If you are an NRI, India actually has a lot more good investment options compared to what you think. Not only that, you get fruitful returns on the investment you make. However, you do need one of the NRI accounts, namely, the NRE, NRO or FCNR bank account. Here are what you can do with these accounts and the advantages and disadvantages of each.
1.National Pension Scheme (NPS)
This is when a principal is invested after which an annuity is claimed by the investor. It can be availed by any NRI in between the ages of 18 and 60. Funds can be transferred from an NRO or NRE account. However, this cannot be done from an FCNR account. Also, whenever an NRI gives up his citizenship, he loses his NPS account.
2. Fixed deposits
An FCNR or NRE account is preferable as compared to an NRO account when it comes to fixed deposits. This is because the NRE and FCNR account are tax-free in India, whereas an NRO account cannot be repatriated and is taxable at its source. Also, ever since the RBI was linked to LIBOR, NRE fixed deposits can get up to an 8.5% return whereas with an NRO you can only get up to 7.75%.
A CD is a certificate of deposit. They are basically a liquid form of a time deposit. However, NRIs can only subscribe to CDs on a repatriable basis. This means that it can be moved from one country to another. The rate of return on these are also higher than a fixed deposit.
These are not just bonds but bonds which cannot be redeemed in India. They are usually used by a company or the government when long-term investment is the goal. The coupon rate for March 2015 is between 9.48% and 10.75%. However, banks do lock your principal amount for quite some time.
5. Mutual funds
These can be either debt mutual funds or equity mutual funds. Debt mutual funds are when investments are done in fixed income securities. Among these, money market instruments, treasury bills, and corporate bonds are included. Equity funds are the other type of mutual fund. However, it has been highly recommended by financial experts to use hybrid funds for mid-term investments.
Mutual funds, bonds, CDs, fixed deposits and the national pension scheme are just some of the ways that NRIs settled abroad can avail the financial markets in India. However, it all depends on your financial requirements and what you plan to do with it in the future.