NRIs are constantly on the lookout for better investment avenues in India. There are several options in the country that offer very good returns but the risks involved are also huge. So, it becomes pertinent for them to be mindful of the extent of risk in various investment avenues before locking in their hard-earned income. Also, when it comes to investments there are two categories involved: financial and non-financial assets. Financial can be market-based items such as Mutual Funds, stock etc and fixed income products like bank deposits etc. As for non-financial assets they happen to be real estate and physical gold. So, let us explore some of the ideal investment avenues in India for the NRIs.
Equity Mutual Funds
The equity mutual fund schemes invariably invest in equity stocks and an equity fund can be managed either actively or passively. In the active funds, the returns hinge upon the fund manager’s capacity to engender returns. Equity schemes can be classified as per market capitalization or the domains of investment. Even they are classified on the basis of domestic (Indian companies) and international (overseas companies) investments. NRIs can invest in the MFs of India as long as they are following Foreign Exchange Management Act (FEMA).
National Pension System (NPS)
This is a long-term retirement-based investment product looked after by the Pension Fund Regulatory and Development Authority. This happens to be a combination of equity, fixed deposits, liquid funds, government funds and corporate bonds etc. However, the onus is on the NRI investor to assess the extent of risk and then route his or her money through the NPS.
Bank Fixed Deposit
This is a popular investment vehicle among NRIs as it is a very secured, compared to equity, option to invest in India. As per deposit insurance and credit guarantee corporation norms, every depositor in a bank is insured up to Rs 5 lakh (Max) when it comes to both principal and interest amount. Previously, the safety coverage was extended only up to the amount of Rs 1 lakh (Max) in both cases. The interest accrued is put into one’s income and taxes are levied as per one’s income slab.
This is also a very good investment option for NRIs, especially if they don’t stay in the country and visit only occasionally. However, the value of the property is based on the place it is situated and the amenities and facilities in the near vicinity. These things will also determine the rental rate of the property. The only hiccup is getting the requisite approvals from the regulatory body, and despite having a real estate regulator there are still scopes for improvement. Nevertheless, it is a good avenue to invest your money as you don’t want your property to lose its sheen due to lack of use.
From 1st April 2020 onwards, NRIs were made eligible to invest in government bonds devoid of any particular limit in certain specific instruments. The rules and regulations involved in the investment in bonds by NRIs and OCIs happen to be similar as well. NRIs can choose to invest in 5 years, 10 years and 30-year bonds from FY 20-21, however, the RBI is within its rights to come out with new guidelines from time to time. These are some of the bonds NRIs can opt to invest in:
Public Sector Units and Capital Bonds
Non-Convertible Debentures (NCDs)
Debt Mutual Funds
Bharat Bond ETF & FOF