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Investment Options

The Indian Government is opening more doors for NRIs (Non-Resident Indians) to invest in their home country and hence is coming up with vital options so that NRIs can diversify their global portfolio.

Unit Linked Insurance Plans (ULIPs)

Capital Guarantee Solution Plan

Retirement Plans

Guaranteed Returns Traditional Plans

Child Plan

National Pension Scheme

Mutual Funds

Fixed Deposits

Real Estate

Equity Investments

Portfolio Management Services (PMS)

Public Provident Fund or PPF

Bonds and Non-Convertible Debentures (NCDs)

Pre-IPO investment

Unit Linked Insurance Plans (ULIPs)

ULIPs or Unit Linked Insurance Plans are plans that include the benefits of both insurance and investment. This insurance plus investment plan helps in the creation of wealth as well as protects the family of the insured after their untimely demise. It is undoubtedly gaining huge popularity these days and is considered one of the best sources of investment for moderate to high risk-taking investors.

The investment amount in the ULIP is divided into 2 parts:

One part of the premium is to provide life insurance coverage.
The other part of the premium is used for investments in debt and equity funds to reap financial benefits.

The amount invested in ULIP can be chosen as per the financial goal of the investor.

Benefits of ULIPs

It is an investment plus insurance plan.
No other plan in India serves a dual purpose for the investor.
Generally, it comes with a 5-year lock-in period that helps save money for the future.
Partial withdrawals can be made after the completion of the lock-in period.
Offers tax exemptions under the Income Tax Act, 1961.
Offers easy switching between funds facility to investors.
Allows diversification in the investor’s portfolio that helps them in the future.
Flexibility to redirect future premiums to funds of the investor’s choice.
A guaranteed sum assured is provided to the nominee in case of the untimely death of the investor.
Provides long-term benefits along with high returns.

Capital Guarantee Solution Plan

The capital guarantee plan is an investment that focuses on safeguarding the investor’s principal from any losses during economic downturns. Under the capital guarantee fund, the fund company absorbs any losses experienced by the underlying investment. Capital Guarantee Plans are basically ULIP plans that are a combination of insurance and investment. Under this plan, 50-60% of the amount invested goes into debt for capital protection, and the rest is invested in equity. The plan comes with a policy tenure of 10 years and a premium paying tenure of 5 years.

The significant advantage of the capital guarantee plan is that on the maturity of the policy, the full premium is returned along with the additional benefits made by the product. The capital gain funds thus aim to invest majorly in conservative instruments to help minimize the probability of losses and offer guaranteed returns.

Retirement Plans

Retirement plans, in general, are policies and plans specially designed to safeguard an investor’s future after retirement. Retirement plans help in creating a financial corpus for an investor, ensuring that they maintain a particular lifestyle, even after they have stopped earning.

There are 2 types of retirement plans available in the market:

Pension Plans

Pension is a source of income after retirement when an individual cannot earn regular monthly income for themselves. Pension plans allow the investor to save money regularly during the earning years to have a stable retirement life. Pension plans in India are designed in such a way that inflation does not affect the returns, hence allowing maximum returns to the NRIs.

Annuity Plans

Annuity plans offer regular payouts to the investors for the rest of their life after retirement. Pension plans provide accumulated phase to the investor, which can be systematically put in a policy regularly. After retirement, an annuity plan can be bought with these accumulated funds that provides regular paybacks as per the plan’s policies.

Guaranteed Returns Traditional Plans

Guaranteed returns traditional plans are one of the most vanilla and oldest forms of insurance plan that comes with the following benefits:

Guaranteed fixed returns
Complete risk coverage
Life protection
Tax deduction benefits

Guaranteed return traditional plans are highly-suited for investors not having a considerable risk appetite. Total Sum Assured + Vested or Guaranteed Bonus is provided to the investor at the time of maturity of the plan. The highlighted feature of the Traditional Plans is that the investor is not directly linked to the market and hence, only has to enjoy maximum returns provided by the plans without thinking about market fluctuation.

Child Plan

Due to massive economic growth in India, more Non-Resident Indians (NRIs) are willing to invest their money here for better growth. A child plan is one way of making investments in India and safeguarding your child’s future.

A child plan is a combination of insurance and investment under one roof. The insurance part helps in protecting your child against any unforeseen event, such as your untimely demise. In addition, it ensures that your child receives a fixed annual payment from your insurer, as per the terms and conditions of your policy.

On the other hand, the investment component helps in fund accumulation through investment in various financial instruments. These instruments include equities, debt bonds, etc.

National Pension Scheme

One more reliable source of investment could be the National pension scheme. It is a completely government-backed scheme that lets the Non-Resident Indians invest in either equity, debts, or a combination of both.

A national pension scheme is for individuals between the age of 18 years to 60 years and can be opened with minimal documents like Aadhaar and PAN card.

Non-Resident External Account and Non-Resident Ordinary Account are generally used while investing in National Pension Scheme.

Under National Pension Scheme, you can go for either:

Active Choice

Where the asset is allocated in between

Equity
Corporate Bonds
Government Securities

While selecting an active choice, 75% (maximum) can be allocated in equity.

Auto Choice

Asset allocated completely depends upon the age of the Non-Resident Indian.

Auto means that the assets are allocated automatically and cannot be decided to be the investor.

Mutual Funds

Mutual Funds are safer and more option as compared to direct equity and are gaining rapid popularity these days. NRIs with limited expertise in foreign investment can surely opt for mutual funds for better returns. However, it is important to understand the nature of mutual funds and whether they are open for Canada or USA NRIs before making any kind of investment. Checking of rules for house parties is another important criterion.

Foreign Exchange Management Act (FEMA), 1999 governs the Non-Resident Indian mutual fund investments. NRIs, as per the government rule, can make investments in the following capital markets in India:

Direct stocks,
Mutual funds,
Exchange-traded funds.

Mutual fund investments are subject to market risk and are a little riskier as compared to fixed deposits or national pension schemes. Therefore, an NRI should select funds as per their risk profile and financial objectives.

Key points under Non-Resident Indian investment in Mutual Funds are as follows:

Money can be invested through Non-Resident External Account
Money can be invested through a Non-Resident Ordinary Account

Money can be invested only in Indian National Currency only and not in foreign currency

Fixed Deposits

Not just for the citizens of India, fixed deposits are quite common for the Non-Residents Indians as well. Directly depositing in banks is one of the safest options and is considered the most famous. The Non-Resident Indians can deposit their money in India through one of the following accounts:

Fixed Deposit in NRE Account (Non-Resident External Account)
Fixed Deposit in NRO Account (Non-Resident Ordinary Account)
Fixed Deposit in FCNR Account (Foreign Currency Non-Resident Account)

For better returns than FDs, an NRI can also opt for an all-new “Max Life Smart Fixed-Return Digital Plan” that offers a combination of higher fixed returns, life coverage, and tax savings, making it a preferred choice for investors looking for guaranteed fixed returns.

Some of the main highlights of the plan are:

Guaranteed returns as high as 6.5%, payable as a lump sum at maturity.
Tax saving benefits on the premiums and tax-free maturity benefits.
A loan can be availed in case of financial emergencies.
Insured can select the life insurance coverage as per their financial requirement.
Additional 0.25% maturity benefits are available for a policy term of 5 years.
Additional 0.50% maturity benefits are available for a policy term of 10 years.

Real Estate

Real estate prices have increased immensely over time. Therefore, it is very convenient for Non-Resident Indians to buy property in India and put it out on rest for some extra income. Real estate is a decent source of investment as it offers good long-term returns and steady growth.

Bank accounts to be used by Non-Resident Indians to buy or sell a property in India are as follows:

Non-Resident External Account
Non-Resident Ordinary Account
Foreign Currency Non-Resident Account

Equity Investments

In case an NRI is an aggressive investor, then investing in equity is an ideal investment option. The NRIs can easily invest in India’s stock market within the portfolio investment scheme of the Reserve Bank of India.

Bank accounts used for equity investments by Non-Resident Indians are as follows:

Non-Resident External Account
Non-Resident Ordinary Account
Demat Account
Trading Account to invest in the stock market in India

Portfolio Management Services (PMS)

Portfolio Management Services (PMS) is a professional investment service tailored to meet the needs of High Net-worth Individuals (HNIs) who wish to maximize their returns on their investments. In this, a professional fund manager is appointed to manage the investment portfolio of the client in accordance with their objectives and risk tolerance.

One of the primary benefits of PMS is that it provides the client with a high degree of flexibility and control over their investment portfolio. They also has the option to choose the investment and freedom to enter or exit a particular investment any time. However, the same facility is not available in traditional mutual fund investments where the decisions are made by fund managers.

Public Provident Fund or PPF

Public Provident Fund (PPF) is a popular long-term savings and investment option offered by the Indian government. It is also available to non-resident Indians (NRIs), making it a viable investment option for those living abroad who wish to invest in India.

It is a 15-year investment scheme that can be extended for an additional five years. The scheme offers tax benefits and is backed by the government, making it a safe investment option.

PPF is available to NRIs, subject to certain conditions. NRIs can open a PPF account either in their name or in the name of a minor child of whom they are a guardian.

The following are some of the features of PPF for NRIs:

Eligibility:

NRIs are eligible to open a PPF account provided they are Indian citizens. They cannot open a new account once their NRI status is changed to that of a resident.

Minimum investment:

The minimum investment amount for PPF is INR 500 per year, while the maximum investment limit is INR 1.5 lakh per year.

Tax benefits:

PPF offers tax benefits under Section 80C of the Income Tax Act. The interest earned on the investment and the maturity amount are tax-free.

Tenure:

The tenure of the scheme is 15 years, which can be extended for an additional five years.

Withdrawal:

NRIs can make partial withdrawals from their PPF account after completion of five years from the end of the financial year in which the initial deposit was made.

Nomination:

NRIs can nominate a person to receive the proceeds of the PPF account in case of their death.

Loan facility:

NRIs can also avail of loan facility against their PPF account after completion of three years from the end of the financial year in which the initial deposit was made.

Bonds and Non-Convertible Debentures (NCDs)

As an NRI, investing in bonds and non-convertible debentures (NCDs) can be a safe and reliable option for generating fixed income. Bonds and NCDs are debt instruments issued by companies, financial institutions, or the government, where investors lend their money to these entities for a fixed period, in exchange for interest payments.

Non-Convertible Debentures (NCD)

Non-convertible debentures (NCDs) are a secure and long-term investment option that NRIs can consider. These debt instruments are backed by the assets of the company issuing them.

Perpetual Bonds

Perpetual bonds are a type of debt instrument that does not have a specific maturity date. Instead, the issuer promises to pay the investor a fixed amount of return every year, making it a perpetual source of income for the investor. Due to their unique characteristics, perpetual bonds are relatively rare and typically issued by large corporations or government entities.

Public Sector Unit or PSU Bonds

When you invest in PSU bonds, you essentially loan money to a PSU company, which guarantees to pay you interest upon maturity. The interest rate offered on PSU bonds depends on the creditworthiness of the issuing PSU company.

PSU bond investors enjoy the benefit of tax-free interest income under section 10 (15) (IV) (h). However, if you sell the bonds after owning them for more than three years, you will be taxed at a rate of 20%. NRIs can also avail tax deductions by investing in REC and NHAI capital gain bonds under section 54 EC.

Pre-IPO investment

Pre-IPO investment is investing in a company before it goes public. It can offer significant returns, but also carries high risk since private companies may lack oversight and have less financial information available. Investors should conduct thorough research and work with experienced advisors before making any investment decisions.

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Investment Options