India is one of the fastest growing economies in the world and is projected to become one of the largest economies in the near future. Currently, India ranks within the top 10 largest economies in the world, and is bound to take a place in the top 5 in 2023.
Does it, then, make sense for NTI investment in India, how NRI can invest in Indian share market and what are the best investment in India for NRI options?
What Are The Benefits Of NRI Investment In India?
- Currency differences - It is well known how much more valuable the US dollar, British Pound sterling, and the Euro are to the Indian Rupee. Even disregarding higher interest rates in India, for an NRI with a stable income, investing in assets in India can yield a higher return in general.
- Supporting the Indian economy and your family - NRIs investing in India can help bring wealth from abroad into development projects that only help the Indian economy. Furthermore, sending money back can help fortify your family’s finances as well.
- Prepare for your own retirement and financial security - Many NRIs choose to return post-retirement and settle down in India due to high costs of living abroad. Having a solid financial background can prepare you for retirement early on.
What can NRIs invest in India?
- Can NRIs invest in mutual funds? - NRIs can invest in mutual funds as long as they keep with regulatory requirements. The AMC needs to be informed of your residential status and you need to complete a KYC status check before investing.
- Can NRIs invest in PPFs? – Public provident fund (PPF) is a government-supported scheme that offers sound returns for investments made by citizens. NRIs can keep their existing PPFs that they made as residents. However, they cannot extend the investment period of existing PPFs and invest in new one's while being an NRI.
- Can NRIs invest in NPS? – The National Pension Scheme (NPS) is another government-aided savings scheme which allows the subscribers to save for retirement. Unlike PPF, however, NPS is open to all citizens, regardless of residence status. Hence, NRIs can also invest in NPS.
- Can NRIs invest in the Indian share market? – The answer is yes, but it’s a bit tricky. So, how can NRIs invest in the Indian stock market? NRIs need a Portfolio Investment Scheme (PIS) account to be able to invest in the Indian stock market.
Keeping these in mind, what are some of the best investment options for NRIs in India? While multiple asset classes exist, many NRIs often focus on real-estate or retirement schemes.
Real-estate might be a good choice, but disproportionate investment in real estate might not make much financial sense. Unit Linked Insurance Plans (ULIPs), Capital Guarantee Solution Plan, Pension and Annuity Plans, Mutual Funds, and the National Pension Scheme are some of the best long-term investment solutions for NRIs.
Things to keep in mind before investing
These are some of things that you need to keep in mind if you choose to invest in India.
- Not using the correct account type – Using resident accounts as an NRI is illegal in India. To continue saving money and investing, NRIs need to set up appropriate accounts. For example, NRIs require Non-Resident Ordinary (NRO) bank and Demat accounts in order to continue saving and investing. If NRIs have existing mutual fund investments, then they must inform the company that manages the assets of changes in residential status.
- Avoid paying double taxes – Many investment options are subject to a tax deduction at source India (TDS) and can often end up paying double the tax if they aren’t careful. For that matter, it is important to consider tax implications when investing. Many countries have a Double Tax Avoidance Agreement (TDAA) with India. This can help prevent you from paying double taxes.
- Not seeking professional help – For most investors, it is often advised to seek professional advice when it comes to investing. For NRIs things can be even more tricky, and having professional guidance can help prevent many of the headaches that can arise if you try to tackle the problem on your own. Professionals are much more well versed when it comes to the state of the market as well as the necessary rules and regulations involved.
Investing in Indian assets as an NRI can be rewarding in many ways. From helping the economy to building your own financial security, investing in India can be very worthwhile. But it's also important to think about the pros and cons of these kinds of investments. It's always a good idea to keep learning and to get help from a professional when you need it.
If you are a non-resident Indian (NRI) interested in making an investment in India, you have come to the right place. To discuss your investment needs, please get in touch with us.