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Best Investment options for NRI

Non Resident Indian’s are meant as NRI’s and they have all relationship with India and they would have left India either on office duty or business purpose. If anyone who leaves India for more than 180 days, they are called as NRI. When the sensex has grown just with Foreign Institutional Investors or FII’s money, can the NRI not participate in Indian stock market or in any form of investments, definitely Yes.


Before complaining about higher tax regime in India, look at the tax slab of these countries which had movement compared to last year,

Income Tax rates-Your-Money-matters.png 


More than tax slabs, it is the kind of investment you choose which provides you with great investment returns. India has formed Tax treaty with most of the countries and there may be a universal treaty which is being promoted by bigger countries to avoid taxes.


Generally based on Tax treaty, NRI can be categorised as below,


1) NRI’s residing in US & Canada residents & 


2) NRI’s residing in the rest of the world


Generally investments are made to build the required corpus and to generate more returns to have a successful life with all amenities. If you are planning to invest in India, being a resident some were look at the investment opportunities which exists in the country and see if you are able to understand the investment methods which exists there.

I believe it is not easy to understand quickly about the investment and return opportunities as you may be stuck with work and there may be regulatory hindrance which may delay the options further.


NRO & NRE Account;

 First and foremost thing becoming an NRI is opening a account with any one of the account. It is better to open the account after knowing the Pros and cons of both the accounts. If you have regular income in India which may be required to be deposited into your account, then you should have NRO account. Another point to consider is Repatriation of your fund. Repatriation means withdrawing your money and taking to foreign country. If you had decided to settle down in India, then it is better to go with NRO account itself as you can have regular income based out of India also.


NRO Account;


1) NRO accounts are not tax exempted, Income tax, wealth tax & gift taxes do apply in India.


2) Any pension, dividends, rent etc can be deposited in NRO account in India


3) You can transfer to another NRO, but not to NRE account.


4) Repatriation of your fund is allowed only upto a limit of 1 million USD per financial year & also CA need to complete the formalities.


5) NRO account can be opened jointly with resident Indian


6) Day to day forex gain\losses does not affect the Balance


7) Reduced tax benefit is available under Double Taxation Avoidance Agreement (DTAA)


NRE Account;


1) NRE accounts are tax exempted


2) You cannot deposit any money originating in India, you can deposit only from foreign countries.


3) You can transfer to both NRO and NRE account 


4) Repatriation of your amount is allowed without any limitations and in any currency is allowed 


5) 2 NRI can jointly open joint NRE account, but cannot open joint account with Resident local.


6) Day to day forex gain\losses does affect the Balance


KYC formalities;


If you are resident Indian and going to be become NRI, you need to inform the Banking or concerned authorities regarding change in KYC. Once this is completed you will considered as NRI in all the investments and banking authorities.


If you are returning back to India, then again you need to inform Bank or other investment authorities to do the KYC once again. Now you will be changed from Non Resident Indian to Resident Indian. This is being done to comply with International Tax treaties which India has done with other countries.


Investment Option for NRI’s;


General Investment options which exist across the world are,


1) Direct Equities or Share Market


2) Local Investment Opportunities


3) Mutual Funds


4) Real Estate


Direct Equities or Share Market;


If direct equities are available in y our location, see if it is viable to do transaction in this market. If you are clear about the companies listed and the performance of these companies in the past and the past returns by this index should be considered before making nay investments.


Local Investment Opportunities;


local investment opportunities can be plenty depending on the regulations in each of the countries. For example in Dubai, you can invest in Islamic Bonds, IPO’s are fewer and transaction charges are high.


In US and Hong Kong, you can look at new age investment options. There are Index funds which had generated good returns and new private equity investments in startups etc. All these requires extensive studies and risk associated with it if you are planning to return to India in sometime.


Mutual Funds;


Mutual funds exists in most of the countries and you can also choose to invest in mutual fund which exists in other countries as well. Index funds is a passive mutual fund which has generated better returns than active mutual funds in the past in US.


Possibly in other countries you can look at the regulators or seek help in investing locally from the Financial Advisors who exists there. Most of the European countries, UK, Australia and United states of America have regulations for Financial Advisors, so you can seek help easily. You also need to take into consideration the cost associated while taking such help.


Real Estate;


Real estate has always favoured the investment options for people. It takes pride to show off what you own and real estate is the ultimate way for it. Hong Kong, some of the cities in US, UK and some of the European countries are hot properties for real estate and the prices have soared to sky. In the last few years, additional amenities have decided the price along with the place in centre of the city which is most happening in the country.


Some of the countries offer better tax incentives but you need to analyse the cost implications and other benefits before finalising. Auckland in New Zealand is one of the hottest market as slew of offers provided by the government for real estate sector. There is no income tax, capital gains tax, but the investment needs to be there for a minimum of 2 years. Even Mumbai has become hot market when it comes to real estate as well, as the spaces are cramped and some of the old structures are having for new high rise buildings. 


Investment Options for NRI’s in India;


Irrespective of your decision to return the foreign country or not, you can choose to invest in India for better returns. Generally all the sectors will improve if there is scope for opportunity across sectors. In India, the scope of development is very large, if it is tourism you have so many naturally breath taking places, if it is culture, there is no other tradition or culture in the world that is as old as of India, Economy is still around 2 trillion dollars and it took almost 7 years to reach 2 trillion dollar economy from 1 trillion dollar economy.


Remember that China is around 11 trillion dollar economy and US is a 18 trillion dollar economy. India is vast and scope for automobile, Banking, consumer durables, manufacturing etc to grow at double digit for the next 2 decades is really huge. Investment options for NRI in India is very wide and also with Better investment returns compared to rest of the world.


Some of the best investment options for NRI in India are,


1) Real Estate


2) Share Market


3) Mutual Fund


4) Money Market


Real Estate;


Generally in India the most lucrative sector is Real estate and the people who knows about the growth in this sector have made a fortune for themselves. Further for NRI’s it is easy to own a home by earning abroad quickly. It is easy to purchase large land in an upcoming area in India easily. Further the growth of other sectors have paved way for real estate also to boom easily. In most of the metro cities like Chennai, Bangalore, New Delhi, Mumbai, Hyderabad & Kolkatta the prices have soared very highly in the last 2 decades. 


As real estate along with Gold is the most favoured form of investment, it is obvious that most of the investments are routed here.


Share Market;


Few years ago it is FII who had decided the course of the share market as bull market will start with their buying momentum and bear market starts with them selling in huge numbers. In the last few years, DII’s or Domestic Institutional investors have taken part in direct equities via SIP equity mutual funds.


You can approach to invest in India either through direct banks or brokers who provide such service. There are many regulations which needs to be followed. Again you can invest only if you know the risk associated with it or know were your funds are invested. In most of the cases you will not know the number of shares you had invested as some one else from bank or broker will invest for you. If you are clear about 


Mutual funds;


An easy way to invest your money for anybody will be to take this route of mutual funds. Suppose you are earning more than few lakhs every month, you can look at investing major portion of it in equity markets through mutual funds. Most of the funds have generated more than 15% in the long run. If you have Visa period of more then 2 or 3 years it is easy to make bigger corpus when you are returning to india.


Even if you had become citizen of foreign nation or in the process of becoming foreign national, you can look at investing in India by Repatriation basis. By this way you can use the money you had earned at any point of time. Being an NRI, investment in mutual funds can yield you better returns. Look at the returns of equity mutual funds in India since inception,


Money Market;


If you are travelling for 6 months alone and want to make money in the short duration, you can use the ultra short term bond or short term bond which can provide you with good returns. These are same as fixed deposit with best tax benefits.


You have mutual fund for short, mid or long term and here are some of the best funds,


Factors to be considered before investing by NRI’s,

Before making any inevstments, you can look at these factors as Your Money Matters,

1) How long is your investment tenure


2) Corpus you are looking to build in “X” years


3) Your age at the time of investment as there may be other dependencies


4) Risk profile as returns may vary with risk


5) Tax implications of that investment avenue once the term is over


6) If you need that amount after reaching India or want to repatriate partially at any point in time.


7) These are additional corpus which can be invested judiciously for better returns than investing in safer tax free fixed deposits alone.


Common Investment Mistake;


People buy a flat and try to find a onsite job to earn more. Now the earnings are spent on closing the home loan. Remember you need to save till your last date. This last date may be beyond retirement age of 60.


Another option is people close the first home loan and by this time trying to find second home thinking it as asset. It cannot be considered as asset until you get at least rental yield out of it. Expenses you need to make for the second home makes it less attractive. 


Else many use to buy plots in their respective city outskirts hoping it would fetch them good returns.


Reason for mentioning all these as mistake is that average real estate returns are around 10-11% in the long run only. There may be boost during high economic activity and then the rates will be flat. 


Once you approach Bank for any investments, you will be mentioned about ULIP policies which are explained as same as mutual funds. Returns of these funds are projected as high as 18% and these funds were launched during 2012-13 only. Actually ULIP is an Insurance product and you cant expect humongous returns, as per IRDA regulations returns has to be projected as 4% or 8% only. Further major difference is that there are charges in the initial 3-5 years which is around 7-8% depending not he life insurer. In mutual funds charges are capped to 2.5% in case of equities and in case of other categories it is even less.


Why Financial Advisors can help ?


Financial Advisors are like doctors of your financial life who looks beyond the current earnings period and also into the future earnings and your aspirations. There may be huge rise in your income which may not be sustainable in the future, this is the most important factor when it comes to investing or financial planning. only a Financial advisor who works closely with you can understand and help in monitoring your current situation based on available income.


Generally people get into the notion that the earnings they had received may be easy to sustain for their lifetime or for next decade, but it depends on the lifestyle you had got used and kind of service you receive for everything. Financial advisors helps you in looking after each of these details and you can share any plans if it has anything to do with corpus needs from your financial plan.


You can get a proper financial advisors in a flat fee or AUM based or having both together. At the end of the day you should get better service and help in creating wealth as expected and agreed.


Case Study 1;


Rahul is an NRI and living in “X” and he wants to invest properly. He has been living there for the past 2 years and he had spent mostly to take trips in and around that place. After much thought he had decided to invest some amount so that on his return he can start his own business.


This needs continuous monitoring and he may reach India in the next 2 or 3 years. As the investment term is very volatile, along with financial advisor he can look at short term bonds or liquid funds and then transform it into SIP by STP. Else he can also invest directly in SIP for the next few years.


Case Study 2;


Sam had just returned from US after a long stint and he had already closed a home loan which he had got in mumbai, He is thinking of purchasing another home near pune and take ULIP policy to secure his future.


Idea may look good on papers, but the charges on ULIP policies along with lock in period makes it attractive. If you believe in the returns shown by the Bank people, then you need to invest all your amount into “Small & mid cap” category to earn that return. Returns shown by them is not deducted with charges which will be deducted every month before investment. If you are also in this situation think twice or consult a financial advisor.


Case study 3;


Ravishankar has bought a home on loan and he was fortunate enough to get onsite opportunity. He had been there for the past 4 years and he had extended his visa for another few years. till this period he has always closed his home loan partially and then investing in fixed deposits. As his income had grew over the period he had thought of looking at other opportunities but due to continuous work shift he is not able to understand the process of investing in a right way.


It is easy to approach a financial advisor and let him know the status of his assets and liabilities and the goal priorities once he returns to India. Then he can analyse whether to go with the plan as per financial advisor.


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Tags: Financial Planning, NRI, Investment

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