If you are from Indian origin, have become a Non-Resident Indian [NRI] over a period of time, and have a consistent source of cash flow in the country, you can invest your money into different investment products in India. Many NRIs park their funds into investments in India because of the tax benefits and the simplified regulations by the government. The government strives to encourage such investments to boost the financial growth of the country.
Because of the declining value of Indian rupee, you will be able to earn higher returns from the investments made in the country. Even if you are an Indian engaged in an employment abroad, you can send money to your family in India and it will fetch more on conversion. This is mainly because of the depreciating Indian currency, which is the main attraction for NRIs to park their funds in India.
Top investment options for NRIs in India
Here are some of the most preferred and suitable investment options for NRIs in India.
Fixed deposits
One of the best investment options for NRIs is a fixed deposit in the bank, which can generate a regular income in the form of interest. NRIs can open a fixed deposit account with those Indian banks, which are eligible to deal in foreign exchange. This means as an NRI, you can opt for a term deposit under a Non-Resident External Account [NRE], Non-Resident Ordinary account [NRO], and Foreign Currency Non- Resident [FCNR] account. Banks generally offer attractive interest rates on the fixed deposits held by NRIs.
Equity
As an NRI, you can invest in the stock market directly through the Reserve Bank of India’s Portfolio Investment Scheme [PINS]. In order to make an investment in the stock market, you will have to seek permission under PINS. The total investment must not go above 10% of the paid-up capital owned by the company you are investing in.
It is essential to open a dematerialized account as well as a brokerage account with a firm, which is registered with SEBI. It is mandatory for you to process a transaction through a stockbroker. It is important to note that you cannot trade in all the stocks of Indian companies. There is a list of stocks, which are eligible for NRIs and they are not allowed to carry out intraday trading or short selling in the country.
Mutual funds
In order to invest in mutual funds, an NRI will have to have one of the three bank accounts—FCNR, NRO, or NRE. The investment will only be made in Indian currency and the amount will be directly debited from their bank account. During redemption, the maturity amount will be paid in Indian currency through a check or will be directly credited to the account of the investor. In case of mutual funds, the tax liabilities will remain the same for NRIs and that of a ‘Resident’. However, the only point of difference is that in case of NRIs the tax will be deducted at source.
Certificate of Deposits [CDs]
NRIs can invest in CDs but only on a repatriable basis. They carry a higher rate of interest and the tenure ranges between seven days to one year, which makes it ideal for NRIs having short-term financial goals. CDs have an impressive return on investment in comparison to bank deposits.
Unit Linked Insurance Plans [ULIPs]
As an NRI, you can invest in ULIPs and enjoy the benefit of an insurance through an investment product. With a ULIP, you can grow your wealth and have a life insurance cover at the same time. You can also claim a tax deduction up to an amount of INR 1.5 Lakh according to Section 80C of the Income Tax Act, 1961.
Government securities
Indian Government issues bonds from time to time and if you invest into these bonds, you will be considered as a lender for the company. You will have an equity stake in the company. You will receive a fixed return on the bonds and if the purchase is processed through an NRE or FCNR account, the proceeds will be repatriable to the country where you reside.
National Pension Scheme [NPS]
Only NRIs who are citizens of the country can contribute to NPS. If you are not holding Indian citizenship, your account will be closed. NRIs between the ages of 18 to 65 are eligible to contribute through the form of fund transfer from their bank accounts. If you consistently deposit in NPS, you can have high returns and build a strong post-retirement corpus. However, you will only be allowed to withdraw 60% at the time of maturity and the rest will have to be converted into annuity. You can avail of a tax deduction of INR 1.5 lakh under Section 80C and an additional deduction of INR 50,000 under Section 80 CCD [1B].
If you are an NRI wondering where to invest money, you can make the most of your funds by investing in these top investment products in the country. You can get a tax benefit from the investment and can grow your wealth over a period of time. Another popular investment option is real estate. Many NRIs purchase property in India and make the most of the rising real estate prices. It is a valuable possession and gives a sense of security. However, it is advisable to take professional help before you choose any investment product because some investment options have legal documentation and procedures that need to be followed.