Retirement Planning for NRIs: Tips for a Secure Financial Future

In Kerala, there is a joke that states that each family donates one of its sons to the UAE or the Gulf. Gujarat and Punjab would both fall under this. And many non-resident Indians (NRIs) return to India to live out their golden years after having spent a significant amount of time abroad. They appear to know where they want to retire, but are not making sufficient planning. This may not apply to all NRIs, but it is a crucial reminder that NRIs may overestimate their children’s desire to contribute to their retirement and underestimate the corpus required.

Five things that you need to do if you plan to relocate back home in your later years

1. Decide your age of retirement

2. Corpus required during retirement

3. Insure yourself; health insurance is must

4. Choose the right investment

5. Make a will

Retirement planning is a long-term objective, so investing aggressively in equities allows you to take on greater risk for greater reward. If you have a 20-year or longer investment horizon, around 60-80% of your investment should be made in equity because it is a long-term investment plan, and the remaining portion should be made in debt.

1. Mutual Funds

These days, mutual funds are quickly gaining popularity since they offer more possibilities and are safer than direct equities. Even NRIs with less experience in international investing can choose mutual funds for better returns.

Foreign currency investments might not be allowed by Indian mutual fund providers. Another FEMA regulation is that one must maintain a bank account (not a regular bank account), particularly as:

● Non-Resident External (NRE) or

● Non-Resident Ordinary (NRO) or

● Foreign Currency Non-Resident (FCNR)

When investing in Indian mutual funds, NRI investors typically worry about double taxation. Tax on investments in mutual funds is not applied if and only if India and the country of residence sign a Double Taxation Avoidance Agreement (DTAA).

2. Equity Investment

Equity investments are the best choice for NRIs who are risk-taking investors. Within the Reserve Bank of India’s portfolio investment scheme, NRIs can readily invest 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.

3. Gold

The Indian Stock Exchanges list gold exchange traded funds, or gold ETFs, in which NRIs can invest. One unit of the Gold ETF represents one gramme of actual gold, and it tracks domestic gold prices. As per FEMA guidelines, NRIs are required to open a Portfolio Investment NRI Scheme (PINS) Account before investing in Gold ETFs. NRIs who like gold mutual funds over gold exchange-traded funds can do so. According to the 1999 Foreign Exchange Management Act (FEMA), NRIs are not permitted to invest in sovereign gold bonds (SGBs).

Like resident Indians, NRIs can invest in E-Gold.To invest in E-Gold in India, NRIs must open a Demat and Trading Account with NSEL-approved depository participants. Additionally, just like shares, E-Gold units can be traded on the stock exchange, and one E-Gold unit is equivalent to one gram of gold.

4. Real Estate

NRIs are allowed to own or purchase property in India as long as they follow the FEMA (Foreign Exchange Management Act) regulations. Market analysts claim that the lack of significant regulatory constraints is the largest benefit for NRIs investing in real estate in India. They simply need to complete the registration procedures for real estate. Compared to residential properties, investing in commercial property in India can offer NRIs substantial rental yields. Given how quickly India’s economy is expanding, there is a considerable increase in demand for commercial real estate, which has led to financial gains for investors.

5. Fixed Deposits

NRIs are eligible to open FCNR, NRE, and NRO FDs. On NRE and FCNR FDs, they are permitted to receive interest income without paying taxes; however, interest on NRO FDs is subject to taxation in India. Keep in mind that not all NRI FDs provide 100% repatriation of funds. NRO Fixed Deposits have restricted repatriation compared to FCNR and NRE FDs, which are fully-repatriable.

6. Public Provident Fund

The Indian government provides the Public Provident Fund (PPF), a well-liked long-term savings and investment option. It is a suitable investment choice for those who live overseas and want to invest in India because it is also open to non-resident Indians (NRIs).

It is a 15-year investment plan that has a possible five-year extension. The programme has tax advantages and is supported by the government, making it a secure option for investments. Both the investment’s interest and its maturity sum are tax-free.

7. Insurance

It is important to protect yourself since life insurance can benefit you by giving your family financial security in the event of a sudden death of the policyholder. On the other hand, health insurance guarantees payment of your medical expenses in the event of a critical illness and extended hospitalisation.

Due to increased globalisation, investment prospects are increasing daily. Today, there are many more options available to non-resident Indians who want to invest their money in their country than there were in the past. There are many possibilities for investing in India, but it is best to understand the investment before moving forward.