It's bewilderingly difficult for a non-resident Indian (NRI) to choose from multiple investment. Personal needs dictate financial choices. Some plan to retire in India, others abroad. Some make remittances, others wish to diversify.
Zankhana Shah, CFP of Money care Financial Planning says: "Investment decisions affect lifestyle. If NRIs sort out their longterm priorities, it's easier. But if investing is a one-time decision, start comparing options in India and the country of residence."
For example, a US-based NRI who plans to retire there, should hold dollar assets. If he invests in India, he must ensure repatriatability. Another NRI who retires in India will receive and spend rupees. Remittances should be in rupees to make the most of tax breaks.
Three types of bank accounts are customised for NRIs to hold either rupees or forex. Non- Resident External (NRE) and Non- Resident Ordinary (NRO) accounts are rupee-denominated. Foreign Currency Non-Resident (FCNR) is held in forex.
NRE and NRO offer savings, current, fixed and recurring deposits. FCNR offers fixed deposits in US, Australian and Canadian dollars, pound sterling, yen and euro. FCNR interest rates are regulated by RBI.
FCNR offers high interest with zero exchange risk. NRE and NRO rates vary. NRE and FCNR can only hold money from abroad. NRO accounts accept rupee earnings. These accounts offer variable repatriation. NRE and FCNR funds are repatriable. NRO deposits are not fully repatriable. But you can issue rupee cheques from NRO accounts while NRE payments can be made only to repatriable avenues. If an NRI returns for good, he can liquidate and transfer overseas assets to a forex-denominated account, the resident foreign currency account (RFC). RFC funds are free of all restrictions.
The tax treatment for NRI investments in mutual funds is the same as for residents (see guest column Home Ground Advantage). Repatriation of fund redemptions is possible if the investment is through approved banking channels or NRE/FCNR. The principal of an NRO account cannot be repatriated but income earned can.
An NRI can acquire property from repatriable or non-repatriable funds. Sale proceeds of up to two residential properties can be repatriated to the extent of repatriable funds used in the purchase.
Remittance channels (see guest column The India Opportunity) include online and wire transfers, cheque "boxes", cheques and demand drafts. DDs or cheques take 30 days to clear. A "cheque lock box", reduces clearing to 15 days. Wire transfer takes about three days with charges of $25-40.
Manish Misra, head, global remittances, ICICI Bank says, "Online transfers are speedy, free, transparent and the status can be tracked online. They offer desktop convenience." ICICI Bank's online transfer facility Money2India does not require users to have an account. It can be used as a free remittance platform by anyone for any amount over $1,000.