A Non-Resident Indian or NRI is a person who has spent less than 183 days of the financial year in India. Even though NRIs are settled abroad, they still hold Indian citizenship. While the income earned outside India is not taxable, it is not the same for the income earned in the country.Read more
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To help NRIs save and invest, the government of India provides them with a diverse range of opportunities to save and invest. This article explores some of the Indian government schemes for NRIs.
The government of India is offering NRIs the following range of options for investment:
All these schemes will help the NRIs plan their future finances efficiently, which will help them achieve their goals. These investment options also help them plan retirement.
A fixed deposit is an investment instrument where NRIs can deposit their money and receive fixed interest. The interest rates may vary for different banks, which NRIs receive periodically. However, you cannot withdraw money from your fixed deposit account prematurely if your bank does not facilitate it. A penalty is imposed on premature fixed deposit withdrawals.
Three types of fixed deposits for NRI are:
In this type of fixed deposit account, your deposit is kept in the form of rupees. The interest earned is tax-free. The interest rates vary for different banks and the principal amount.
NRIs usually use this type of account to control their income. This type of account has a limit on the amount that you can transfer from your Non-Resident Ordinary Account (NRO) to the account in your residence country. The interest earned from an NRO account is taxed at the rate of 30%.
NRIs use these types of accounts to store foreign currencies. This helps the depositors to avoid currency fluctuations that take place in foreign exchange markets. The interest rate for these accounts depends on the type of deposited currency.
With US dollars, depositors generally get 2% - 3%. These accounts are liquid as you can withdraw money at your convenience. The interest earned on the deposit is tax-free.
NRIs are also eligible to invest in Government bonds and securities such as Treasury bills or T-bills, PSU bonds, and G-Sec Bonds. In simple terms, bonds are loans that government or PSUs take from different investors such as individual investors, HNIs, NRIs, Mutual Funds, and insurance companies.
The government then repays these loans by redeeming the bond, including the interest in the form of coupon payments to the investors/lenders. Government bonds generally have three types:
Mutual funds are a type of investment tool formed by Asset Management Companies (AMCs) or Fund Houses. These are pools of investments from different individuals, corporate houses, NRIs, and HNIs. This fund is then driven or operated by fund managers who are professional money managers. They invest this pool of funds into different stocks and bonds and other investable securities.
Mutual funds have a higher risk profile as compared to a fixed deposit account but mutual funds can generate a higher rate of return than an FD. But also, mutual funds are strictly regulated by a government authority named SEBI or Securities Exchange Board of India.
To invest in mutual funds, an NRI will need an NRE, NRO, or FCNR account in India to be able to invest. These accounts will help to initiate the investment process and also will help in the payout process.
Few government companies that have mutual fund investment facilities for NRIs are:
Direct Equities / Stocks Investment
Equity Mutual Funds
Debt Mutual Funds
NPS is a retirement savings scheme. NPS subscribers are allotted PRAN or Permanent Retirement Account Number. This retirement savings account works based on defined contributions. The benefits to an NPS subscriber depend on the volume of their contributions, returns, and the total term.
Following are the benefits for an NRI investing in India:
Investing builds a habit of saving and growing your money. It can help you achieve goals like foreign vacations and buying your dream car or house. Investing habits will also help you to plan your child's future. To achieve all these, you must start saving and must invest those savings intelligently.
Investing your money in India in instruments such as fixed deposits or mutual funds can generate a passive income for you. You can either send it to your loved ones or decide as per your convenience.
It is difficult to earn a decent interest income if you live in the USA. To counter it, you can invest in India because India has a higher interest rate than the US, and India is an emerging and rapidly growing economy.
The Government of India has taken some major steps to launch NRI schemes and welcome foreign investments. This initiative is beneficial for both India and the NRIs. It will help the NRIs to save and grow their hard-earned money and will provide them with an opportunity to earn better returns.
Past 5 Year annualised returns as on 01-03-2024
^Tax benefit are for Investments made up to Rs.2.5 L/ yr and are subject to change as per tax laws.
*All savings are provided by the insurer as per the IRDAI approved insurance plan.
Tax benefit is subject to changes in tax laws. Standard T&C Apply
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.
#The lumpsum benefit is calculated if policyholder invested ₹10000 monthly for 10 years in the fund with a policy term of 20 years. This Point To Point past performance data of last 10 years has been used to illustrate a scenario for the customers benefit. It is assumed that the past 10 years returns would have also been delivered in last 20 years. This is not guaranteed and not in anyway indicative of what the customer may actually get 20 years from now. The investment is subject to market risk and the risk is borne by the policyholder.
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