I am an NRI from Muscat. I am not filing ITR in India. Please advise where to invest considering my time horizon is 15 years.

I am an NRI staying in Oman. I am saving the following amounts: Rs 1.50 lakh in PPF account, Rs 5,000 monthly SIP in heathcare fund, Rs 1,000 monthly SIP in consumption fund, and Rs 5,000 monthly SIP in gold fund. 

I want to invest Rs 10,000 more every month. My time horizon is 15 years. I am investing online from my normal saving account and not from my NRI account. I am not filing any ITR in India. Kindly advise whether an NRI has to file tax returns. What is the maximum limit upto which an NRI can invest in mutual funds? I am staying in Muscat. 

Reply by Balwant Jain, a tax and investment advisor

It is not advisable to invest in any sectoral schemes, since performance of the fund depends on the performance of that particular sector where entry and exit time both are important so it is always advisable to invest in diversified equity funds where the fund manager will anyway make allocation to the sector which is in vogue. So, you should stop your existing SIPs in healthcare and consumption funds. Your allocation to gold is too high as a percentage of your overall portfolio. I would advise you to reduce it.

Since gold funds have annual expenses whereas investments in Sovereign Gold Bonds (SGB) give you interest at the rate of 2.50% on your investment amount, I would recommend you to buy SGB from the market instead of continuing with the SIP in gold fund if you can do that so as to ensure that your investment in gold on average does not exceed 10%-15% of your overall average monthly investments.

Investment recommendations depends on your investment time horizon and your risk profile since your time horizon is around 15 years, you can take risk of investing in equity aggressively. You should review your investments periodically (preferably at least annually).

Here is the recommended for monthly investment of Rs 21,000- Nifty 50 Fund – Rs.8,000,  Flexi Cap Fund – Rs.6,000, Small Cap Fund – Rs.4,000  and  SGB – Rs.3,000/- on (average basis.)

Also read: Sovereign Gold Bond Scheme 2023-24: Here are top 5 reasons to invest in SGBs over physical gold or gold ETFs

Also read: What sets UPI Wallet apart? Superiority compared to UPI and ideal usage scenarios explained

Also read: Sovereign Gold Bonds 2023-24 Series IV to open on February 12: Here is what you should know

There is no upper limit up to which an NRI can invest in mutual fund in India. However, some of the fund houses do not allow residents of some countries like US, Canada to invest in their mutual funds. You do not have to file your ITR here just because you are an NRI. You have to file an ITR here in India only if your income in India before various deductions exceeds the basic exemption limit.

When you become an NRI, it is your duty to inform your bank about change in your status from resident to non-resident for banking and investment purposes and the bank has to then designate your existing bank account as NRO account. Please inform your bank immediately about your NRI status. Since, you are NRI, you can invest in the PPF account till its maturity and you cannot extend your PPF account once it matures. So, make sure you do not extend your PPF account even by mistake once it matures. It is illegal and you may face problem while claiming the proceeds.

 (Views expressed by the investment expert are his/her own.)