Financial Hazards NRIs Should Be Mindful of While investing in India.

 Non-Resident Indians do not get the chance to visit India as often as they’d like. The trips are almost always rushed and brief. In the middle of meeting all the relatives, attending family events, and taking a break to relax, important financial appointments take a backseat. The rules and regulations of investments for NRIs are ever-changing and, it is important for NRIs who wish to invest in Indian assets to keep track of these changes. Since most NRIs do not get the time to look after their financial portfolio in India as carefully as they’d like, they end up facing financial pitfalls that can be easily avoided if they are mindful. 

Here are some things NRIs investing in India should take care of:

Investing as a resident

Once an individual gets the NRI status, they need to convert their existing savings accounts into NRO Savings Accounts or start a new NRE Savings Accounts to manage their savings in rupees. The rules and regulations of other investment instruments like direct equity, mutual funds bonds, and more change too.

Barred investments

Usually, NRIs continue their investments that they started as resident Indians, ignoring the regulations put in place. NRIs settled in either the USA or Canada have restrictions on the mutual fund houses they can invest through. There are many complications in the compliance put into place by USA & Canada’s regulatory body FATCA, hence, there aren’t many mutual fund houses that accept investments from NRIs.

The double taxation problem

Income earned by NRIs in India through dividends, equity, shares, or mutual funds is taxable in India. In some countries, income earned in India is taxable in both, India and the country of residence. A tax treaty known as the Double Taxation Avoidance Agreements was signed between India and multiple countries to provide relief to NRIs from paying taxes in both countries. Most NRIs are unaware of such a treaty and hence, sadly end up paying double taxes.

Zero diversification

It is important to have a healthy diversification in your financial portfolio so that all your money is not tied up in a single asset class. Most NRIs stick to fixed deposits or physical investments like real estate or gold. This is also to avoid the complicated web of rules, regulations, and double taxation problems, NRIs have to be mindful of. There are mutual funds, NPS, direct equity, PPF, and more, apart from traditional investment options that NRIs should explore.

Digital assets

Many tech-savvy young NRIs are investing in NFTs and cryptocurrencies without accounting for the volatility of the market and the legal repercussions in India. It is good to maintain a diverse portfolio, however, it is also advised to be careful while allocating money to such assets to avoid risking their entire portfolio.

Controlling outflows

NRIs usually have education loans or property loans from back home. Sometimes, in the desire of a better lifestyle abroad they get carried away and put off paying back the loan amount. NRIs who have loans need to prioritize timely repayment and prepayments of loans, to ensure that they’re safe during volatile market conditions and unprecedented times that may lead to job cuts, visa delays, and more.

SBM Bank India offers a range of banking and financial services for NRIs to help manage their funds. You can get expert advice on investments so that you can create a well-diversified portfolio that does justice to your hard-earned money.