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Recently one of my good friends received a job offer with an upcoming IT company in Silicon Valley which would take him away from India for at least a few years. I congratulated him on his dream job in a new country and he asked me about what to do with his existing investments and potential NRI investment options in India? This is a question that comes to us very often from NRIs all over the world – whether they are in the Middle East, Europe, Australia or the US.

With the Indian economy being one of the fastest growing economies in the world and a home bias that tends to exist for many families, many NRIs choose to invest in Indian markets to achieve their life goals such as planning for a child’s education and marriage, planning to purchase a property in India or abroad, or planning for one’s retirement.. Whilst both Indian equities and Indian real estate, along with Indian fixed income options are a great way to boost the overall yields on your portfolio, there are a few critical items that you need to keep in mind especially as you try to build a large corpus to sustain life events that you would come across during your 25-30 years post retirement, when there would be no income stream of salary or professional income to depend on.

Choice of Assets & planning for them

You need to have a financial plan in place so you can have a holistic view of your finances to make financial decisions with confidence. Having large accumulated savings in your bank account can sometimes expose you to taking investment decisions that are sub-optimal for your overall financial health, as you may be in a hurry to put it away.  Your financial plan will show you how much you need to invest starting today, for each of your life goals, and will also enable you to create an appropriate mix of equity, fixed income and real estate exposure in your portfolio.

Repatriating your money:

Confused with so many bank accounts? You need to be clear whether you want to invest your funds in Indian rupee or a foreign currency, and also if you wish to have complete flexibility in repatriating the monies overseas. A NRE account that is designated in INR can be a savings account, current account or term deposit account without any taxes from an Indian perspective, and allows complete repatriability. Once you become an NRI, your existing bank account will be converted to an NRO account (Non Resident – Ordinary). You can deposit all your earnings in India into a NRO account. As per RBI guidelines, you can remit or repatriate an amount up to USD 1 million per financial year from the NRO account.

Currency Fluctuations:

When you earn and spend in one currency, and invest in a different currency, currency risks have to be well understood in relation to the goals and investment product selected. An investment today may offer attractive returns in rupee terms; it may not remain attractive when it is repatriated. Considering that India has traditionally being a high inflation economy vis a vis many other global economies, potential currency depreciation tends to be an important factor to keep in mind.

Tax Treatments:

It is critical to understand the tax implications in both countries as a part of your financial plan. You may need to seek the help of a tax advisor in both India and your home country, so that there is complete clarity on the same. In addition, there may be Double Tax Avoidance treaties in place that allow you to set off the taxes you pay at in one country against taxes due in India, or vice versa, so that you are not taxed twice on the same amount. This is extremely critical as income which is tax free in one country may be subject to tax in the other, and it is therefore critical to get good tax advice around the choice of investment products that you buy.

Frequent Home Visits:

This is one type of recurring and large expense many families may be facing overseas. It may be  common for some NRIs, that they should book and send tickets for their parents and other close relatives, when they have to visit them in the host country, or certainly when they visit India. Don’t forget to add this as a different goal in your financial plan.

To conclude, NRIs need to better understand the potential currency fluctuations, taxation and income and expenses pattern in their country of residence and retirement, before making investment decisions. Creating a financial plan should help you and your family have a very clear roadmap for yourself and your family.

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