What are the best NRI Investment Options in India
Most of the NRI thinks that they are not allowed to make investments in India. It is nothing less than a useless rumour. The NRI’s are provided with various investment options in the Indian Stock Market.
Here, we have analysed various investment options and bought the 8 best investment options where an NRI must invest.
1. Fixed Deposits Bank Accounts- It is one of the known NRI Investment in India. In a fixed deposit, a NRI customer can deposit the money into an account and then it is kept for a predetermined amount of time. A customer can then withdraw the fund when the tenure for the same will finish. A customer receives the amount with the interest after the time period has ended.
An NRI gets various fixed deposit accounts that serves as the NRI Investment Options to NRI are:
• NRE Account (Non-Resident External Account)- In this account the money is kept in rupees. It then becomes easy to return the money to dollars. The interest rates on these accounts changes depending on the deposit size or bank. The interest may vary from bank to bank.
• NRO Account (Non-Resident Ordinary Account)- In this account the NRI’s control their Indian income. The customers can rent income, dividends from investments, or pension funds that can be further paid into these accounts. Such account has a limit of $1 million and is allowed to transfer from this account to US account each year. The interest earned on an NRO fixed deposit is further taxed at 30%.
• Foreign Currency Non-Resident Account (FCNR)- In this account the foreign currencies are stored. This account helps in avoiding the currency fluctuations that takes place in the financial markets. The interest depends on the currency deposited into the account. Dollars causes an interest rate between 2% to 3%. The customer can take the money from this account at any point of time and is not taxed by the Indian government.
2. Mutual Funds- Mutual Fund investments work as the large pool of money of the investor’s money that is further managed by the professional fund managers. The investments in mutual funds are operated under the strict regulations of the SEBI. The investment in Mutual Funds are riskier than the fixed deposits.
An NRI must have an NRE, NRO or FCNR account in India to invest in the Indian Mutual Funds. Holding such accounts helps the customers in facilitating with the investment and pay out procedure.
Mutual Funds has the two predominant categories in which the tax is charged differently:
• Equity Funds: It has more than 65% of the funds that contains equity. An NRI will pay 15% tax if they can sell the investment within the first year. The investment is tax-free after an individual owns it for a year.
• Debt Funds: It has more than 65% of the funds invested in equity. The NRI can pay 30% tax even after selling it within 3 years of owning it. The customer is required to pay 20% tax when an individual sells it after owning it for more than 3 yrs.
3. Direct Equity- The customer can invest their money into the stocks on the NSE. An NRI needs to be a part of Portfolio Investment Scheme (PINS) of the Reserve Bank of India (RBI). It further allows the customers to trade in the stocks on the NSE.
One needs to hold the following accounts to invest in Direct Equity:
• An NRE/NRO savings account is specially dedicated only for the PIS purposes.
• A dematerialized account holds the shares in an electronic form.
• A SEBI trading account with the registered broker.
4. Real Estate- Real Estate or investing in a property is one of the most favourite investment sources for the NRI. It is a long-term investment that results in the steady growth to the customers. One must make sure of the bank account type he uses to buy or sell the property (NRO, NRE or FCNR). The money that will be allowed to return in the dollars depends on the rules applicable for the account.
5. Bonds and NCDs (Non-Convertible Debentures)- Investing in Bonds and NCDs comes along with the risks. With the risk, profit also comes along. Thus, it serves as a good investment option. The three main types of bond are PSU bonds, NCDs and Perpetual Bonds.
6. Government Securities- The government provides various investment opportunities. The treasury bills or the T-bills have various maturity dates ranges between 3 to 12 months. These T-bills are bought at the RBI auctions. This does not earn the investor any interest but it promises to redeem a discount. It simply means that it will make certain specific profit at the time of T-Bill redemption.
To make investment for the long-term, the NRI’s can follow the different types of dated government securities:
• Fixed rate government bonds.
• Floating rate government bonds.
• Capital Index bonds (CPI).
7. Certificate of Deposits- These are also termed as CDs. CDs are used as the short-termed investment. The working of CDs is very similar to that of FDs. But the difference is that in CDs the holder may sell it. An individual needs to have a dematerialized account to buy and sell CDs. A CD has a maturity date through which it promises to repay a certain amount. It is difficult to return the amount invested into CDs to dollars.
8. National Pension Scheme (NPS)- The National Pension Scheme allows the Indian citizens to save a certain amount for retirement. The age to invest in NPS has to be between 18 to 60 years. There are two account each one with the separate rules and regulations.
Tier 1 account: All kind of payments and funds in this account are remain locked until requirement. If an individual retires before 60 then they may take investments as cash. An individual is obliged to invest the rest amount into an annuity. Taking retirement after 60 will also allow the customers to take 40% cash and the rest will be further invested into an annuity.
Tier 2 Account: The customers who already holds a tier 1 account are only allowed to open this type of accounts. These accounts are unrestricted so that an individual can deposit and withdraw money as per their wish. The customer can also decide on their own the structure of tier 2 account.