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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