As with resident individuals, the selection of investment instruments by Non-resident Indians (NRIs) primarily depends on their risk appetite, investment horizon, liquidity requirements, asset allocation strategy and tax liabilities.
In recent years, India has evolved as a preferred destination for international investors looking at developing economies. This has resulted in many NRIs turning to India for investment opportunities. Besides, the Indian government has made investments easy for NRI investors by making the rules more beneficial for them.
Also read: Basic thumb rules to start planning your retirement Here are a few of the investment options for NRIs in India: Bank fixed deposits (FDs)
According to Harsh Jain, Co-founder and COO, Groww, bank FDs are the safest investment options available in India. NRIs can deposit a fixed deposit with their NRE, NRO, or FCNR accounts.
FDs are currently offering returns in the range of 5 percent to 7 percent.
Direct equity investments
As per Archit Gupta, Founder and CEO, ClearTax, direct equity investments are one of the best investment options for NRIs.
“To invest in equities and debentures of Indian listed companies, NRIs need to have an account under the portfolio investment scheme (PIS) on either repatriation or non-repatriation basis. The long-term investment horizon, coupled with a balanced investment approach is likely to yield good returns in the long run,” Gupta explains.
With India showcasing its capabilities on most industrial fronts, Jain of Groww adds, this can be a good time to participate in the growth of a developing economy.
Meanwhile, Sahil Arora - Director, Paisabazaar, warns NRI investors against investing in equities for the short term.
"Equities can be very volatile in the short term. While in the long term, these can beat the returns generated by fixed income instruments by a wide margin," he opines.
Investors who lack the knowledge or time to manage investments made in direct equity may consider investing in mutual funds as these are professionally managed by finance professionals known as fund managers, suggests Gupta.
"NRIs residing in the United States of America (USA) and Canada are allowed to invest only in some mutual fund houses. Mutual funds are an excellent option for long-term wealth creation. It is advisable to have an investment horizon of longer than five years to unleash the power of compounding to the fullest," he advises.
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In the words of Jain, "NRIs can invest in mutual funds through their NRE or NRO accounts. Investments can be made in INR only, foreign currency investments are not permitted in mutual funds in India. Since NRIs are not living in India, banking on the expertise of a fund manager can help them navigate the economic ecosystem with ease."
NRIs wishing to invest in tax saving instruments should, meanwhile, consider ELSS (popularly known as tax saving mutual funds), which have the lowest lock-in period of just 3 years.
"Being invested in equities, ELSS also has the highest wealth-creating potential among all Section 80C for the long term, at least for investment horizons exceeding 7 years. Hence, NRIs ready to stay invested for an entire economic cycle should prefer ELSS over other tax-saving investments to generate greater wealth while retaining the flexibility to redeem their investments, if required, after 3 years," further tells Arora.
Real Estate investments
NRIs can participate in India's booming real estate market. Apart from capital appreciation, they can also earn regular rental income.
Public Provident Fund (PPF) and National Pension Scheme (NPS)
NRIs are permitted to invest in PPF accounts in India too. These investments have a lock-in period of 15 years. Like PPF, NRIs can invest in NPS too.
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