The Indian stock market offers a wide range of investment avenues for individuals. It is an excellent option for investors who wish to diversify their portfolios, earn substantial returns, and participate in the economy whilst undertaking risk in alignment with their risk appetite.
The available investment options include both short-term instruments and long-term ones.
Whether you are looking to park your funds in a suitable investment avenue for the short run or searching for a long-term savings plan, there is no dearth of alternatives to invest in the stock market. While the individuals residing in the country can participate in the Indian stock market with ease, Indian citizens residing in other countries can also participate in these markets through Non-Resident Indian (NRI) investments.
What is NRI Investments?
NRI investments are the investments made in the Indian market from any other country in the world.
If you’re an NRI investing in the country, your investments have to comply with the rules listed by the Foreign Exchange Management Act (FEMA). Your residential status based on FEMA will determine if you can invest as a resident Indian or as an NRI.
Along with this, you will also have to follow the RBI regulations on NRI investments. As per the RBI regulations, NRIs can invest only up to 10% of the paid-up capital of a company listed on the Indian stock exchange.
Who Qualifies As an NRI?
You will be considered a Non-Resident Indian if you’re an Indian citizen who has resided in India for less than 183 days during the preceding financial year or if you’ve gone or stayed out of the country for employment or managing a business. You will also get NRI status if you have gone outside India for any other purpose for an unspecified period.
Best Investments Options for NRIs in India
Here are a few of the best options for NRI investments in India:
- Mutual funds:
For secure market-linked investments, NRIs can invest in mutual funds if they strictly follow the rules set by the FEMA (Foreign Exchange Management Act). You can start your investment by opting for equity funds, debt funds, hybrid funds, etc.
based on your objective and risk profile. Investing online in mutual funds can be beneficial, as you can easily track and manage your funds from anywhere in the world.
You can also start an SIP (Systematic Investment Plan), i.e., regular monthly investments into mutual funds, for a disciplined investment mode. Additionally, with the ELSS-based (Equity Linked Savings Scheme) mutual funds, you can avail applicable tax benefits as per prevailing tax laws.
ULIPs
ULIP or Unit Linked Investment Plans offer the dual benefit of wealth generation through market-linked investments, along with life cover. The ULIP premium is used to invest in market-linked funds based on your risk appetite.
Opt for equity, debt or hybrid funds based on your risk-taking capabilities and financial goals. Additionally, your family will be taken care of in your absence with the assured death benefit. You can also enjoy tax benefits as per prevailing norms on ULIP investments.
Guaranteed Savings Plans for the Risk-Averse Investor:
If you are not interested in market-linked investments but are looking for savings-based insurance plans, go for guaranteed savings insurance plans. These savings policies are considered optimal options for NRIs, as they offer the benefit of both assured returns and life cover to the investors. With savings insurance, you can protect your loved ones and build wealth simultaneously.
Opting for a long-term savings plan will be a better option, as you can secure your golden years with non-market-linked assured returns. Leading insurers like Tata AIA life insurance company also offer various savings plans that provide lump sum payout as well as regular income options to the policyholder.
Accounts required by an NRI to invest in the Indian stock market
NRE account:
A Non-Resident External Rupee (NRE) account is an Indian rupee-based account that offers excellent security. The account can be in the form of a savings account, fixed deposit, or current account. The international currency you deposit in this account is converted to INR. You can transfer your funds to your international account from your NRE account.
NRO account:
The Non-Resident Ordinary (NRO) account is a savings or current account for NRIs that helps them manage the income earned in India. You can deposit and manage the funds in such an account. In addition to this, this account helps you receive funds in international currencies as well as the Indian currency.
You will need to open either of the above-mentioned accounts for international investments. The accounts help investors transfer foreign earnings in Indian currency to Indian accounts. They also allow you to handle and earn funds from Indian investments.
Conclusion
India’s economy is on the rise, and while you may have moved to a different country, you can still participate in the country’s growth. With NRI investments in the Indian stock market, you can build a strong portfolio for yourself that holds different asset classes and helps you achieve your financial objectives in life.
