Sovereign Gold Bonds – All You Need to Know

invest on sovereign gold bond

For Indians, gold is one evergreen investment – the love for which never fades. There are some problems with gold investment – the biggest being security. Now you don’t have to worry about investing in gold as there is an alternative and a better one – Sovereign Gold Bond (SGB).

What is Sovereign Gold Bond?

The Sovereign Gold Bonds are backed by RBI and the Government of India. The scheme was made public in November 2015 as an alternative to physical gold. It is one of the safest options for investment as it is backed by GoI and RBI.

SGBs have gold as the underlying asset, and the price is denominated in grams of gold. The issue price is the average closing price of the last three working days of 999-purity gold as given by the Indian Bullion and Jewellers Association.

Who can invest in Sovereign Gold Bonds?

Indian residents as defined under the Foreign Exchange Management Act, 1999 are eligible to invest in SGB. Eligible investors include individuals, trusts, HUFs, universities, and charitable institutions.

If your status changes from resident to non-resident, you may continue to hold SGB till maturity or early redemption.

How to buy Sovereign Gold Bonds?

You cannot buy SGB as and when you want to. They are intermittently available for investment – the government releases them in tranches. The price is announced per gram every time the window is opened. You can invest in multiples of a gram.

You can purchase it from offices of nationalized banks, scheduled private banks, scheduled foreign banks, Stock Holding Corporation of India, designated post offices, and authorized trading members of stock exchanges.

You can apply offline by downloading the application form from RBI’s website. However, if you apply for it online, you get a Rs 50 discount per gram.

Why should you invest in SGB?

  • There is no risk of theft when you invest in SGB. When you invest in physical gold, there is worry about storage, and safety is a big issue.
  • When you buy physical gold, there is a making charge. When you invest in SGB, there is no such fee.
  • The gold bonds can be redeemed on maturity or prematurely in the secondary market. You can get in touch with an advisor to find out how to do it.
  • One of the biggest advantages of SGB is interest payout. You get a fixed annual interest rate of 2.5% on the amount you invest in SGB. The interest payment is made every six months to the investor. It is on top of gold price appreciation.
  • There are tax benefits associated with SGB. There is no TDS on the interest you receive from your SGB investment. The capital gains tax is exempted if you redeem the bond after maturity (8 years).

What are the drawbacks of Sovereign Gold Bonds?

Before you invest in SGB, you must also understand the drawbacks. Below are a couple of drawbacks:

  • Lock-in: It is a long-term investment as the lock-in is eight years. We believe that the government has kept the maturity long to prevent losses for the investors due to gold price volatility. Though the lock-in is eight years, investors can redeem their investment five years after the investment date.
  • Capital Loss: You will have to stay invested for 5 to 8 years. The price of your investment is directly linked to the gold price in the international market. If the price goes down, you may incur a capital loss. Since the investment duration is long, the chances of it are minimum.

Should you invest in Sovereign Gold Bond?

If you plan to diversify your portfolio, SGB is one of the best options to explore. The tax benefit, government guarantee, and interest payment make it an attractive investment.

The vital question in front of investors is on the percent – how much allocation to have in gold? There is no universal answer to this question – it depends on your investment goals and risk profile. We at Right Horizons can help determine the correct gold allocation for you. Get in touch with us and leave all your investment worries so you can enjoy life.

What is the corpus required for a monthly income of Rs 1 lakh?

retirement-corpus

Whether you are retiring soon or plan to retire after a few years, generating a monthly income of Rs 1 lakh will not happen automatically. It requires planning and effort.

If you are starting your career and your retirement years are far away, the goal of Rs 1 lakh monthly income can be easily achieved. However, if you are in your 40s and 50s and have decided to start a plan now, you will have to work hard. You need to be more focused on your investment.

Today, we will discuss things you need to take care of if you plan to retire today with a Rs 1 lakh income per month. Also, we discuss if your retirement has time, how you can decide on the retirement corpus.

Inflation is a crucial factor to consider

If you are looking for Rs 1 lakh monthly income, the first thing you should be careful about is the time. Have you decided on the monthly amount based on your current expenses or have factored in the inflation?

For example, if today your monthly expenses are Rs 1 lakh and you want to retire after 20 years, assuming 6% inflation, you will need Rs 3.2 lakh per month to have the same living standard. We recommend all our clients to give due importance to inflation for all their future planning.

If your current expense is Rs 30,000 today and your retirement is 20 years, in that case, you will need Rs 1 lakh approximately. With these two numbers, you can estimate what you need at retirement.

Also, if you are 60 today and think you will need Rs 1,00,000 and that amount is sufficient – You are mistaken. Again, because of inflation, you will probably need a lot more by the time you reach 70 or 80. If you are looking for a rough estimate, you will have to make certain assumptions:

  • The inflation rate: Given the historical data, you must assume the inflation rate of 6% for all your retirement years.
  • Life Expectancy: It is one of the crucial parameters that would decide how much corpus you will need to retire. It is always better to be conservative in this estimate. Taking life expectancy higher than the average is a good idea. Hence, taking a minimum of 80 years and taking 85 years is on the safer side.

Corpus for Rs 1 lakh month income

Before giving you an estimate, we would like to mention that we have taken inflation into consideration post your retirement years. For example, we have assumed that in the first year would need Rs 12.72 lakh (6% inflation), in the second year, you will need Rs 13.48 lakh, and so on.

Assuming a life expectancy of 85 years, you will need approximately Rs 3.5 crore today. We have also assumed that your investment corpus will generate moderate returns of 6%, and your current age is 60 years.

The numbers will change drastically if you are 40 years and you plan to retire today and require the same monthly income.

It is always better to consult a financial advisor to make such calculations as there are too many assumptions and variables that you may miss. We at Right Horizons have years of experience in solving the complex financial needs of our clients and making their financial journey super easy.

Where to invest your retirement corpus?

One of the biggest mistakes most retired people make is that they invest all their corpus in debt with low returns. Given the high inflation, the returns may not beat inflation.

Also, as explained above, the retirement years can be 20 to 25 years or even more. Note that all your retirement funds won’t be needed immediately. Hence, you can put a certain percentage of it in equity. How much? It depends on how much risk you are ready to take. Within equity, there are some safe options, and you can invest in them. Other options can also give you inflation-beating returns.

Before you go

Making the best use of your retirement corpus and generating steady income is not easy – there are too many variables to take care of. If you cannot plan it yourself, please consult a financial advisor. It is something where you cannot afford to go wrong.

P.S – The numbers and assumption used in this article are only for understanding. The actual numbers may vary from person to person.

NRIs: Income Tax aspects on renting out a property in India

NRIs Income Tax aspects on renting out a property in India

If you are an NRI and wondering what you should do with your residential flat in India, you are at the right place. NRIs want to rent out their residential flat, but they are unsure of income tax aspects. In this article, we will answer your queries concerning income tax on renting a property in India.

Why should NRIs rent the property?

NRIs staying abroad must rent out their residential flat in India for two main reasons:

  • It takes care of the maintenance and other expenses related to the flat.
  • You generate a steady income that can help you with specific financial goals.

Rent a property - Get the basics cleared

You can rent your property in India as an NRI and receive the monthly income. The only difference is that the rent amount should be credited to your NRE or NRO account. You are free to repatriate the amount received. If you do not have the NRO/NRE account, you can ask your tenant to transfer the rent amount to your local account.

For either option, your tenant should submit Form 15CA online to the Income Tax Department. You may also need to produce an appropriate certificate from a Chartered Accountant (CA) certifying that all taxes are fully paid.

Do NRIs have to pay taxes on rental income?

Most NRIs are unaware of it, but they need to pay taxes on the rental income they earn in India. In fact, the tax is deducted at the source (TDS) by the tenant. Your tenant must obtain a TAN number and deduct tax of 30% from the rent amount and only transfer the balance to your account and share a TDS certificate.

What if a tenant does not deduct TDS? If the tenant does not deduct tax and you fail to declare your income and pay the tax, the IT department will hold you responsible in this case. If a tenant is not deducting TDS, it is your responsibility to declare the income and pay the required taxes.

Do NRIs have to pay taxes in the country of residence?

In general, as a resident of the country and getting global income, you are required to pay taxes. Hence, the tax is deducted from a source on your rental income in India, and your foreign income will be subject to tax in your residing country.

However, we have many countries with whom India has signed Double Taxation Avoidance Agreements (DTAA). India has signed DTAA with 88 countries (with 86 countries, it is in force). If you are not sure how you can benefit from the DTAA, you can take help from a financial advisor.

The DTAA rules are different in different countries. For example, India-US DTAA states that the rental income will be taxed in the country where the property is located. Hence, if you are an NRI resident in the US, you will only have to pay taxes on your rental income in India. However, you will have to disclose your rental income while filing your tax returns in the US. You will get a credit for taxes paid in India. You must check the tax laws for the country you are residing in or consult an expert.

Are there any exemptions around tax for rental income?

Yes, if your total income in India, including your rental income, is below Rs 1.6 lakh, you get a TDS exemption – your tenant should not deduct the TDS. However, the process for the exemption is not easy. The first thing you need to do is apply for a tax exemption certificate from the tax authorities. Once you have your certificate, submit the certificate to the tenant. The certificate issuance is at the discretion of the tax office. and he needs to be convinced about your case.

There is an alternative – you can file your returns and claim a refund of the TDS paid. Please note, in this case, the rental income may be taxed fully in the country of your residence. For example, if you are a US resident and your income is below the basic exemption limit in India, you pay no taxes in India*. However, your rental income gets added to your US income and taxes as per US laws.

What is a deemed rent?

Below are different scenarios related to deemed rent:

  • If you have one residential property in India and do not rent it out, it will be deemed to be self-occupied. In this case, there will be no tax liability for you.
  • If you give your property on rent, the rental income is taxed for that financial year.
  • If you have two houses in India and rent one out, the other will be deemed to be self-occupied. You pay tax only on the rental income of a single property.
  • If you have two houses and don’t rent any, then one will be deemed to be self-occupied, and the other deemed to be let out. It will be taxed based on the valuation of rent. You have the choice to choose any of the properties as self-occupied for taxes.

Conclusion

Taxation for NRIs is not simple, and taking an expert’s help to manage the taxes gets crucial in most cases. We at Right Horizons have years of experience helping NRIs with taxation and other money-related matters. Get in touch with us and leave all your financial worries to us.

*The tenant is supposed to deduct TDS irrespective of the value of the rentals. So, one would need to get a certificate not to deduct tax at source by disclosing all income data to the IT department and showing that your income is below the taxable limit. The IT officer may not easily give this, so technically possible, but practically difficult not to pay tax in India.

How should NRIs file a tax return? All they must know

NRI's tax return filing

Many NRIs are unsure about income tax filing rules and go wrong with taxation. As an NRI, you need to file an income tax return in India for the income arising in India in a financial year. The taxation rules are different compared to Indian residents. Hence, if you had filed returns when you were an Indian resident, the same regulations cannot be applied when filing tax as an NRI.

Even though you are earning in a foreign land, your tax obligations in India do not end. You have to file IT returns if your Indian income exceeds the basic exemption limit. Let us look at everything you need to know about tax returns as NRI.

Know your residential status

The first thing you must be sure of is your residential status. It is determined for every financial year and depends on the number of days you have stayed outside India. As per the IT Act 1961, you are NRI if you meet one of the below two criteria:

  • You are physically present in India for less than 182 days in a financial year.
  • You have been present in India for more than 60 days in a year or cumulatively not more than 365 days in the last four years.

Calculate your taxable income

Once you have determined your taxable income, you should calculate your taxable income. You need to understand total gross income – it is your total income before tax deductions. If your total gross income is more than Rs 2.5 lakh in a financial year, you will have to pay taxes.

You could have earned this income from several sources – a monthly salary, capital gains on mutual funds, interest from deposits in an NRO account, or rental income. You should carefully sum up all the income. Using all the available data, file the income tax. If TDS is deducted from your income, you can claim refunds.

NRIs can also claim deductions up to Rs 1.5 lakh under Section 80C of the Income Tax Act. However, they cannot invest in a specific tax-savings investment option under Section 80C. You are prohibited from investing in Public Provident Fund, National Saving Certificate, Senior Citizen Saving Scheme, etc.

If your Indian income is above Rs 50 lakh in a financial year, you need to report your assets and liabilities in India. In case you need help in the process, it is always better to consult a tax  consultant than to file incorrect numbers.

Claim Double Taxation Treaty Benefits

As an NRI, you must know the Double Tax Avoidance Agreement (DTAA). It will help you save on taxes. DTAA enables you to avoid paying tax twice on the same income. According to DTAA, your income will either be exempted from a tax deduction in one country or should be taxed at a lower rate in your home country.

Let us understand this with an example. You paid your taxes in India and can get a tax credit in the residing country where you earn. This credit is available on the tax paid on the same income.

Verify your IT returns

The last step is to verify your tax returns within 120 days of filing. If you fail to do it, the returns are not valid.

What are provisions related to long-term capital gains for NRIs?

For long-term capital gains made from sales of assets, you receive no benefit of indexation, and no deduction is allowed under Section 80C. However, you can avail exemption on the profit under Section 115G under specific scenarios. For example, if you reinvest the amount back into the shares of an Indian company, central government securities, etc.

Do NRIs have to pay advance tax?

If your tax liability in a financial year is more than Rs 10,000, you must pay advance tax. If advance tax is not paid, interest under Section 234B and Section 234C is applicable.

Do you need tax expert help in filing returns?

As an NRI, if you need help filing returns, you can get in touch with Right Horizons and we can help you file your returns by yourself or connect you to an auditor. We have years of experience in managing the end-to-end portfolio of our clients. Get in touch with us now and transfer all your taxation and personal finance worries to us.

Financial Planning for Child’s Education

financial planning for child education

“Education is the passport to the future, for tomorrow belongs to those who prepare for it today.” – Malcolm

In India, everyone firmly believes that education is everything. We want our kids to go to the top schools and support them in what they want to do. We understand the importance of good education, but the cost is a concern. The cost of education is increasing at a high rate. As per a report in Financial Express, education inflation stands at 11 to 12%. Let us understand the impact of this inflation.

Assume your son is three years old, and the cost of education today is Rs 5 lakh for the courses you assume he may get enrolled in. You have 15 years before your son gets ready for graduation. Assuming 11% inflation, the education cost will be approximately Rs 24 lakh. Financial planning for a child’s education becomes essential to beat high inflation.

Steps you must follow

You can follow the below steps to start financial planning for your child’s education:

  • Know the time: The first step is to know how much time you have for your child’s graduation. The longer the time horizon, the easy it is for you to plan for it. You must not delay and wait for the last hour to start planning. It is one of the essential and mandatory financial goals, and you must plan NOW.
  • Find the cost of education: It is one of the toughest questions to answer as the education cost will depend on many factors. The first question to answer is whether you plan to send your child to a foreign university or you want them to graduate in India. There is no way you can predict – the course your child will enroll in the future. You can only assume – your child will be in a profession similar to yours. For example, if you are a lawyer, check the cost of this field and factor in inflation to calculate the education cost in the future. You may need a lot more or less depending on what your child is interested in doing, but it is a good starting point.  As the child gets closer to their 10th/12th standard, one may be able to plan based on your child’s interests.
  • Know the amount that needs to be saved monthly: Once you know the amount for education, you must decide the amount you need to save and invest to reach the corpus. If the goal is far away, the easiest way is to opt for regular monthly investments. Your goal should be to put aside some money regularly to meet your goals. Assume you are unable to invest the required amount for a child’s education. Then, you must try to reduce your household and personal expenses or find an additional income source. Taking the help of your financial advisor is one of the best things you can do. You can achieve your goal with a lower investment amount with proper guidance. They have expertise in balancing the risk and the reward.
  • Plan your investments smartly: This is the most crucial step in financial planning. You have to decide where you will invest to achieve your goal. You need to invest your hard-earned money in suitable financial instruments depending on your risk profile and investment horizon. You will also need to follow asset allocation. When the goal is far away, you can make most of your equity investment. As the financial goal nears, you have to move gradually from equity to debt – rebalancing is essential. If you think you cannot do it yourself, get in touch with Right Horizons. We have expertise in financial planning.
  • Prepare for the unexpected: Like any other journey, you may have unexpected turns in your financial journey. You should be prepared for them. Figure out what happens to your goals if you have an untimely death or an accident and can no longer earn. One of the biggest setbacks to a child’s education is the death of the only breadwinner in the family, and there is no insurance. Have enough insurance for your life and health. The coverage should be able to take care of your family’s future needs and also take care of your child’s education. Investing in plans that offer a child’s education protection option (for example, ULIP) can also be considered. A financial advisor would be the best person to tell you which is the best option to secure your goals.

Start now

The last thing or the first thing you must do is to start NOW. One way to surely not achieve your goal is procrastination. Since it is a mandatory financial goal, you should start it as soon as your child is born. You can save and invest early since the longer the time horizon, the easier your financial journey becomes. The power of compounding works magic for you.

If you have any questions about your child’s education planning, get in touch with us. Right Horizons has a range of products to share your burden and you to secure your child’s future.

Investing globally: Options for Indian Residents

Investing globally-options for Indian residents

Investors in the 21st century should be well-informed and aware of different markets’ performance. Today, there are no geographical boundaries for investors, and they can explore investment opportunities in different countries and get good returns. If you plan to invest in international markets, it is essential to understand the need – why should you invest in the global market?

In this article, we will talk about the benefits of investing in global funds and the different ways in which you can do it.

Reasons why you should invest in foreign funds

Below are some reasons why you should consider investing in the international markets. You must not invest in them because others are doing. Understand the need and risk and if it is in line with your goals, invest in them.

  • Diversification: As a financial advisory firm, we always create a diversified portfolio for our investors. We also educate them on the need for the same. The reason is simple – you should not keep all your eggs in the same basket. In the investing world, you should have different financial instruments in your portfolio for diversification. By investing in international funds, you diversify your portfolio even further.
  • Risks and Returns: Some international markets have delivered better returns than India and may continue to do so. When you invest in such a market, you give yourself a chance to get higher returns. However, you must be careful while choosing the market. The risk will depend on the market conditions and macroeconomic factors of the country you are investing in. It requires expertise to evaluate the economies to invest in.
  • Inflation Hedge: Investing in global funds is also a good way to hedge against inflation.

How to invest in global markets?

There are different options through which you can invest in the global market. Before you invest in any form, you must understand the risk. Below are some options we suggest to our clients. The suggestion varies as per the client’s risk profile and investment goals.

Listed Stocks: Investors can pick an economy that they believe is stable. Once done, the next step is to invest directly in the best stocks in the country. For example, if you want to invest in US stocks, you can pick companies that have been consistently generating returns for investors. We help investors end-to-end with investing in companies from the international market.

Exchange-Traded Funds (ETF): Investing in direct stocks comes with a risk and is not suitable for every investor. Investors looking to stay invested for the long term and looking for low volatility can invest in foreign companies through ETFs around the popular index. ETFs not only give you the option to invest in equity but also in commodities and can further diversify your portfolio.

Active funds: These are the easiest way to invest in foreign funds. There are mutual funds available for Indian investors that invest in foreign companies. You get the option to invest in economies like the US, China, and other emerging economies. It works just like any other mutual fund. The difference is – the underlying asset in these mutual funds are not Indian companies but international companies or international funds.

Unlisted companies: Many unlisted companies in different geographies are profitable, and you may want to have shares of those companies. For example, if given an opportunity to invest in SpaceX, would you like to own the stocks of SpaceX? If you want to invest in unlisted companies, you must consult a financial service provider as it requires experience and expertise in investing in unlisted companies.

Private equity funds: Have you heard of the Medallion fund? It is one of the best-performing funds in history. Unfortunately, it is a closed fund and not available for retail investors. However, there are ways to invest in private equity funds.

When it comes to international investment, 99% of investors think of the US market. However, it is not the only option. Many world economies have the potential to deliver high returns to investors. They all should be explored before investing.

Pros and Cons of investing in global markets

Pros

  • You get the opportunity to invest in the fastest-growing markets.
  • You insulate yourself against the ups and downs of the equity markets in your own country.
  • You diversify your portfolio, reduce risk and get a chance to get good returns.
  • If you plan an overseas education for your child, investing overseas can be a hedge against currency depreciation.

Cons

  • Your investment is exposed to market risks that you may not be completely aware of as it may be hard to track all the developments there.
  • If there is a depreciation in the currency into which one has invested, it will have a negative impact on your portfolio.

Invest in other markets for diversification

There is no doubt that investors should consider the option to invest in other markets. However, they must be careful before making such an investment. It is always better to have a specialist for such investments.

Right Horizons, over the years has integrated international investments in the portfolios of its high net-worth clients to create a diversified portfolio. Get in touch with us, and we will help you create a portfolio that will minimize your risk and maximize your returns based on your risk profile.

Best Investment Options for NRIs in India in 2022

Portfolio Management Services
The Indian Market

Over the last few decades, India has experienced tremendous economic growth to become the fifth largest economy in the world. This makes it an attractive destination to invest for NRIs.  Debt returns also are relatively more attractive compared to most other countries. Further, NRIs are given tax concessions, especially for bank fixed deposits.

However, one needs to keep in mind that investing in India is procedurally more cumbersome.  India is a high return market, yet the risks are also higher.

We out line below, the best investment options for NRI’s in 2022

Fixed Deposits

Fixed Deposits (FDs) are a good option for NRIs to consider. Bank FDs are regarded as among the safest investment options because they are rarely defaulted on by banks and the tight oversight by the Reserve Bank of India. More importantly, fixed deposits are tax-free for NRIs.  NRIs can open a savings account using their FCNR, NRO, or NRE FD accounts. The rate of interest is determined by the bank, the amount of the deposit, and the duration of the deposit.

  • Fixed deposits in the NRE account: You could want to open an NRE account in Indian Rupees. You will not be taxed on the interest you earn, but you may be taxed in your home country. Depending on the duration of the deposit, the interest rate ranges from 5% to 7%. 

  • Fixed deposits in the NRO account: The NRO account can be used to manage your Indian revenue. Rental income or dividends from stocks and mutual funds, for example, could be deposited into the NRO account.

  • Deposits in the FCNR account: The FCNR (Foreign-Currency Non-Resident Account) can be opened in any foreign currency. It could last anywhere from one to five years. You will not be taxed on the interest you earn. Furthermore, the deposits in the FCNR account are unaffected by foreign exchange movements since they are denominated in foreign currency. However, the interest rates of FCNR deposits are lower than other fixed deposits.

As interest rates have started inching up, FDs are an avenue to consider in 2022.  You can look at shorter-term deposits currently and move them to longer-term deposits when interest rates go up.

National Pension Scheme

Another good investment which we recommend for NRI’s is the National Pension Scheme

An NRI can open an NPS account with a POP (Point of Presence) in India if they are between the ages of 18 and 60. If you have a PAN card or an Aadhaar card, you can also open an eNPS account. You could invest in the National Pension System with your NRO or NRE bank account.

You can choose the active option, which allows you to choose your asset allocation between equity (E), corporate bonds (C), and government securities (G) (G). However, you can only invest up to 75% of your portfolio in equities. If you can’t decide on the proper investment proportions, you can use the auto pick option, which allocates assets based on life stages (age).

If you leave the NPS before reaching the age of 60, you can only take out 20% of the money you’ve saved. The remaining 80% of the corpus must be annuitized as a matter of course. If you are 60 years old or older at the time of withdrawal, you can take out 60% of your money and the remaining 40% must be utilized to purchase an annuity plan. The National Pension System will pay the pension in Indian Rupees.

One can look at investing in NPS in 2022 under the moderate risk-moderate return category and use the fund option based on your risk appetite.  Keep in mind that this is a long-term option.

Mutual Funds

NRIs from countries other than the United States and Canada can invest in most Indian mutual funds. NRIs from the United States and Canada are subject to specific restrictions and can only invest in a limited number of mutual fund schemes. If your KYC is done, Mutual Funds can be one of the simplest ways to invest into India. 

An NRI can invest in equity funds, balanced funds, debt funds, liquid funds, and MIPs, depending on their risk profile. Short-term capital gains are gains realized on the sale of non-equity funds within three years of purchase. It will be taxed at a rate of 30%. Gains on non-equity funds sold after three years are long-term gains. After indexation, they will be taxed at a rate of 20%. We suggest you to invest in a direct Mutual Fund plan rather than the regular plan 

Mutual Funds can be purchased in a variety of ways. Regular investments can be made with SIPs, and regular withdrawals can be made with SWPs. ELSS, or equity-linked savings schemes, have become one of the most popular tax-saving strategies for everyone, including NRIs with income in India.

Since mutual funds offer a whole range of options, it is important to be able to choose the right option for you.  Also, one needs to keep in mind cross border taxation while you choose between dividend and growth options.

Mutual funds with the ease of investing, its liquidity and the range of options that it offers; is an avenue to consider for NRIs in 2022.

Direct Investment in Stocks / Portfolio Management Services:

If you are an evolved NRI investor willing to accept some risk in the stock market and have awareness of individual stocks and sectors in India, you can 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.  The banks take care of the day-to-day reporting of transactions of NRIs to RBI.

For investors without the expertise of individual stocks and sectors, one could use Portfolio Management Services (PMS) schemes.  This is managed by a PMS Fund Manager and provides higher flexibility to the investors as compared to MFs.  

Investors who have the time and expertise of investing in stocks can look at direct investment in stocks in 2022.  PMS schemes have also done very well and are an option to consider for high-net-worth investors.

Purchasing Real Estate

India’s real estate market is expanding. Over the last few years real estate prices in major Indian cities such as Delhi, Mumbai, Bengaluru, and Pune have moved. Many non-resident Indians are buying homes in India for themselves when they return or they look to rent out the property. There are numerous possibilities available, including developed plots, villas, and flats, among others.

Before selecting to invest in Indian real estate, you should assess your needs and risk profile. Real Estate in India is expected to do well over the next ten years, after coming out of a long downturn. It may be noted that NRIs, not allowed to invest in agricultural land or plantations in India.

If one plans to come back to India, then purchasing a property for yourself is an option to consider in 2022.

Conclusion:

Despite the market slowdown, India is still a strong investment opportunity. We expect India to perform very well through this decade.  The government has taken various steps to improve the economy and its standing in the global economy. It’s a great time for an NRI to invest in the country as it looks to emerge as one of the top 3 economies in the world.

Right Horizons is one of the leading financial advisors in Bangalore, with offices in four other major cities: Mumbai, New Delhi, Chennai, and Hyderabad. We strive to cater to all of your personal finance needs under one roof. We help define, plan and track your financial goals.  We also keep in mind taxation aspects while we support you on your investments.

Our contrarian investment strategy, combined with a singular focus on long-term investments, ensures that our clients receive tax-efficient and superior risk-adjusted returns. Join the Right Horizons family and experience financial freedom for the rest of your life.

5 Things an NRI Must Know About Bank Fixed Deposits

nri bank fixed deposits

Central banks around the globe are increasing interest rates. It is likely that now you can get better returns on fixed deposits. Hence, NRIs looking for fixed-income investment options can start exploring fixed deposits. NRIs working in countries like the US, Australia, UK, etc get a much higher return on fixed deposits in India than in the developed nations. However, one needs to keep in in the negative impact of rupee depreciation. If you plan to open a fixed deposit account in India as an NRI, you need to know a few things.

Types of Fixed Deposits accounts

A fixed deposit is a reliable and risk-free investment option. You can choose one of the below options while opening a fixed deposit account:

  • Non-Resident External (NRE) Deposit: The deposit is rupee denominated in NRE deposit. The advantage of opening an NRE account is both the principal amount and the interest earned are tax-free. Another advantage is that you can repatriate your funds in any available foreign currency easily. Compared to traditional fixed deposits, the interest rate offered under NRE deposits is higher in some cases.
  • Non-Resident Ordinary (NRO) Deposit: If you have earnings in India, you can open a fixed deposit account under NRO deposits and invest your earnings from India. The interest earned is taxable as per IT laws.
  • FCNR Fixed Deposits: A Foreign Currency Non-Repatriable(FCNR) deposit allows you to deposit your money in foreign currencies that are accepted all over the world.

Eligibility Criteria For NRIs to open fixed deposits

You will have to share the below details with the bank:

  • Visa/Work permit: You need to present the visa documents that contain your work permit. Banks, in some cases, may ask for other employment-related documents.
  • Passport: Your passport needs to be shown for name, address, DOB, etc.

5 things to know before opening a fixed deposit account

Below are the top five essential points to know:

1. Fixed deposit interest rate: Different banks offer different interest rates based on the credit rating of the bank. The first point you need to know is the interest rate offered by banks. Opt for a bank that gives you a competitive interest rate. The rates will vary depending on your investment amount and tenure. While you choose the bank, ideally look for one with a credit rating above AA. The bank providing the highest interest rate could also have a higher risk of default. It requires some level of expertise to choose the best combination.

2. Repatriation of Funds: Repatriation allows you to transfer money earned overseas back to the country where you are based. NRE deposits allow unlimited repatriation. In most cases, both the principal and interest amount is available for repatriation. NRO fixed deposit accounts only let you repatriate a stipulated amount in the financial year, along with some increased documentation.

3. Tenure: As mentioned above, tenure is one of the crucial parameters to consider when opening a fixed deposit account. Unlike traditional FD accounts, the minimum period of an NRE fixed deposit account is one year. Usually, the longer the tenure, the higher the interest rate offered by the bank. However, a high FD duration is not always advisable. If interest rates are likely to go up, it is advisable to use shorter duration FD accounts.

4. Should be in line with your financial goal: Before opening an NRI fixed deposit account, you need to evaluate your financial goals. You need to know whether your FD investment is in line with your financial goals and help you achieve them. Also, you should know how much amount to invest in a fixed deposit.

5. Taxation: Last on the list but the most important parameter to consider when you are NRI and plan to invest in India. Taxation plays a crucial role in determining your net earnings from the investment. NRI fixed deposits are partially taxable in India – it depends on the type of account. While NRE FD is completely tax-exempted, the NRO FD is liable for tax on the interest earned.

Before you go

Opening an NRI fixed deposit is a simple process, and it can be done online or by visiting the bank’s branch. However, as discussed above, you need to be careful while opening an NRI FD. Taxation gets complicated for NRIs, and hence it is always better to consult an advisor. They give you the best investment advice and also take care of your taxation.

Right Horizons has years of experience in helping NRIs manage their money. You may want to open an NRI FD account, invest in a mutual fund, stocks or create a Will – Right Horizons is your one-stop solution. Leave all your financial worries with us and enjoy your time with your loved ones.

Come April 1, keep these in mind NRIs

Home loan tips by Right Horizons

Budget 2020 and action items for nrisfirst came the shock and that followed by some clarifications. Nris, it appeared would be taxed on the global incomes here in india. While that seemed onerous and unfair, it was later clarified that it applies to only those who tax residency is ambiguous. Also, the tax net now falls on nri who have incomes generated here in india but still did not end up paying taxes. A few of the important changes and clarifications provided by the government that impact the nri community from april are –1. Nri are liable to pay taxes on the global income in an event their residency status is ambiguous or cannot be established2.

Nri’s located in tax-free jurisdictions (like the middle east and having residency there) are not impacted. 3. Nri will continue as before to pay taxes on their incomes earned in india#1 is the most important change or rather a loophole that has been plugged during the current budget that is applicable from april 1, 2020. There are number of nris who are wealthy and do not have any single permanent residency status and often end up dodging many tax jurisdictions. These individuals would now be liable to pay taxes on their global income here in india. This loophole has therefore been plugged, however, there can still be many tax-free jurisdictions that might offer an escape route for the nris like in the middle east or other tax havens with liberal residency laws. #2 has been more of a clarification in the post budget interaction sessions and this therefore is a status quo from the earlier period where tax-free domiciled residents will not be taxed on the income from those jurisdictions as has been the case till now. #3 as a result applies to nri to pay taxes on all indian origin incomes as before.

There has been a clarification that this will not change. Residency provisions tweakedanother anti-abuse provision that was used by some nri was the rule of no. Of days stay. Now the rule of minimum 183 day stay out of india for being nri has been raised to 240 days and this makes frequent travellers claiming nri status a little more difficult. Another loophole being plugged, albeit partially.

When should I exercise my ESOPs?

-Most of the time, people look at the exit point in the esop and not the exercise period.

-Since there is a significant tax liability when you exercise, lowest price is best.

-This reduces the perquisite tax thereby resulting in tax savings.
Know more about how do we deal such problems in easy ways

Talk to our certified “Senior financial planning advisors and Risk Management advisor”.

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