India, a rapidly growing economy with a myriad of investment opportunities, has been an attractive destination for Non-Resident Indians (NRIs) looking to invest their hard-earned money. Its growing economy has garnered global attention, which, in turn, has attracted significant inflows of foreign direct investments (FDIs) in recent years. This trend has further reinforced the country’s potential as an investment destination for NRIs.
As per the Foreign Exchange Management Act (FEMA) and the Government of India, NRIs are permitted to invest in India and take advantage of the benefits they offer. For NRIs residing in the UAE, there are several avenues to explore and tap into the potential of India's flourishing market.
This article provides a comprehensive guide for those NRIs in the UAE planning to invest, providing the best investment plans in India. So whether you are an NRI seeking long-term growth, regular income, or wealth preservation, read on to discover how to navigate India's diverse investment landscape and choose the best investment in India for NRIs.
Best NRI Investment Options in India
Without further ado, let’s take a look at the best investment plans in India for NRI –
1. Unit Linked Insurance Plans (ULIPs)
Unit Linked Insurance Plans (ULIPs) have emerged as an attractive investment option for NRIs seeking life insurance coverage and investment benefits. ULIPs are market-linked products combining the security of insurance with the potential for wealth accumulation, making them one of the best NRI investment options in India.
Depending on the risk appetite and investment objectives, you can invest in a wide range of funds such as equity, debt, or hybrid funds. You can choose any option, optimise returns, and minimise risks based on market conditions.
Some of the key features of ULIPs are listed below:
- These plans generally come with a 5-year lock-in period to help you save money - during this period, you are not allowed to withdraw or surrender your policy.
- Unit Linked Insurance Plans offer a unique blend of life insurance coverage and investment opportunities, making them an appealing option for NRIs looking to secure their family's financial future while growing their wealth.
- It is a good NRI investment option in India for investors with a long-term investment horizon.
2. Retirement Plans
Retirement plans offer a good investment option for NRIs investing in India. These plans are designed to accumulate wealth over an extended period, providing a steady income during post-retirement years. By investing in retirement plans, you can benefit from the power of compounding, where returns are reinvested, resulting in exponential growth over time.
In addition, retirement plans are available in various forms, such as pension and annuity plans. While both plans aim to offer financial security in retirement for NRIs, their structure and pay-out methods differ.
- Pension Plans - Pension plans are long-term investment retirement plans that help you accumulate wealth over an extended period. You can contribute to these plans through premiums or a lump-sum payment, which is then invested in various funds depending on your investment goals and risk appetite. Upon reaching the retirement period or at the end of the policy term, you will receive a portion of the accumulated amount as a lump sum. The remaining corpus, meanwhile, can be used to purchase an annuity plan to provide a regular income during retirement.
- Annuity Plans - Annuity plans are insurance products that offer a guaranteed income stream during retirement. They can be purchased with a lump-sum payment, usually from the maturity proceeds of a pension plan or other retirement savings. Annuity plans convert the accumulated corpus into periodic pay-outs, providing financial stability and predictability during retirement.
3. Capital Guarantee Solution Plan
Known as capital-guaranteed funds, these plans are among the best investment plans in India. They are designed to safeguard the principal amount invested from potential losses during economic downturns while providing returns. These plans are essentially ULIP plans that combine insurance and investment elements.
Within this plan, 50-60% of the invested amount is allocated to debt instruments to ensure capital protection, while the remaining portion is invested in equity. These plans typically come with a policy tenure of 10 years and a premium payment period of 5 years.
4. Child Plan
Child plans can be a good investment option for NRIs, combining the dual benefits of insurance and investment under a single umbrella. The insurance part of the plan offers financial protection for the child in the event of any unforeseen circumstances, such as the untimely demise of the parent. In such cases, the child receives a fixed annual payment from the insurance provider, as outlined in the policy's terms and conditions.
Concurrently, the investment component of a child plan focuses on accumulating funds by strategically investing in a variety of financial instruments. These instruments encompass equities, debt bonds, and other assets that align with the investor's risk appetite and financial goals.
By diversifying the investment portfolio, child plans aim to generate higher returns and ensure a financially stable future for the child. In essence, the child plans provide a comprehensive solution for NRIs seeking to support their child's future milestones, such as education or marriage, by leveraging the growing Indian economy.
5. Guaranteed Returns Traditional Plans
Guaranteed return traditional plans are among the most fundamental and best investment plans in India for NRIs, offering a range of benefits that include:
- Guaranteed fixed returns: These plans promise a predetermined return on investment, ensuring a predictable financial outcome regardless of market conditions.
- Comprehensive risk coverage: Traditional plans provide complete risk coverage, offering financial protection and peace of mind to policyholders and their families.
- Life protection: Alongside the investment component, guaranteed return traditional plans also offer life insurance coverage, which ensures financial support for the policyholder's loved ones in case of an untimely demise.
- Tax deduction benefits: Policyholders can enjoy tax deductions on their premium payments, further enhancing the appeal of these plans.
Ideal for investors with a low-risk tolerance, guaranteed return traditional plans provide the total sum assured along with vested or guaranteed bonuses upon the plan's maturity.
A key feature of these plans is that the investor is not directly exposed to market fluctuations. As a result, you can enjoy good returns with these plans without the stress of market volatility. This combination of security and financial benefits makes guaranteed return traditional plans a popular choice for conservative investors seeking stable returns and comprehensive coverage.
6. Mutual Funds
Mutual funds are among the most sought-after options for NRI investment in India. NRIs with limited experience in foreign investment can confidently choose mutual funds for potentially better returns. However, it is essential to be aware of the regulations governing such investments. The Foreign Exchange Management Act (FEMA) of 1999 governs NRI mutual fund investments in India. As per Government regulations, NRIs can invest in the following capital markets in India -
- Direct stocks
- Mutual funds
- Exchange-traded funds
Mutual fund investments are subject to market risks and are generally considered riskier than fixed deposits or national pension schemes. As a result, NRIs should only select funds that align with their risk profile and financial goals.
You can invest in mutual funds through any of the following methods -
- Investment through a Non-Resident External (NRE) account
- Investment through a Non-Resident Ordinary (NRO) account
- Investment in Indian National Currency only
7. National Pension Scheme
The National Pension Scheme (NPS) is another one among the best investment plans for NRIs, designed to create a substantial retirement corpus. As a government-backed retirement savings plan, the NPS offers a combination of safety, flexibility, and attractive returns, making it an appealing option for NRIs seeking to secure their financial future in India.
The NPS invests in a mix of equity, government securities, corporate bonds, and alternative investment funds, catering to diverse risk appetites and financial goals.
Some of the prominent features of the National Pension Scheme are given below:
- The primary motive of NPS is to build your retirement corpus.
- There are two investment options under NPS – active choice and auto choice.
- In the active choice option, the NPS subscriber has the flexibility to decide the asset allocation among different asset classes, such as equity (E), corporate bonds (C), and government securities (G).
- The auto choice option, also known as the 'Lifecycle Fund', automatically adjusts the asset allocation based on the subscriber's age. This option is designed for investors who do not want to manage their investments actively or may not have the expertise to do so.
8. Real Estate
Over the years, real estate prices have grown significantly, making property investments an attractive option for NRIs. By purchasing a property in India and leasing it out, you can generate additional income and capitalise on the booming real estate market. Real estate investments offer long-term returns and steady appreciation, making them a reliable and best NRI investment in India.
To facilitate the purchase or sale of property in India, you can use the following types of bank accounts, each catering to specific financial needs:
- Non-Resident External (NRE) Account: This account allows NRIs to hold and manage their foreign income in Indian rupees. It is ideal for those who wish to transfer overseas income to India and repatriate funds freely.
- Non-Resident Ordinary (NRO) Account: This account is designed for NRIs to manage their income earned in India, such as rent, dividends, or pension. The NRO account can be used to purchase or sell property, and any rental income generated can be deposited into this account. However, the repatriation of funds from an NRO account is subject to certain restrictions and limits.
- Foreign Currency Non-Resident (FCNR) Account: This account allows NRIs to hold their foreign income in a designated foreign currency, protecting them from exchange rate fluctuations. Although not typically used for property transactions, FCNR accounts can be an additional financial instrument for NRIs looking to manage their foreign currency savings while investing in the Indian real estate market.
9. Public Provident Funds
The Public Provident Fund (PPF) is a widely favoured NRI investment option in India. As a secure and government-backed investment avenue, PPF offers a 15-year tenure with the flexibility to extend for additional five years. This investment opportunity presents tax benefits, attractive interest rates, and a sense of financial stability for NRIs, making it an appealing choice for those living abroad who wish to invest in India's growth and secure their financial future.
Here are some key features of PPF for NRIs:
- NRIs with Indian citizenship are eligible to open a PPF account. However, they cannot open a new account if their status changes from NRI to a resident.
- PPF requires a minimum investment of INR 500 per year, with the maximum annual limit for the same being INR 1.5 lakh.
- PPF investments come with tax benefits under Section 80C of the Income Tax Act, with the interest earned and maturity amount being exempt from tax.
- The PPF scheme has a tenure of 15 years, which can be extended by additional five years.
- After completing five years from the end of the financial year in which the initial deposit was made, NRIs are allowed to make partial withdrawals from their PPF accounts.
- NRIs can nominate a beneficiary to receive the PPF account proceeds in the event of their death.
- After completing three years from the end of the financial year in which the initial deposit was made, NRIs can obtain a loan against their PPF account balance.
10. Bonds and Non-Convertible Debentures (NCDs)
Investments in bonds and non-convertible debentures (NCDs) can provide a secure and dependable avenue for generating fixed income, which makes them one of the best NRI investment options in India. Bonds and NCDs are issued by corporations, financial institutions, or governments, where investors lend their funds to these entities for a predetermined period, receiving interest payments in return.
- Non-Convertible Debentures (NCDs): NCDs represent a secure and long-term investment opportunity for NRIs. These debt instruments are supported by the assets of the issuing company, ensuring a higher level of security for investors.
- Perpetual Bonds: Perpetual bonds are a unique type of debt instrument with no specific maturity date. The issuer of the bond is required to pay a fixed amount of return to the investor annually. Due to their distinct features, perpetual bonds are relatively uncommon and usually issued by large corporations or government entities.
- Public Sector Unit (PSU) Bonds: Investing in PSU bonds involves lending money to a PSU company, which in turn guarantees interest payments upon maturity. The interest rate provided by PSU bonds depends on the creditworthiness of the issuing PSU company.
Benefits of NRI Investment Options in India
Having explored the features of these plans, let's delve into the benefits of each as outlined in the table below -
|Types of NRI Investment Options
|Unit Linked Insurance Plans (ULIPs)
- Combine life insurance coverage with investment opportunities
- Earn returns on investments in the underlying funds
- Offer a choice of equity, debt, or hybrid funds based on your investment objectives
- Offer liquidity by allowing policyholders to withdraw a portion of the fund value after the initial lock-in period, subject to terms and conditions
- Enhance protection with optional benefits such as accidental death, critical illness, and disability coverage
- Provide flexibility to switch between funds to optimise returns and manage risks as per market conditions
- Allow you to invest additional amounts as top-up premiums, contributing to the investment component and potential returns
- Provide regular updates on fund performance, charges, and policy details, enhancing transparency
- You can choose the annuity plan for a steady income during post-retirement years.
- Catering to different risk profiles and financial goals, different types of retirement plans are available.
- Annuity plans offer flexible pay-out structures, allowing NRIs to choose between immediate, deferred, fixed, variable, life, or joint life annuities based on their requirements.
- Encourage disciplined savings and investment habits, promoting long-term financial planning.
- Earn tax benefits and compounding returns from investing in a retirement plan early.
|Capital Guarantee Solution Plans
- These plans prioritise safeguarding the invested principal.
- By allocating a portion of the investment to equities, these plans offer the opportunity for capital appreciation based on market performance.
- Provide a diversified investment portfolio, helping to mitigate risks and manage volatility.
- Feature various investment tenures and lock-in periods, which can help you choose a plan that aligns with your financial goals and time horizon.
- A capital guarantee solution is an appropriate choice for investors looking for capital preservation and also wanting to participate in market-linked returns.
- As a type of ulip plan, these plans offer both life insurance coverage and investment opportunities, addressing both protection and wealth accumulation needs for NRIs.
- Ensure a stable financial future for the child, helping cover expenses such as education, marriage, or other significant life events.
- Combine insurance and investment components, offering both protection and wealth accumulation opportunities
- Promote diversification and potentially higher returns
- May benefit from the compounding returns, leading to substantial wealth accumulation over time
- Available in different forms like ULIPs, endowment funds, and more
|Guaranteed Return Traditional Plans
- Offer predetermined returns on investment
- Ensure complete risk coverage
- Incorporate life insurance coverage, providing financial support for the policyholder’s loved ones
- Well-suited for investors with a low-risk tolerance, providing a secure investment option with guaranteed returns
- You may receive vested or guaranteed bonuses upon the plan's maturity, in addition to the total sum assured, potentially increasing the overall returns.
- Offer exposure to a variety of assets, reducing risk and improving the potential for returns
- Managed by experienced fund managers, ensuring optimal investment strategies for higher returns
- Generally easy to buy and sell, providing NRIs with flexibility in managing their investments
- You can start investing in mutual funds with relatively small amounts.
- You can also opt for systematic investment plans (SIPs) and reduce the burden.
|National Pension Scheme
- Provides a structured and disciplined approach to building a retirement corpus for NRIs.
- NPS is known for its low fund management charges, leading to higher net returns for investors.
- Permits partial withdrawals under specific conditions, ensuring liquidity during emergencies or significant life events
- Being a government-backed retirement savings plan, it offers safety, attractiveness and reliability for NRIs.
- Exhibits steady growth and long-term appreciation
- Generates a consistent stream of rental income
- It can act as a hedge against inflation, as property value and rental income tend to increase over time.
- You can access the funds freely by selling real estate investments in India.
- Helps in the diversification of your portfolio, reducing the overall risk associated with your financial holdings
|Public Provident Funds
- It is a safe and low-risk investment option.
- Eligible for tax deductions
- You can nominate a beneficiary to receive the proceeds of your PPF account.
- Offers flexible investment options to cater to different financial capacities and goals
- A partial withdrawal facility is also available as per the terms and conditions outlined
- Known for higher interest rates compared to other investment options
|Bonds and Non-Convertible Debentures
- Offer a steady stream of income through interest payments
- Both NCDs and bonds are typically considered low-risk investments, as they are debt instruments backed by the assets of the issuing company or government entity.
- You can choose from a range of bond types such as NCDs and bonds.
- They are usually rated by credit rating agencies, providing you with a better understanding of the issuing entity's creditworthiness and the relative safety of perpetual investment bonds, PSU bonds, and NCDs.
Why Should NRIs Invest in India?
Understanding the best investment options for NRIs in India is crucial, as it highlights the reasons why NRIs should consider investing in India for better returns and a secure future. Some of the reasons are listed below -
- By investing your savings in various platforms, you can secure your future and maintain a high quality of life.
- By investing wisely today, you can increase your wealth for future requirements.
- You can provide additional funds for your family back in India, ensuring financial assistance when needed.
- Strategic investments help grow financial wealth and build assets, such as purchasing a house in India, which can generate rental income or serve as collateral for loans. The best NRI investments in India contribute to long-term financial growth and stability.
As an NRI, you can enjoy a wide range of choices - from ULIPs mutual funds and real estate to retirement and pension schemes - when you look for the best investment options in India. These investments can provide financial security for your future and also help you generate potential returns to support family members and build a strong financial asset base. As India continues to exhibit robust economic growth, it is an opportune time for NRIs to explore various investment avenues and take advantage of the potential benefits.
However, it is crucial to carefully assess your risk tolerance, financial objectives, and the regulatory requirements associated with each investment option before making any decisions. By investing wisely and strategically, you can secure a prosperous future for yourself and your family.
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