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Apart from citizens of India, Non-Resident Indians, Persons of Indian Origin, as well as Overseas Citizens of India can invest in SIP schemes in India. The Systematic Investment Plan or SIP helps one invest in mutual funds regularly and affordably.
If you are investing via SIP, you are offered repatriable and non-repatriable options. Opening an FCNR or NRE bank account is compulsory for repatriable mutual fund investments. And for non-repatriable mutual funds, it is important to open NRO or NRE/FCNR bank accounts.
Five reasons why NRIs should consider mutual fund SIPs in India
Growth
With a bright, English-speaking population and reformative government, India has become one of the fastest-growing economies. Half of the population in India is under the age of 25, something people call the demographic gift.
This demographic gift gives India the opportunity that China has had for decades, wherein China's young population made it the world's factory.
Goods and Services Tax, Foreign Direct Investment, and Demonetisation, as well as the reduction in paperwork for business registration, showcase the proactiveness of the Indian government in easing the business arena in India.
Multinational companies are setting up shops in India. These and other factors also contribute to India's profitable situation in the mutual fund arena.
Better Investment Choice
Mutual funds have been performing extremely well in recent times. They also allow one to start investing in small amounts.
Earlier, NRIs used to invest in the real estate market of India. However, the real estate market has been performing less lately, given there is a surplus of houses. And buyers are willing to pay much lower than the listed price.
Though considered a safe and high-return investment once upon a time, real estate has significantly reduced since 2011. Even gold, a favourite investment option of NRIs, has shown negative growth in the last few years.
Hence, mutual funds emerge as the safer and high-return-yielding option compared to other investments.
Convenient
Investing in mutual funds is convenient and easy since you can do it from anywhere around the globe. NRI's must choose mutual fund investments through SIP for ease of convenience. All they have to do is select their mutual fund plan, the amount of their deposit, and tenure. The SIP plan ensures the predetermined amount is regularly debited from the investor's bank. Doing so doesn't entail the hassle of error or forgetting the same.
Low-effort investments
Investing in any equity, stock, or other investment tools requires much research, analysis, and time. On the other hand, mutual funds are more straightforward. Investing in bonds and securities like channels also requires an excellent understanding and skillset. However, mutual funds consist of huge teams responsible for several investing aspects. It is difficult for a single person to master such skills, and it is time-consuming and challenging.
Investing in mutual fund SIPs is as easy as finding a fund that suits your needs and risk appetite. You can assume outsourced investing when you invest in a mutual fund, as the experts control the heavy lifting for you.
Portfolio diversification
Diversification is automatic with mutual fund SIPs. Additionally, they are managed to ensure reduced risk exposure. It is a fact that investing in a single investment instrument is risky. Because if something negative occurs, losses are to follow.
Hence, mutual fund SIPs entail portfolio diversification to avoid risk and losses. A diversified portfolio means assets are distributed across several instrument vehicles, reducing the loss risk.
If you invest in bonds and stocks, you must diversify your portfolio and monitor your investments regularly to avoid poor-performing and high-risk assets.
Understanding Double Taxation Avoidance Agreement (DTAA)
India has a DTAA with 85 countries, ensuring you don't pay excessive taxes in the country of your residence and India.
Different mutual funds are associated with additional taxes. For instance, equity mutual funds have a 15% tax on gains achieved in less than a year from the investment. As for investments exceeding a year, there is no tax levied.
The amount of tax to be paid in the country of an NRI's residence depends on the local laws of that country.
With DTAA, one doesn't get taxed twice.
Conclusion
To conclude, mutual fund SIPs are an ideal investment and profitability tool for NRIs. With an easy process, low risk, and ease of convenience, mutual fund SIPs render great returns in the long run. Additionally, investing in a life insurance policy can also prove to be beneficial, the advantage of both life cover and savings acts as a great step toward attaining your financial goals.
