Download - 5 Investment Options for NRIs
Investment options for NRIs 5
India is considered the ‘hot’ investment option these days. The
economy is well set to improve. There is optimism everywhere
that better days are here. Considering all this, it may just be the
right time you considered investing in India. However, remember,
you may be exposed to foreign currency fluctuations. This could
affect your overall returns.
Here are 5 investment options for you:
Background
NRE, NRO
fixed deposits #1
As a non-resident Indian, you can invest your money in a special
kind of bank deposit account – a Non-Resident External (NRE)
Account or a Non-Resident Ordinary (NRO) account. These can
be used as a savings account, a current account or even a term
deposit account. The money held will be in rupees.
NRE, NRO fixed deposits
The difference lies in the source of the account funds. While the
money in an NRE account comes from a fund transfer from
abroad, the NRO account is used for crediting local income
earned in India like rent or dividend income.
NRE, NRO fixed deposits
(Contd.)
There is another type of account called the Foreign Currency
Non Resident (FCNR) account. This is used to avoid exchange
rate fluctuations as the money held in the account is in Dollars,
Euros, the British Pound or another foreign currency. However,
the interest rates on this account is lower than NRE and NRO
accounts.
NRE, NRO fixed deposits
(Contd.)
The best part is that any interest you earn on an NRE or FCNR
deposit is tax-free in India. However, you may be taxed in the
country of your residence. Ever since the rupee depreciation in
2013, interest rates were hiked for NRI accounts to attract more
fund deposits. Currently, they range between 4% and 9%. The
same for FCNR accounts ranges between 1% and 5%.
NRE, NRO fixed deposits
(Contd.)
Direct
Equity #2
Want high returns? Try equity investments. The Indian stock
market has outperformed its global peers this year. Its strong
bull-run is expected to continue in the near future too. This may
well be the best time to invest and profit from the future
growth in the markets. All you need are trading, bank and demat
accounts. And there may even be special services for you as an
NRI investor.
Direct Equity
Stock markets in India have returned around 15-17% on an
average. It could be higher for certain high-growth stocks. You
can invest for the long-term or even for the short-term in the
markets. Your returns depend on your trading and investment
strategy as well as the duration. However, you need to have a
higher appetite for risk, as prices fluctuate in the market.
Direct Equity (Contd.)
Equity Mutual
Funds #3
EMFs help you reduce the amount of energy you put in for
research as well as portfolio management. The asset manager
will take all the required decisions for you. Equity mutual funds
also provide the option of SIP. This allows you to break your total
investment into monthly or quarterly instalments. So, you don’t
have to worry about getting your investment timing right. Some
funds have given returns as high as 70% in the last one year and
over 20% annually in the last five years.
Equity Mutual Funds
Offshore funds,
ETFs #4
As an NRI investor, it may be a better idea to invest in India-
based funds which are managed from outside the country. This
way, you minimize the amount of exposure to Indian
regulations.
Offshore funds, ETFs
However, it is always better to read the fine print and compare
their benefits with domestic mutual funds. They may also be
exposed to risk of the Rupee’s valuation against the Dollar. You
can also look at India-based Exchange Traded Funds (ETFs) listed
in US markets. These are similar to mutual funds, but are listed
on the stock exchange and trade just like stocks. As a result, they
are much more liquid. Most of these ETFs have grown
significantly in value this year, some as much as 70%.
Offshore funds, ETFs (Contd.)
Realty
Investments #5
In a developing country, the real estate sector always grows.
There are two kinds of real estate investments – directly
property investing or putting you money in a Real Estate
Investment Trust (REIT).
Realty Investments
The benefit of the latter is that REITs are more liquid and less
cumbersome. All that paperwork and registrations you have to
go through while buying a property would not be applicable for a
REIT. However, it depends on what your investment goal is. If you
want an immovable property, which can even double up as your
vacation residence, then direct investing would be a better
option.
Realty Investments (Contd.)
Whenever you invest, ensure you read the fine print to make
sure it fits your requirements. One of the key factors to consider
is the tax implications of such investments. Tax is often
deducted at source compulsorily for non-resident Indians. Some
investments may also have a higher threshold period for short-
term and long-term capital gains classifications. Know these
before taking the leap.
In a nutshell
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