Every year, NRIs send substantial sums of money back to India. Many people are eager to take advantage of the Indian market’s investing potential. Apart from real estate, bonds and debentures are favored investment vehicles.
The Indian government announced in the Union Budget for 20202021, that NRIs will be eligible to invest in certain categories of government bonds without any restrictions. On April 1, 2020, this became law.
The Reserve Bank of India (RBI) established a special channel for non-resident Indians (NRIs) to invest in Government of India securities, or G-sec. “Fully Accessible Route (FAR)” is the name of this route.
Long-term securities are known as G-secs. Tenure lengths range from 5 to 40 years. Fixed or adjustable interest rates are available. Interest is calculated on the face value of the loan rather than the purchase price. The yields on these bonds range from 6.18 percent to 7.72 percent, depending on the tenure.
NRIs will be able to invest in all new government securities with 5-, 10-, and 30-year maturities beginning in the Financial Year 2021, according to the RBI. The FAR channel would be used to make this investment. NRIs, on the other hand, are unable to invest in Floating Rate Bonds 2020.
Can you repatriate these investments?
Yes, you certainly can. The investment must be made either from abroad through recognized and permitted banking channels or from monies accumulated in the NRE/FCNR (B) account.
If you invested on a non-repatriation basis, the money will be credited to your NRO account when it matures. If you invest on a repatriation basis, the maturity amount will be deposited into your NRE/FCNR (B)/NRO account.
How do you invest in these bonds?
You’ll need to contact your bank or brokerage, depending on whether you have an NRE/NRO account or a trading-cum-Demat account with them. On the scheduled days of the week, the bank/broker would bid for the appropriate bonds. For further information, you can contact the RBI’s Primary Dealers.
Are NRIs permitted to invest in Indian government bonds?
NRIs can now invest in Government of India bonds (G-sec) through the Reserve Bank of India. These are long-term investments. The duration of these bonds ranges from 5 to 40 years. These bonds have yields ranging from 6.18 percent to 7.72 percent depending on the duration.
The trading of bonds yields a fixed return, known as the ‘coupon rate’ or ‘interest rate.’ The interest rate might be either fixed or variable. Floating Rate Bonds 2020 are not available to non-resident Indians.
How may a non-resident Indian invest in RBI bonds?
Non-Resident Indians are paying close attention to the Reserve Bank of India’s recently launched Retail Bond Scheme (NRIs). Individual investors can open a Gilt Securities Account “Retail Direct Gilt (RDG)” account in the primary market and buy/sell in the secondary market under this scheme. Non-resident retail investors who are eligible to invest in government securities under the Foreign Exchange Management Act of 1999 can create an account with the RBI and use the RDG Scheme to invest in government securities. Higher returns could be the key reason. “The yield on an Indian Government Bond, which ranges from 6.5 percent to 7%, is substantially greater than the yield on developed market sovereign debt with a similar risk profile.” According to Sonam Srivastava, founder of Wright Research, a SEBI-registered RIA, “this new scheme must be a desirable secure debt option for NRIs.”
According to Abhay Agarwal, founder and fund manager of Piper Serica, a SEBI-registered PMS, NRI investors in the nation have limited possibilities for debt investments. They are unable to open a new PPF account. They cannot invest in high-yielding modest savings programmes like the National Savings Scheme or Kisan Vikas Patra. Mutual fund houses impose restrictions on NRIs from the United States and Canada, and only a few allow them to invest. Furthermore, mutual funds’ expenditure ratio eats into their returns. NRIs can invest in bank and corporate deposits, although these are only available for 5-10 year terms. “Most of these options, such as debt funds and fixed deposits, have significant fees and taxes,” Agarwal explains. They must also follow stringent regulations when investing.
Is it possible for NRIs to invest in tax-free bonds?
NRIs are authorized to invest in NHAI and PFC tax-free bonds, which are available for subscription in the primary market. This will also apply to HUDCO and Railway Finance Corporation’s planned tax-free bonds.
Are NRIs allowed to invest in SBI gold bonds?
Gold is a valuable item that increases in value over time and could be beneficial to you. Gold bonds have been made available for investment by the Indian government through banks and other financial institutions. NRIs can now invest in gold, contrary to previous practice.
Is it possible for NRIs to invest in G-Securities?
NRIs have been able to invest in certain GOI-dated securities without any quantitative restrictions since April 1, 2020, thanks to the government of India’s decision to create a “Fully Accessible Route (FAR)” as a separate channel for this purpose. NRIs, OCIs, and FPIs are allowed to invest in G Sec under the FAR.
Can non-resident Indians purchase perpetual bonds?
Bonds. If the issuer allows it, NRIs can invest in a variety of bonds, including PSU bonds and perpetual bonds. NRIs received tax-free bonds from the government a few years ago.
Fixed Deposits
Fixed deposits are not only popular among Indian citizens; they are also popular among non-resident Indians. Depositing money directly in banks is one of the safest options, and thus the most well-known. Non-Resident Indians can deposit money into one of the following accounts in India:
National Pension Scheme
The National Pension Scheme could be another safe investment option. It is a government-backed scheme that allows Non-Resident Indians to participate in stock, debt, or a mix of the two.
Individuals between the ages of 18 and 60 can join a National Pension Scheme, which can be created with just a few documents such as an Aadhaar card and a PAN card.
When investing in the National Pension Scheme, non-resident external accounts and non-resident ordinary accounts are commonly employed.
Mutual Funds
These days, mutual funds are gaining a lot of traction. For greater returns, NRIs with minimal experience in international investment might consider mutual funds. Before making any kind of investment, it’s critical to understand the nature of mutual funds and whether they’re open to NRIs from Canada or the United States. Another crucial criterion is to check the guidelines for house parties.
Non-Resident Indian mutual fund investments are governed by the Foreign Exchange Management Act (FEMA) of 1999. According to government regulations, NRIs can participate in the following Indian capital markets:
Mutual fund investments are more risky than fixed deposits or national pension systems since they are vulnerable to market risk. An NRI should invest in funds that are appropriate for their risk profile and financial goals.
Money can only be invested in Indian rupees and not in foreign currencies.
Real Estate
The value of real estate has skyrocketed in recent years. Non-Resident Indians can easily own property in India and rent it out to supplement their income. Real estate is a wonderful investment since it provides good long-term profits as well as consistent growth over time.
Non-Resident Indians can use the following bank accounts to buy or sell property in India:
Public Provident Fund
For NRIs, investing in a Public Provident Fund (PPF) account is a perfectly safe and government-backed option. An Indian citizen can open a PPF account and begin investing at any time. On the other hand, if an NRI does not already have a PPF account, he or she will be unable to profit from this scheme. NRIs cannot extend their Public Provident Fund Account after 15 years of the prescribed maturity period under the PPF Account.
Equity Investments
If an NRI is looking for a risky investment, equity is a good choice. NRIs can readily invest in India’s stock market through the Reserve Bank of India’s portfolio investment plan.
Non-Resident Indians’ equity investment bank accounts are as follows:
ULIP Plans
NRIs (Non-Resident Indians) enjoy the same rights as Indian residents to invest in ULIPs (Unit Linked Insurance Plans) under the Foreign Exchange Management Act (FEMA). It is regarded as one of the most popular and trustworthy investment solutions.
The main advantage of ULIPs is that they provide a dual benefit of investing and insurance, which can help you build wealth over time if you invest sensibly. The availability of tax incentives is another factor that attracts NRIs to invest in ULIPs. Under Sections 80C and 10(10D) of the Income Tax Act of 1961, the premiums paid for ULIPs are tax deductible.
If an NRI (non-resident Indian) wants to invest in a Unit Linked Insurance Plan (ULIP), he or she can do so by:
Child Plans
If you are an NRI (Non-Resident Indian), purchasing a Child Insurance plan is one of the finest ways to guarantee your child’s future. This type of plan promises a considerable corpus for your child back in your native country, thanks to high returns and frequent saves. Child insurance plans are available from a variety of private insurance companies as well as the Life Insurance Corporation of India (LIC).
Benefits Offered by a Child Insurance Plan
It provides financial security to your child so that he or she can have a nice and secure life.
The majority of child insurance programs provide both insurance and investment rewards.
These plans offer a maturity benefit in the form of a lump sum payment at the end of the policy period.
Partially withdrawable funds are also available in these schemes. A policyholder may use a portion of their funds to meet their child’s immediate needs.
Can NRIs purchase gold bonds issued by the RBI?
Experts have always recommended that people invest 5 to 15% of their overall assets in gold. The pace of increase in gold is very strong, which means that gold investment from outside India has a lot of potential.
Because of its amazing rate of growth, gold is an excellent investment for NRIs. Gold investing by non-resident Indians (NRIs) can be a lucrative alternative. The following are the gold investment alternatives open to NRIs:
Investment in Gold in Physical Form
In India, gold is always purchased and collected in the form of jewelry. Buying, presenting, and wearing gold jewelry at family events and celebrations is a tradition because of its aesthetic appeal. Although appealing, it has certain disadvantages, such as the possibility that many homes may not sell it when the price rises; another issue is that metal wastage and manufacturing and melting costs may not be favorable.
Purchasing bullion coins is advantageous since they are available in several values ranging from 2.5 grams to 50 grams, with an international assay certification of 24 carat purity. NRIs should purchase it from jewellers rather than banks because they can sell it back to the jeweller but not the bank.
Gold ETF
ETFs (exchange-traded funds) are mutual funds that invest in gold and extract value from it. NRIs must have a PINS account to invest in Gold ETFs on the Stock Exchange in India. They can purchase it from a fund house, but they must do it in multiples of 1000 units.
E-gold
This is a fantastic chance for NRIs wishing to make a little gold investment. This can be done in Demat form in lesser amounts as low as 1 gram of gold and its multiples. This gold investment system functions similarly to stock exchanges, with high liquidity, no purity issues, and low storage expenses.
Sovereign Gold Bonds
If consumers wish to acquire gold digitally, they have a convenient choice. The Indian government has launched this scheme with a 2.5 percent annual interest rate; however, NRIs are not permitted to participate in these gold bonds. They can, however, maintain these bonds until early redemption or maturity if they purchased them before obtaining NRI status.
Gold Funds
Gold funds are gold mining and producing firms that offer investment choices in the form of bars. Investing in gold funds is comparable to mutual fund investing.
Is it possible for NRIs to invest in mutual funds in India?
NRIs are allowed to invest in mutual funds in India, but they are subject to particular tax and foreign exchange rules. Several platforms, such as Kuvera, Clear, and Scripbox, allow NRIs to invest in India completely online from their home country. However, because of the extensive documentation required by FATCA, several mutual fund institutions refuse to accept mutual fund applications from the United States or Canada (Foreign Account Tax Compliance Act). L&T Mutual Fund, Nippon India Mutual Fund, PPFAS Mutual Fund, and UTI Mutual Fund are some of the AMCs that allow US/Canada residents to invest in India. Certain terms and limitations apply to the investments.
Is it possible for NRIs to invest in Indian stocks?
If you are an ambitious investor willing to accept some risk in the stock market, you should consider investing in equities. Under the RBI’s Portfolio Investment Scheme (PINS), NRIs can participate directly in the Indian stock market. To invest in the Indian stock market, NRIs must have an NRE/NRO bank account, a Demat account, and a trading account.