You may invest in ELSS a tax-saving mutual fund that qualifies for the Section 80C tax benefit if you have income in India.
Invest in mutual funds through the Systematic Investment Plan or SIP. It is a method of investing a fixed amount of money regularly in a mutual fund scheme. Mutual funds are a great investment as they can offer inflation-beating return over the long run.
You can continue with your PPF account which you opened when you were a resident Indian. However, you cannot extend the PPF account after the maturity period of 15 years. An NRI cannot open a PPF account in India.
PMS is an advanced investment vehicle that provides medium to long term growth by picking and investing in undervalued stocks from a larger list of well researched stocks. The major benefit of this scheme is that investors can rely on the expert knowledge of fund managers.
These plans come with the benefit of an insurance cover along with the returns of long term wealth creation. It is considered a very good option for investors with a moderate to high risk taking ability. The investments that you make in a ULIP are split into two parts: