What are the Top investment options for NRI in India

http://blog.advantagefp.in/investment-options-nri-india/

What are the Top investment options for NRI in India

When you, an NRI thinks of investing in India, what are the top issues that come to your mind? Do you feel nostalgic or a patriotic or like an investor? When you are looking at creating just wealth from your investments abroad. Or you wish to get the best returns from all opportunities across the world, does India fascinate you? Does the past 17 years of India shining gives you confidence? Do Modi's 2.5 years look great! And perhaps another 2.5 plus 5 years tenure give you confidence? Do you wish to explore all such avenues for maximised returns with minimised risk? What are these top investment options in India? Are you looking for such opportunities in India in clear, concise and transparent, yet unbiased opinion? If yes, then this blog is for you.http://blog.advantagefp.in/investment-options-nri-india/

India has the maximum Indians settled abroad! Over 14 million NRI and if you include OCI/ PIO, then a total of over 30 million in 160 countries.

Investments from these Indians has increased from $ 55 billion to over $ 77 billion in the last 7 years.

Over 55% of all foreigners in the middle east remit money to India.

Over $69 billion is remitted to India every year! That's a huge confidence level of Indians.

These Indians may be looking at retiring and settling in India as their principal objective for remittances.http://blog.advantagefp.in/investment-options-nri-india/

Has the investment norms been so much eased that the inflow has increased? Or is it the ease of just operating in investments in India so smooth now? Or is it the love of higher returns drawing Indians to invest in India? You will find out more on this blog.

India is actually the best and preferred nation for investments across the world. Why? Due to is young population and rising economy, there is tremendous opportunity to reap the benefits at least for the next 7 years.

India’s high economic growth and depreciation of the rupee remain major driving forces of increased investment from overseas Indians in the country, finds a new report by WealthInsight. The report also forecasts phenomenal growth in India's economy which shall lead to great investment opportunities in India for NRI's.

India's economy has overtaken China's to become the world's fastest growing major economy in late 2015. The economy grew by 7.3% in the last three months of the year compared to China's 6.8% during the same period.

The Indian government has undertaken several initiatives to stimulate the country's overall economic growth. These include recent

  1. Recent interest rates cut,
  2. The launch of the Made in India program,
  3. Reforms in the power generation industry,
  4. Strengthening of the country's telecommunications and internet networks.
  5. Opened up key sectors such as railways, defence, insurance and medical devices to attract higher levels of foreign direct investment.http://blog.advantagefp.in/investment-options-nri-india/

How is India an opportunity for NRI investments? Let's examine the new report by WealthInsight:

  1. There are over 2.36 lakh millionaires NRI in the world. Indian millionaires are expected to grow by 34 % by 2020 instead of 4 % in 2014.
  2. In 2015, the population of NRIs globally stood at around 28.45 million.
  3. The US accounted for the largest proportion of NRI millionaires with a total of 133,564 and a share of 56.5%, followed by the UK with a 12.7% share.
  4. The other leading countries with a significant number of NRI millionaires include the UAE, Canada, Hong Kong, Singapore, Indonesia, and Japan.
  5. The total wealth of NRI millionaires was estimated at around US$915 billion in 2015 and is expected to reach US$1.4 trillion by 2019.
  6. The value of the rupee against the US dollar depreciated from INR53.01 in December 2011 to INR66.20 in December 2015. This has created an attractive opportunity for NRI investors looking to invest and remit funds to India.
  7. The key sectors in which NRIs are expected to increase investments include realty and healthcare.
  8. The overall Indian healthcare market was worth US$100 billion in 2015 and is projected to grow to US$280 billion by 2020.
  9. According to WealthInsight research, the value of inward NRI remittances rose from US$62.49 billion in 2011 to US$72.17 billion in 2015, registering a review-period CAGR of 2.9%.
  10. Dr Roselyn Lekdee, Economist at WealthInsight comments: "Most of the NRI millionaires are self-made entrepreneurs who still have a strong connection with their home country.
  11. According to the World Bank, India was the world's largest recipient of remittances in 2015, largely from the Gulf countries.
  12. While global economic uncertainties continue to hamper the Indian economy, depreciation of the rupee could offer opportunities for the NRI millionaires to develop stronger ties with their home origin."

Conclusion: there are tremendous opportunities to be benefited by investing in India. These 12 points above clearly indicate the rising star nation status for India. As an NRI, you need to take a look, else you may be missing this great opportunity.

Now, let's look at the top ten reasons as to why India is a great opportunity for NRI to invest in India:

  1. Today, India is one of the fastest growing economies in the world. The annual GDP growth was at 7.55% in 2016 and it is expected that with political and economic stability in 2017-2018, this GDP shall grow to 7.74% in 2018. Lesson: Stable growth brings you confidence and joy of investing in a country which has continued positive growth.
  2. India has a huge domestic captive consumption base. This has lead to businesses growth opportunities year after year. Further, as consumer spending grows, India is one of the largest consumer markets in the world. This again leads to demand for many products and services within the country. Lesson: Investing in a country which has self-consumption so high that this country shall not get so much affected by any other country's or even the world's any part having lean growth period. Confidence for you for investing for long-term. 
  3. With a relative stability of Rupee to US $, US $ investments are expected to be favourable also. Even though it has depreciated by about 5% in 2016, a steady rupee-dollar exchange rate seems likely due to the sound economic fundamentals of India at this point. Lesson: Stable rupee $ brings you great opportunity to invest over an extended period of time and especially if you are going to be coming back to India or looking at wealth creation within India. 
  4. India offers so many diversified investment avenues for retail investors. Starting with investments in businesses, stocks, real estate and also managed solutions such as PMS, bond funds, equity mutual funds and also select corporate fixed deposits. Lesson: It gives you huge diversification opportunity to invest as per your goals and time horizon. Financial planning and then investing would bring positive and definite results for individuals.
  5. Indian equities and fixed income investments are going to be an attractive investment destination as a position. For all NRI's across the world can actually judge that from their own country perspective, does India look comparatively attractive? Lesson: With clear goals and country specific investment, India shall look a likely destination for investments in the next three to seven years horizon. Make hay while the sun shines!
  6. Till the next elections and further on, the next seven years looks confident to invest India from the perspective of Indian stock market. AS corporate earnings and net profits are expected to rise further on stable political and economic growth, domestic consumption shall add the necessary catalyst. Lesson: Great investment opportunity with a combination effect.
  7. Someone with a conservative risk profile, investing in the Indian fixed income market, shall bring relatively stable returns. Banking and macroeconomic factors shall continue to be primary positive motivators. Lesson: Conservative and steady returns possible for investors with low-risk appetite.
  8. With up to US$ one million outward remittance policy for NRIs, it is a great chance to take out money from your NRO while NRE assets remain fully repatriable for NRIs in each financial year. Lesson: Don't fear the remittance policy but benefit from it!The flexibility of each fiscal year and per person is a definite advantage for an NRI.
  9.  With Double Tax Avoidance Agreements (DTAA) agreement between India and countries like Singapore, USA, UAE, NRI would find its tax efficiency. Lesson: To set off taxes from your own country against taxes paid in India would help in maximizing post tax returns as well. 
  10. Technological advancement brings online investments greater opportunity for transparent investment and easy monitoring. Not only safe and liquid, but tax efficient investments offer an array of online services like mutual funds. Making right choices and choosing the right kind of product from a basket of offers, you need to plan well with qualified available CERTIFIED FINANCIAL PLANNERS (CFPCM) who are regulated by country's robust regulations. Lesson: With careful selection of your financial planner and then an investment advisor, gives you the satisfaction of having an experienced fee based professional guiding you on every up and down of the market.

Now that you are clear on why it is an excellent idea to investment in India as an NRI, the third part of this blog is now dedicated to the different scenarios.

Scenarios under which different routes should be taken. The perspective of investment for NRI changes if his goals, called here as situation differ. Circumstances may demand a different outcome, and hence the task around it should also be varying.

Scenarios under which different routes should be taken. The perspective of investment for NRI changes if his goals, called here as situation differ. Circumstances may demand a different outcome, and hence the task around it should also be varying.

Three Scenarios for NRI Investments

As an NRI, you have been

  1. Abroad on an assignment: You should look at investing in India for your long term goals like your children's education, their marriage, your retirement. Since you are on an assignment and are sure to come back, do start or continue your health and life insurance policies (take only "term insurance", refer to our blog on life insurance).  You are an NRI for sure but are also very sure that you will return to settle in India. You may have many goals to accomplish like children’s education or their marriage or perhaps for buying your own House. Your plan could be to primarily for your for your old age retired life. You may not be sure of global factors but are more confident of India.
  2. Settled abroad: Now that you have decided that you are not coming back, You should compare the investment opportunities in your country. If you feel that the opportunity, regarding your goals, risk profile, time horizon does not match with the kind of returns, you can look at India as an investment diversification.  You wanted to be an NRI and perhaps would like to remain an NRI: You want to take benefits of “India Shining” for wealth kept only as diversification. Also, you wish to keep money in rupee currency only as a limiting reason. Maybe, to avoid high tax rates in India, perhaps as you may think! You are an NRI who is now clear that you wish to be a Global Roamer and are sure of not coming to India: You don’t want to invest in India in Indian Rupees! You have simple diversification strategy in mind and have invested already in let’s say, real say real estate in India. You are also sure of not settling in India. It’s an absolute decision, and you are confident of an alternative country as your permanent residence. Also, you are already a citizen of another Country, but India charms you due to your “roots” in India or some old investments in India. You may be inheriting property from your parents & would look at repatriation of same. In these scenarios, it would be prudent to make a financial plan. This shall help you to first identify when and how much money you may need and at what stage in your life. Without a goal, a ship may go nowhere, and the chances of getting stuck in a storm are high! Decide on your goals and then "time" all your investments to get money when you need it. 
  3. You wish to someday come back to India: India always is your home. Your country has been very dear to you. As an Indian, it is your right to be a part of India growing. You have an equal right to make your investments in India. Creating wealth out of your investments could be the next step.

The fourth part of this blog looks at some more issues that NRI would like to find out more, and we have given replies to each question marked in blue:

  1. You may have explored all options for creating wealth abroad with your money and have sometimes, still thought of finding out the right investment opportunities in India for an NRI. You have to be clear of the routes that you would like to take, depending on what you really want? Accordingly, there can be some suggested strategies to invest in India.
  2. As an NRI, you have cherished investing some of your money. Deciding where to invest, shall be explained in detail shortly.
  3. You would also like to know the steps involved in investing as an NRI in India. Replied soon
  4. What are the options available for an NRI to invest in India?  Replied shortly
  5. Are there some restrictions to investing?   Replied shortly
  6. You also need to understand who is an NRI. What are the necessary approvals required for an NRI before he starts investing? What are the incomes that are tax exempt for an NRI? What are the steps involved in making a financial plan before investing in India? Refer to this diagram for more information.
  7. What are the limits for repatriation? Does an NRI have to file his income tax return in India?  Replied shortly.
  8. What are the right avenues for an NRI to invest once he becomes an NRI (assuming, he is an Indian Passport holder and let’s say stationed abroad for work like in Dubai and is eager to continue investing thru India?  Replied shortly.
  9. How does the NRI protect currency risk and fluctuations in US$ vs. INR? Understand that’s a risk, but what can be the strategies to “minimise” them if not rule out, so that he continues to invest in India.  Replied shortly. 
  10. Should the NRI look at diversification by investing in US $ thru places like Singapore, Dubai, Swiss banks? If yes, should he choose various options including leveraging, offered by banks?  Replied shortly. 
  11. As a CFP and RIA, how much jurisdiction or authority, do I have to guide and give “expert opinion” and when it best to refer to their respective country CFP or a CA.  Replied shortly
  12. Does the maturity proceeds received from foreign insurers liable to tax or exempt u/s 10(10D) of Income Act? It is that in one of the cases, assessing officer imposed these fully on the ground that Sec 2 defines "insurer" as Indian insurer - the contention was dismissed later.
  13. If you not sure whether you will be able to return to India and might need fund for daughter's education in foreign currency. Should he continue his funds in NRE (currency risk involved) or move some part of the corpus to FCNR deposits (interest rates are very low as compared to NRE FD). So is there a tradeoff between living with currency risk and interest rate differential or is there any other angle?  Replied shortly.

Fifth part of this blog explores the legal and statutory obligation of an NRI before investing in India. Here are some of the necessary guidelines to be kept in mind:

  1. FEMA (Foreign Exchange Management Act) intention is to check your eligibility to invest in India and remittances- both inward and outward, from India. Also, taxation from the number of days present in India in a financial year perspective. The act indicates your source of income and residential status in India for the purpose of taxation. The Act confirms an NRI as a person who stays in India for equal to or less than 182 days.
  2. Approvals: There is no RBI approval required for your earnings outside India. Therefore, don’t wait until the year end to invest in India.http://blog.advantagefp.in/investment-options-nri-india/
  3. A resident of India: Hence, you must change the status of your bank account when you change over from an NRI to a resident and make further changes in your income tax returns or investments or bank accounts also.
  4. Incomes Exempt for an NRI: All NRE bank accounts in India giving you interest on your investments in India are tax-free under section 10(4) (ii). For all NRI under FEMA act and are allowed by RBI. Caution: these incomes become taxable when you become a resident (or your status changes from NRI to “resident”) under FEMA guidelines.http://blog.advantagefp.in/investment-options-nri-india/
  5. DTAA: Double Tax Avoidance Agreement: this helps an NRI to pay tax only once and not twice like the country of investment and country of income.
  6. FATCA: you need to complete the information simply with some basic facts about you:
    1. Your country of birth
    2. Your full current postal address (residence and business, both)
    3. Your occupation
    4. Your current income and net worth
    5. Are you politically exposed?
    6. Tax residency country
    7. Tax identification number
    8. Passport details
    9. NRI KYC norms required: You have an obligation to provide details and relevant document: PAN, overseas address, the local address for communication. Your KYC status online should show you are “NR” to enable you to then make investments in India.
  7. Remittances from India: As an NRI, you are required to give a rupee draft or bankers cheque along with your FIRC letter (Foreign Inward Remittances Certificate) to be issued by your bank. Your first investment in India should not be from an overseas bank account.Source:https://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=8096 and  https://www.rbi.org.in/scripts/FAQView.aspx?Id=52
  8. You may like to know more about the various type of bank account options in India. NRO, NRE, FCNR

The Sixth art of this blog reveals the top more successful ten steps to plan for NRI investments in India, given the above considerations:-http://blog.advantagefp.in/investment-options-nri-india/

  1. Invest as per Goals: Why because it defines your-Time horizon, When you want money, It’s Future value, Gap
  2. Do your Risk Profiling-Aggressive or Conservative Investment- It’s a psychology
    1. Eg, Goal children’s education: 5 Years 50 Lakh, then Equity Mutual Fund. SIP……
    2. Eg, Retire 40 – 60 Years – 20 Years need L lakh per month today – will need corp 8 Crore at 60 Years today just invest life for 20 Years.
  3. Divide Goals into:
    1. Short Term Up to 1-2 Years
    2. Medium Term 2-5 Years
    3. Long Term 5 Years Onwards
  4. Inheriting Property: understand estate planning and WILL making
  5. Keep evaluating, rebalancing, checking favourable government Policies, Tax Changes-Keep a look out for – to enable forecasting- take pre-emptier steps.
  6. Have a knowledge team of professionals guiding you & who can give right directions, can caring for your investments inclusive inheritance, your will, documentation, taxation, financial planning
  7. Avoid Ponzi schemes and other such lucrative offers.
  8. Take health insurance in advance of settling or planning to don’t delay
  9. Keep educating yourself on financial matters: Understand, read, attend seminars, make yourself aware, don’t go by hearsay!

Now, The Seventh part of this blog takes a look at the basic bank accounts for NRI in India:

  1. If you wish to start your investments in India for the first time, its necessary to have one saving account. But understand clearly what type of savings account to maintain for the different purposes of investments (Refer to chart)
  2. NRE is completely tax-free. Use it for remitting money abroad.  Use it to deposit money received by you from overseas earnings. You can repatriate full amount from this NRE account.http://blog.advantagefp.in/investment-options-nri-india/
  3. NRO is taxed @ 30 %; open it before you leave India. Your savings should be converted to an NRO as you leave India. (don't keep standard savings account open when your status changes from ordinary resident to NRI). Use it to deposit earnings in India like rent, dividends, interest, dividends, overseas earnings. This can be in the form of saving, or a current of fixed deposit also. Through proper channels, you can remit money from your NRE into this NRO account.Use it primarily for managing your earnings in or from India.
  4. FCNR: keep it to reduce currency exchange rate risk. You can keep your money here in your foreign (8 designated) currency. Used only for term deposits for periods ranging from 1 to 5 years only. You can have this account in freely convertible currency like US $, Pound and such 8 currencies specified by RBI. The interest rate is quite low as they are now linked to the LIBOR rates. Interest earned is exempt from tax until you, as an NRI, continue to be an NRI or RNOR.http://blog.advantagefp.in/investment-options-nri-india/

Now, The Eighth part of this blog takes a look at the Investment options NRI in India:

  1. Bank deposits: as explained above in NRE/ NRO/ FCNR bank accounts.
  2. FD, certificates of deposits, Perpetual bonds are some of the other fixed income opportunities for NRI to invest.http://blog.advantagefp.in/investment-options-nri-india/
  3. Mutual Funds: You can quickly invest in most of the mutual funds in India. However, there are only a select mutual funds allowing USA/ Canada-based NRI residents. All your investments in Indian mutual funds are repatriable but depends on the type of account you have used to make your first investments. ( NRE: Repatriable) (NRO: non-repatriable). Read more on mutual funds to align with your goals. While tax treatment is same for NRI and residents of India but there is TDS at the source for NRI, wherever applicable. For NRI: there is 15 % flat necessary TDS STCG in equities and 30% in debt funds respectively. Besides 20 % flat TDs for NRI in LTCG in debt funds.  If you are interested in earning high returns, based on your risk appetite and time horizon of your goal based investments, then mutual funds are the best option for you.  As mutual funds allow you to enjoy the benefits of diversified equity but give you the security of cushioning you from the ups and downs of the market. It saves your principal amount invested over an extended period of time. You should hence choose your select mutual funds based on your financial planner's guidance. This should be based on your risk profile and time horizon. It is suggested to make such investments through your NRE account only. Select amongst the mid cap, large cap, small cap, multi cap, sector funds, hybrid funds.http://blog.advantagefp.in/investment-options-nri-india/
  4. Direct Equity shares:  NRI can quickly invest in shares of Indian companies, but they get reported to RBI if taken under PIS (Portfolio investment schemes).  LTCG are tax-free while STCG in less than one-year redemption gets you flat 15 % TDS.
  5. Real Estate: For NRI, FEMA is applicable. You can invest in all real estate except agricultural land and plantation and farm houses (except where gifted or inherited) (Check for local land law at the time of transaction)
  6. PPF: NRI cannot open a new PPF account but those who opened it before becoming an NRI, but cannot continue or extend it after completion of 15 years. You can continue it till its first 15 years maturity when you can either close it or continue to get interest tax free. Till you close it. Recommended opening a PPF account before taking up NRI status.
  7. NPS: Refer to details in our blog on NPS. NRI would, however, get rupee pension only and hence not a very good idea at all.http://blog.advantagefp.in/investment-options-nri-india/

NRI should carefully weigh the pros and cons of investing in India. Be careful of frauds and don't take up investments as adventures. Trust, not every relative or friend in India! Hire a financial planner to guide you professionally and ethically. STAY FOCUSED THEN. STAY BLESSED.

Sources:

(1): http://www.nriol.com/indiandiaspora/statistics-indians-abroad.asp

(2): http://www.wealthinsight.com/pressrelease/strong-economic-growth-a-key-driver-of-nri-investment-in-india-4878323/

(3): March 16, 2017. USD TO INR TODAY- Source: http://dollarrupee.in/