Many individuals aspire to go to onsite (out of India) to earn money quickly in few years and create good wealth in short to medium term. With the increasing globalization, people are no more confined to their national boundaries. They have to move out of their country to work too frequently. If their residential status becomes NRI, they are often worried about their areas of investment because as the residential status changes, many norms and rules also change for them. Which are the best Investment Plans in India for NRI’s? Based on the risk appetite, which investment option an NRI can choose to get highest returns? In this article, I would provide some tips around this. However choosing an investment option by NRI should be done based on risk appetite and tenure of the investment.
Who are NRI's which I am referring here?
As per tax laws, an individual is considered to be a resident of India for a financial year if he satisfies any one of the following conditions:
1) If he spends at least six months (to be exact 182 days) in India during the financial year.
2) If he is in India for 2 months (60days) in the previous year but has spent one whole year in the last four years.
3) If an individual fails to satisfy one of these above mentioned conditions, he is considered as an NRI.
4) If we put aside tax laws, in simple terms if any individual goes out of India for medium to long term is termed as NRI.
Why there is a need for separate plan for NRI's?
Over the past few years, there are signs of keen interest from NRIs to invest their money with India. The falling value of Indian currency is one big reason to it as they can have more returns from Indian investments. Moreover, the government is also providing many privileges to the NRIs to encourage NRI investment as it brings foreign currency in the Indian market and boosts the economic growth of the country.
From the viewpoint of NRIs, they want to invest in their home country for different reasons-
They want to build a fund for their retirement and have financial security.
They want to flow the money back to their relatives dwelling in their home country.
They want to build financial assets n their home country.
Top 6 Best Investment Plans in India for NRIs
Now let us jump into the main topic. Here are the details of few investment plans for NRIs based on risk appetite and tenure of the investment.
1) Invest in Stocks
One of the main reason NRI’s go outside India is to create good wealth in short to long term. Hence they should focus more on how their savings can be invested in best option which can fetch highest returns. One of the high return investment option is investment in direct stocks. The Indian stock markets have performed marvelous these years as compared to other peer countries. It is expected to continue in the near future also. The stock market has provided with 15-17% of returns on an average and could be higher for some high-growth stocks. The investments can be made for long term as well as short term in the markets. As an NRI investor, you may be privileged with additional services too. So, if you wish to have higher returns, you can try equity investments. However, there is high degree of risk associated with the price fluctuations. You should pick-up stocks which are performing well in the recent quarters.
NRI’s who has high risk appetite and want to invest in high return investment option can choose investing in good Stocks.
2) Invest in Equity mutual funds
While stocks could high risk, another investment option which can fetch good returns for NRI’s are mutual funds. It is another great investment option which even provides you with SIPs. One even need not put his head in research and portfolio management as the asset manager will take all the necessary decisions. Few funds have fetched as high as 50% of returns last year and over 20% average in the last five years. However one can expect 15% to 18% returns from mutual funds in long run. NRI’s can focus more large cap funds, diversified funds, midcap/smallcap funds and less on balanced funds or debt funds. If you have not yet started invesing in mutual funds, you should read this article on how NRI's can invest in mutual funds in India.
NRI’s who has high to medium risk appetite and want to invest in high return investment option for long term, can choose investing in top performing mutual funds.
3) Invest in Global Mutual Funds
NRI’s outside the country. They would be reviewing the developments in the country where they are working. They can invest in global mutual funds in India that invest in the country where they are working to get maximum benefit. E.g.. NRI might be working in US. They might be thinking that there is good growth in US companies. They can look for Franklin India FF US Opps Fund or ICICI Pru US Bluechip Equity Fund or Motilal Oswal Shares NASDAQ 100 ETF.
NRI’s who has high risk appetite and want to invest in high return investment option based on their gut feel that such funds would perform well and willing to invest for long term can choose investing in good global mutual funds.
4) Invest in Real Estate
Investment in real estate in long term would give good returns. Realty investments have always magneted investors in developing countries as real estate sector has vast potential. There are two kinds of real estate investments- direct investment in property or investing through REIT (Real Estate Investment Trust). Investment through the channel of REIT is more comfortable as the NRI need not go through the cumbersome paperwork and registration process. Moreover, the funds are more liquid also. However, the decision depends upon the goal of investment as direct investing can even double your funds in a span of few years. Even these days one can invest in fraction of property investment.
NRI’s who has medium risk appetite and want to grow their money multiple times in long term can invest in real estate.
5) Invest in National Pension Scheme (NPS)
It is a great investment option for NRIs who hold the Indian citizenship and is between the age of 18 to 60 years who are thinking to plan for their retirement with low risk appetite. Under NPS, there are 2 types of pension account:
Tier I – it comes with certain restrictions on withdrawal, however income tax benefit available for Rs 50,000 u/s 80CCD (over and above Rs 1.5 Lakhs of 80C.
Tier II – There is no restriction and one can withdraw any time form pension account.
Deposits in NPS yields fair amount of returns and it is great option for people who are looking to build a fund for post retirement period. One need to check the best and worst NPS funds of 2017 before they invest.
NRI’s who are low risk appetite and willing to invest for long term till retirement can invest in NPS.
The reason PPF is not indicated here is that NRI cannot open PPF account. However if they have PPF account already, they can continue to invest. You can refer this article on How NRI's can open NPS account in India.
6) NRE and NRO Account
A NRI is eligible to open NRE (non-resident external) account and NRO (non-resident ordinary) account. These accounts can be used as saving account, current account or even a term deposit account. While NRE account is used to keep money that comes from abroad as transfers, the NRO account is used for crediting local income that is earned in India like dividend income, rent or interest income. The best part is that the interests earned on these accounts are tax-free in India. However, they may be taxed in the resident country. Currently, the interest is ranging between 4% to 9%. There is another type of account known as Foreign Currency Non Resident (FCNR) account. It is used to avoid exchange rate fluctuations. Some of the banks that are offering highest NRE FD rates are Deutsche Bank–7.5%, Lakshmi Vilas Bank – 7% etc.,
NRI’s who are at low risk appetite and want to invest in low return investment options can choose investing in such Fixed Deposits.
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Top 6 Best Investment Plans in India for NRIs
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