There are overall 18 Million NRI’s living outside India, as per the latest reports by the United Nations. India has seen tremendous development in the economy over the past two decades, which results in attracting Foreign Direct Investment (FDI). This trend has attracted the NRI’s as they find it a feasible place to invest and make profits.
As an NRI, you can participate in some of the investment options available in India depending on your risk appetite and expected returns. So, in this article, we will discuss the five best investment options for NRI to invest in India in 2021.
1. Fixed Deposit
Not only the Indian residents but the Non-residents Indians (NRI’s) also give their topmost priority to Fixed Deposit (FD’s) as an investment option to grow their income. The reason behind why it is on the priority list is that it is considered the safest form of investment and it doesn’t require any lock-in period for the withdrawal of the amount. Again though, the rate of interest will depend on the chosen bank, capital and tenure.
Some Non-Banking Financial Companies (NBFCs) also provide fixed deposit at a higher rate than regular bank FDs. They have a maturity which ranges of a few months to years and payouts available at different frequencies.
2. Mutual Funds
Mutual funds are the second alternative investment options for NRI’s. These funds are created by merging different types of investments that are well managed by the fund managers. They can provide the solutions as per your investment objective. They offer comparatively higher tax-efficient returns than FD.
They only allow investing in INR and not any other currencies. The return will depend on the type of funds you choose as there are different asset classes – (equity, debt and hybrid) and, another factor is the horizon. You can also invest in a mutual fund through ELSS that will help you qualify for Section 80C tax benefit if you have an income source in India and, you can invest through SIP by depositing a fixed amount regularly. With the help of mutual funds, you can get maximum benefit as they offer an inflation-beating return over the long term.
Additional Read: Out of Investment Options? A Wealth Manager to the Rescue!
3. Real Estate
The other preferred option for NRI to invest their money, but they are only allowed to invest in residential and commercial real estate. Before investing, you have to collect some idea about the property and read the documentation carefully. In the current scenario, investing in real estate in India will be a plus point keeping in mind the rise in the economy.
If you sell the property within 2 years of purchase, it is considered a short-term gain, and TDS -30% is applicable. However, if you sell after 2 years, it is considered a long-term gain and TDS - 20% is applicable.
4. Portfolio Management Services (PMS)
Portfolio Management Services (PMS), is an investment portfolio that may comprise asset classes like stocks, fixed income, debt, cash, and other securities which are managed by the professional fund manager and actively customized to meet the specific investment objectives.
In PMS, the fund manager assigned to manage the investor’s portfolio should be licensed and registered at the Stock Exchange Board of India (SEBI). The NRI’s and the residents are allowed to invest in PMS but with a minimum amount of Rs 50 lakhs. An NRI is required to submit documentation as a one-time process with the provider in that he has to sign a PMS agreement, a power of attorney and also need to open a PIS demat account for PMS purpose only.
Before starting the investment, the provider has to brief the terms and conditions, mutual rights, obligation, and rights of managing the portfolio to the client. There are further two types of PMS: Discretionary and Non-Discretionary. Before choosing the investment type, you may take a thorough understanding of the scheme and invest wisely.
5. Alternative Investment Funds (AIF)
Alternative Investment Funds (AIF) are the funds created in India by a privately pooled investment vehicle that collects funds from experienced investors for investing it following a defined investment policy for the benefit of its investors. It provides more flexibility and opportunity to the fund managers to invest in instruments that may be not available in mutual funds and PMS.
In AIF, the NRI is permitted to invest a minimum of INR 1 crore but there might be some geographical restrictions by the AMC Compliance policy. By investing in AIF, there are several benefits: Diversification, passive Income, Volatility, and Better returns. In this, the fund is classified into three categories.
The investor should choose the investment option by keeping in mind the risk and return objectives constructed. Proper knowledge is required before initiating an investment.
Additional Read: Understanding anchoring bias and its influence on your investment patterns
Conclusion
For the NRI’s, there are enough alternatives available for the investments. But, the first point to consider while choosing the investment options should depend on their goals and the risk appetite.
Do visit Tata Capital Wealth Site or download the application, which will provide you expert advice and more information on the investment options available and will be helpful to achieve the investment objectives.
05 August 2021
5 mins read
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