According to the Indian Ministry of External Affairs, nearly 13.4 million NRIs (Non-Resident Indians) live outside India. Most of these NRIs look for investment opportunities in India mainly with the intent to build a corpus for their future needs and establish financial security for their families.
The Indian investment market is known to offer a wide range of investment options, such as fixed deposits (FDs), equities, mutual funds, debt funds, etc. If you are an NRI looking to tap into the growing Indian market for wealth creation, there are certain important things you must know that will help you accomplish your investment goals.
Know the type of bank account you need to have in India
If you are planning to invest in mutual funds, you must know that all the transactions between yourself and the mutual fund house will be in Indian currency, i.e., INR. So, you must pay to buy the units of mutual funds in INR, and the returns you get will also be in INR. For this, ideally you must hold one of the following NRI bank accounts at any Indian bank of your choice.
- NRE (Non-resident External) Account: This account allows you to deposit money earned in a foreign country and facilitates repatriation of both the principal amount and the returns earned.
- NRO (Non-resident Ordinary) Account—This account is suitable for managing income earned in India and facilitates repatriation.
Keep track of your investments
Investing funds in assets that promise valuable returns is not enough. As a prudent investor, you must keep track of your investments and know exactly where your funds are invested. Being an NRI, you must be accustomed with umpteen number of brokers approaching and advising you to invest in many investment options.
However, before investing your hard-earned money, it’s quite essential to do a thorough background check of these products. It is important that you ask the brokers about the scope of growth of these investments, verify the details of the products on the website of the respective mutual fund company/broker and then only, make an informed investment decision.
Be aware of the tax implications
As an NRI, when you invest in the Indian market, you must be aware of the tax implications. As per the tax laws in India, the returns on your investments are taxable. There are two types of taxes in India – STCG (Short Term Capital Gains) and LTCG (Long Term Capital Gains).
Apart from the taxes payable in India, you may also have to pay taxes in the country of your current residence as per the prevailing tax laws. However, India has a Double Tax Avoidance Agreement with about 94 countries to prevent NRIs from paying tax twice on the same income.
Conclusion
As an NRI, you have many investment options, and you must choose the right one that perfectly aligns with your goals, needs, and risk-taking capacity. If you are a first-time investor, investing in India may seem overwhelming. Do your due diligence about the market and the different investment options, open an NRE account and start your investment journey in India.
Disclaimer: The article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of The South Indian Bank Ltd. or its employees. The South Indian Bank Ltd and/or the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial/non-financial decisions based on the contents and information’s in the blog article. Please consult your financial advisor or the respective field expert before making any decisions.