The Indian economy has seen tremendous growth in the industrial sector in the past few years. The country has been attracting large amounts of foreign direct investments, or FDIs as they are popularly known, in the last two decades. Not only this, but there has also been a huge jump in the investments coming in from the Non-Resident Indians (NRI) to the Indian markets. All of this is possible because of the conducive environment and sufficient stability and flexibility that the government provides the investors for their businesses to grow and prosper. Besides, India has been the most preferred market by foreign investors owing to its well equipped highly profitable financial market.
Looking at the year 2017, one can say that India’s stock market saw a return higher than any other country with a yield of 29%. However, financial markets are subject to fluctuations and this was seen in the following year i.e. 2018 when the investments witnessed significant bleeding. Therefore, it becomes imperative for investors to carry out thorough research before they make an investment decision. They should consider their risk-taking ability, liquidity requirement, and longterm financial goals while choosing an option for investment.
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Investment Options for NRI:
Here are a few of the best investment options for an NRI:
- Fixed Deposit: FDs or Fixed Deposits are one of the most preferred alternatives not only by a resident Indian but also by an NRI because of its alluring features. An NRI can opt for a fixed deposit with his NRO, NRE, or FCNR account. All of these are the types of bank accounts an NRI can open in the country. Though a fixed deposit is a low-risk investment, the rate of return depends on the tenure of the deposit. Generally, these fetch an annual return of 6 to 7% on the deposited amount. Besides, senior citizens are privileged to get the extra interest of around 1% on their deposits.
- Equity: If an NRI is aggressive in terms of his investments, he can consider investing in equity. He can directly invest under the Portfolio Investment Scheme (PINS) by the Reserve Bank of India. An NRI needs to have a bank account in the form of NRE or NRO, a trading account, and a Demat account to be able to invest in the stock market. However, NRI cannot invest more than 10% of the paid-up capital of an Indian company. Also, an NRI is not allowed to indulge in intraday trading and short selling in India. Thus, they should own stocks before selling them.
- Mutual Fund: Another option for an NRI to invest in India is of mutual funds. Mutual fund institutions pool the money of their investors and invest the amount in various financial assets. Mutual funds are moderately risky as they are less risky than direct stock trading but riskier than FDs. An NRI may find mutual funds to be highly profitable as there are a plethora of plans accessible for Mutual Funds to choose from based on the investors’ risk appetite and financial goals. However, there are certain FATCA regulations imposed on an NRI seeking to invest in these funds. Most importantly, they must have an NRE or NRO account and they should invest in Indian rupees and not in any other currency.
- Public Provident Fund: Another low-risk bearing fund is a PPF. This is an investment option that is backed by the Government of India. Even an NRI can invest in Public Provident Funds with a maximum amount of INR 1.5 lakh per financial year. One can open a PPF account at any nationalized bank or the post office. PPF comes with a lock-in period of 15 years but is much tax efficient as compared to fixed deposits.
- National Pension Scheme: If you are an NRI who is looking for several tax-efficient investment options, NPS is another instrument that can be considered. This option is a highly cost-effective, tax-efficient, and easily accessible way of investment. National Pension Scheme is a pension system that is sponsored by the Indian Government. If an NRI invests in this option his entire capital during maturity is treated to be tax-free. Along with this, the investor does not have to pay any tax for the pension that he or she withdraws from this scheme. An NRI in the age group of 18 to 60 years can open an NPS account and start investing in NPS.
- Real Estate: NRIs often invest in property in India and reside abroad. India’s ever-growing population is paving way for the expansion of the real estate sector. Thus, NRIs buy property in India and earn handsome income from it by letting out the property to a third party. However, one thing to note is all the transactions must be carried out in Indian currency. Also, an NRI cannot buy agricultural lands, plantations, and farmhouses in India. Nevertheless, he or she can take any sort of property as inheritance or as a gift.
In conclusion, the investment option that an NRI chooses solely depends on his or her financial aspirations, budget, expected returns, and risk-bearing capacity. Thus, one should ensure to carry out end-to-end research before investing in any option.
Also published on Medium.