Considering the boom in the Indian market, many NRIs are investing heavily in India to increase their wealth. There are a plethora of NRI investment options in India. They can invest in stock markets, mutual funds, fds, gold, and much more. While some NRIs are getting the most out of their investment in India, due to a lack of experience and expert advice, others make mistakes that complicate things later on. Here are 5 common mistakes NRIs make when investing in India.
Also Read: NRI Repatriable Demat Account: Meaning and Purpose
5 common mistakes NRIs make when investing in India
1. continue using your resident accounts
nris generally continue with their resident accounts as before, which is not legal. As per RBI guidelines, once someone obtains NRI status, they cannot operate a resident account to transact in India. non-resident indians need to change their bank account and demat account, and update kyc details. If you want to use your resident accounts after a change in resident status, you must convert the savings account to a No. (ordinary non-resident) account and the Demat account to a No. Demat account. If you have invested in mutual funds, you must inform your AMC of the status change and update your KYC details.
You cannot use regular trading account for nri stock market investment. NRIS who plans to trade shares and non-convertible bonds of Indian companies on the Indian Stock Exchange needs to open a Designated Portfolio Investment Scheme (PIS) account. non-compliance can carry heavy financial penalties from the regulator.
nris can continue your ppf account opened in india but it cannot be extended beyond 15 years (expiration period) and you cannot open a new ppf account as nri.
2. ignore tax implications
nri investing in india in financial instruments like mutual funds, stocks, gold, bonds, ipos etc. is subject to tds (tax deducted at source). For example, TDS for LTCG made in equity funds is applicable at 10% and 20% for debt funds. For NRIs who have rented a property in India, the tenant is required to pay mandatory TDS at a rate of 30%. Likewise, TDS of 20% to 30% apply on capital gains realized from the sale of a property by an NRI.
Also read: nri tax on capital gains on shares 2021 | tax table for nris 2021-22
In addition, NRIS often pay double taxation, ie in India and where they live. You should know that India has signed a Double Taxation Avoidance Agreement (DTAA) with more than 90 countries in the world. NRIS living in these countries do not have to pay double tax. If an NRI has already paid taxes in India on any kind of capital gains, he is not required to pay taxes on them in the country of his residence.
3. disproportionate investment in real estate
While young tech-savvy NRIs tend to diversify their portfolio, most NRIs continue to invest disproportionately in traditional fixed-yield assets such as real estate, bank mutual funds, and gold. however, it makes little financial sense in terms of diversification and income generation. rental yields of 2 to 3% of residential properties are very low. In addition, the maintenance costs of the property are quite high.
if nris are very interested in real estate, they can invest in commercial real estate (cre) for attractive returns.
Also read: Can an NRI buy or own property in India?
Over the last few years, the Indian market has changed a lot, as has the perception of informed investors. There are several more avenues of investment available in India that are known to work better and also come with better liquidity. Some of the NRI investment options in India that offer higher returns include Direct Equity, ETFs, Mutual Funds, IPOS, Pre-IPO Investing, Micro VC, NCDs, etc.
Also read: tds on property sale by nri (non-resident indian) in india
4. not seeking professional investment help
is one of the common mistakes made by investors including nris. In general, people prefer to receive advice from relatives and acquaintances when investing in the market. To get the returns you want and avoid potential roadblocks, you need to make informed decisions. First of all, you need to be clear about your financial goals, future plans like moving back to India etc. If you’re investing in both countries, make sure these investments are working together to meet your financial goals.
nris should consult certified investment professionals who stay on top of the markets and are well versed in the rules and regulations of both countries. They will guide you through the NRI investment process and also provide sound planning that will facilitate smooth transfers of your assets in India and abroad in the event of any unfortunate event.
5. ignore changes in status changes from previous investments
nris should review or liquidate their investments made before leaving india because they may not be able to enjoy the same privileges and retain them as before. For example, NSCs are considered collected, a PPF account cannot continue for more than 15 years, and you will not be eligible to have savings or postal schemes once you reach NRI status.
Also read: Common problems NRIs face when investing in India
These are some of the most common mistakes NRIs make when investing in India. You need to keep the above points in mind to ensure that your hard-earned money is invested wisely. sbnri has a team of experts to help nris invest in india, tax return and opening nre accounts etc. You can download sbnri app from google play store or app store to ask any question related to stock market/mutual fund investing, nri online account opening and tax return in india. To ask any question, click the button below. Also visit our blog and youtube channel for more details.
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