Have you ever been in a serious talk over future planning, finances, and investments with your Captain or Chief Engineer, where they have either bragged about their successful achievements or some huge losses? I am sure you may have given thought to investing some money when you fly back home, but where to invest? Well, this post covers some of the most common assets to invest your money in as an NRI.
Table of Contents
1. Bank Fixed Deposits
The good old favorites of all time. Seafarers can invest their money in fixed deposits through their NRE, NRO, and FCNR accounts. You may be wondering “NRE NRO is ok, but what is FCNR? “
FCNR stands for Foreign Currency Non-Resident Account. FCNR Account allows you to save money earned overseas in Foreign Currency. Most banks book FCNR deposits in the following currencies.
- US Dollars
- Pounds Sterling
- Euro
- Japanese Yen
- Australian Dollars
- Canadian Dollars
FCNR Accounts are an excellent investment option for NRIs if you wish to retain your money in foreign currency and earn good returns at the same time. Since your money will be held in foreign denominations, you can be saved from the risk of exchange rate fluctuations.
Though FD is secure, the returns are not significant enough to compare with other asset mediums. It mostly fails to beat the inflation rate of the economy.
Latest Update
RBI has announced a rule for unclaimed, matured FD accounts. Funds in an unclaimed matured FD account will attract an interest rate as applicable to the savings account or the contracted rate of the matured FD, whichever is lower.
2. Direct Equity in listed shares (or privately held companies subject to RBI guidelines
Investing in equity shares helps to beat inflation by delivering a higher rate of return. The term direct equity refers to investment in the stock market directly. To directly invest in the stock market, you need a Demat or Trading account. This account allows investors to buy shares/stock of the company directly from the stock market. You can subscribe to the IPO and these shares can be sold on a stock exchange like NSE once you are allotted shares. The record is maintained at depositories like NSDL and CDSL. When the company needs to distribute dividends or bonus shares and credit the dividends directly into your bank account.
When you sell an equity share, within one year from the date of purchase, you earn short-term capital gains at the rate of 15%, if you sell after one year from the date of purchase, you earn long-term capital gains (LTCG). LTCG in excess of Rs 1lac is taxable at the rate of 10%.
3. Mutual Funds (Equity, Debt, Index, etc)
Mutual funds are funds where it collects and pool money from multiple investors and invested in various debt and equity instruments.
Equity mutual funds are those which primarily invest their assets in equity shares of different companies.
An index fund is a mutual fund that imitates the portfolio of an index. These funds are also known as index-tied or index-tracked mutual funds. Stock market indexes such as S&P BSE Sensex and NSE Nifty 50.
A debt fund is a Mutual Fund scheme that invests in fixed-income instruments, such as Corporate and Government Bonds, corporate debt securities, and money market instruments, etc. that offer capital appreciation. Debt funds are also referred to as Fixed Income Funds or Bond Funds.
Fund type | Short-term capital gains | Long-term capital gains |
| Equity/ Index funds | 15% + cess + surcharge Shorter than 12 months | Up to Rs 1 lakh, a year is tax-exempt. Any gains above Rs 1 lakh are taxed at 10% + cess + surcharge 12 months and longer |
| Debt funds | Taxed at the investor’s income tax slab rate Shorter than 36 months | 20% + cess + surcharge 36 months and longer |
4. Real Estate
It’s a no-brainer here, this asset class dates way back. The Indian real estate market is thriving and has become a part of many successful investment portfolios because of its high return on investment (ROI) value. Not surprising that 77% of the total assets of an average Indian household are real estate. The Indian real estate market is growing at a fast pace. Real estate is expected to grow from ₹12,000 crores in 2019 to ₹65,000 crores in 2040 and contribute to almost 13% of the country’s GDP by 2025.
You can save up to ₹1.5 lakhs on the principal amount under Section 80C, and up to ₹2 lakh on the interest payable under Section 24. These tax savings can help you lower your investment cost and make the investment a lot more affordable.
There is one important thing to consider which you’ll get as soon as the end of the list.
5. Unit Linked Insurance Policies (ULIPs) & Life Insurance Policies
Unit Linked Insurance Plan (ULIP) is a mix of insurance along with investment. The goal is to provide wealth creation along with life cover where the insurance company puts a portion of your investment towards life insurance and the rest into a fund that is based on equity or debt or both and matches your long-term goals. These goals could be retirement planning, children’s education, or another important event you may wish to save for. An investor can claim an 80C deduction and the returns out of the policy on maturity are exempt from income tax under Section 10(10D) of the Income-tax Act.
Latest Updates
The CBDT has issued guidelines for the calculation of taxable income if the annual premium of ULIP is more than Rs 2.5 lakh.
In the last Budget 2021the government had announced that proceeds from ULIP shall be taxable if the annual premium exceeds Rs 2.5 lakh in any year of the term of the policy.
Life Insurance guarantees compensation for loss of life in return for payment of a specified premium. The beneficiary whose name has been mentioned in the contract receives the specified sum, from the insurer in case of happening of the event.
6. Government Bonds, Non-Convertible Debentures (NCDs)
A government bond is a debt instrument issued by the Central and State Governments of India. Issuance of such bonds occurs when the issuing body (Central or State governments) faces a liquidity crisis and requires funds for the purpose of infrastructure development. The interest income is entirely tax-exempt. Also, the tax deducted at source (TDS) does not apply to these bonds. Some of the bonds are.
- Fixed-Rate bond
- Floating Rate bond
- Sovereign Gold Bond
- Inflation-Indexed Bond
- GOI Savings Bond
Non-convertible debentures fall under the debt category. They cannot be converted into equity or stocks. NCDs have a fixed maturity date and the interest can be paid along with the principal amount either monthly, quarterly, or annually depending on the fixed tenure specified. They benefit investors with their supreme returns, liquidity, low risk, and tax benefits when compared to that convertible debentures.
Check the company’s credit rating, issuer credibility, and the coupon rate of the NCD. Purchase NCDs of a higher rating such as AAA+ or AA+. If NCDs are sold within a year, STCG will be applicable as per the income tax slab rate. If the NCDs are sold after a year or before the maturity date, LTCG will be applicable at 20% with indexation. NCDs are taxed in a similar manner as fixed income securities under ‘income from other sources.
Where seafarers cannot invest
- You cannot invest in National Pension Scheme (NPS) if given up on Indian citizenship,
- NRIs can continue with their PPF account opened in India, but it can’t be extended beyond 15 years (maturity period).
- You can’t operate a resident account to conduct transactions in India. Non-Resident Indians are required to change their bank account and Demat account and update KYC details.
Now that point left off from the real estate investment:
If one (NON-NRI) sells a property in India, there is a TDS deduction of 1%. So, for a 1 Cr. deal the buyer will transfer 99 lac through banking channels or cheques and 1 lac will be deposited at the credit, to be claimed later at tax filing. But for an NRI the TDS deductions are 20% i.e. for a deal of 1 Cr. the seller will get 80 lac through the banking channels and the rest. If you do a capital gains tax calculation that comes up to 5 lacs in this deal. So, 15 lacs can be refundable to you but considering the promptless of the government, this can result in a hassle. To avoid this, there is a provision to write an application under Section 197 for lowering the deduction of TDS to the income tax department.
info credit: Sarthok Ahuja
Conclusion
In conclusion, this blog post provides valuable insights into investment options for Indian seafarers. From traditional avenues like fixed deposits and mutual funds to modern platforms like P2P lending and cryptocurrency, there are diverse opportunities to grow your wealth. Exploring these investment mediums can help you secure a brighter financial future.
Don’t miss out on the chance to make your money work harder for you! Share your thoughts and questions by leaving a comment on the blog post. Start investing today and unlock the potential of your hard-earned earnings.
