Why Financial Planning?

Planning is bringing the future into the present so that you can do something about it NOW.

Capital appreciation, financial security, and optimum investment returns are common objectives of most individuals. However, these objectives depend on factors like financial circumstances and life scenarios, which lead to differences in financial needs and investment objectives among different people.

Decoding NRI Investment Habits in India

Must Read – NRI Investment Options in India

Consequently, NRIs exhibit financial behaviour that is different from that of resident Indians. They adopt financial strategies and tactics and have habits that differ from those of Indian residents. Deciphering their investment preferences, habits, and strategies can provide valuable insights for both NRIs and their financial planners. It will help improve financial planning and financial decisions can be better aligned to their requirements. Let us look at some typical financial habits of NRIs and their effects:

Continuing with barred investments

While NRIs have many avenues of investment in India, there are some restrictions compared to options that resident Indians have. NRIs cannot invest in small savings schemes and national savings deposit schemes. There are restrictions on PPF investments. NRIs can invest in mutual funds but those settled in the USA and Canada have specific restrictions regarding the mutual fund houses they are permitted to invest with.

Must Read – HSBC Report Review

Understanding of taxation

Navigating the subject of taxes can be a source of anxiety for many, and the same holds true for Non-Resident Indians (NRIs). Some NRIs avoid trying to understand taxation rules and others try to procrastinate tax matters. Many are unaware of all the rules. Income earned in India, which exceeds the specified amount, through interest, dividends from equity shares or MFs, rent, capital gains, etc. are taxable. NRIs must file their taxes as per the tax filing schedule. In some countries income earned in India could be taxable both in India as well as in the country of the NRIs residence. It is critical to understand the exact tax rules and leverage Double Tax Avoidance Agreement (DTAA) to optimize tax outgo. Filing taxes as per the tax regulations will ensure compliance and help them avoid adverse consequences like penalties, etc.

Increasing investment in India

As per a 2021 study by HSBC, global Indians (Indians either born in India, with a parent born in India or a grandparent born in India) have increased their investments in the past three years. NRIs can easily access Indian stock exchanges and mutual fund platforms leading to a surge in NRI participation in Indian markets. The eagerness to be part of the India growth story, the potential for higher returns, and the convenience of online trading platforms are key factors for the greater participation in Indian markets.

Few more habits commonly observed among NRIs when it comes to their investments:

1. Dual Currency Management:
NRIs often manage their investments considering dual currencies, balancing exposure to both the local currency of their residence and the Indian Rupee. This habit helps them navigate currency risks and optimize returns.

2. Frequent Remittances for Investments:
NRIs typically engage in regular remittances to India for various investments, including real estate purchases, mutual funds, and fixed deposits. This habit reflects their ongoing commitment to financial opportunities in their home country. Check – Outward Remittance

3. Tech-Savvy Investing:

NRIs frequently exhibit a tech-savvy approach to investing. Leveraging online platforms, digital banking, and investment apps, they stay connected to the Indian financial market and manage their portfolios efficiently.

4. Active Involvement in Real Estate Management:
NRIs often actively manage their real estate investments in India. This includes regular monitoring, maintenance, and potential upgrades, demonstrating a hands-on approach to ensuring the success of their property portfolio.

5. Utilization of NRE/NRO Accounts:
NRIs commonly maintain Non-Resident External (NRE) and Non-Resident Ordinary (NRO) accounts for specific purposes. The habit of strategically utilizing these accounts aligns with their financial goals and regulatory requirements.

6. Adaptability to Regulatory Changes:

NRIs demonstrate a habit of staying informed about regulatory changes in India that may affect their investments. They remain adaptable and adjust their strategies in response to evolving financial regulations.

7. Regular Engagement with Financial Advisors:
NRIs often develop a habit of regular engagement with financial advisors who specialize in cross-border investments. Seeking professional advice helps them navigate the complexities of international investments and stay aligned with their financial goals. Read – How NRIs can choose the best Financial Planner

In conclusion, decoding the investment habits of NRIs reveals a nuanced and strategic approach to managing financial portfolios across borders. From maintaining diversified investment portfolios to actively engaging with dual currencies, NRIs showcase a distinctive set of habits shaped by a blend of cultural affinity, financial acumen, and adaptability to global dynamics.

As NRIs navigate regulatory changes, currency risks, and the ever-evolving investment landscape, NRIs exhibit a commitment to long-term wealth creation and a keen awareness of optimizing returns. Understanding these habits not only provides insights into NRIs financial thought processes but also emphasizes the importance of tailored strategies for successful cross-border investing. Whether it’s managing real estate, staying tech-savvy, or staying abreast of tax implications, NRIs exemplify a forward-thinking and proactive approach to achieving their financial aspirations in India.

What unique strategies or habits have you developed in managing your investments across borders? Share your thoughts and tips in the comment section below, fostering a community of shared knowledge and valuable insights.

Published on December 20, 2023

Hemant Beniwal

Hemant Beniwal is a CERTIFIED FINANCIAL PLANNER and his Company Ark Primary Advisors Pvt Ltd is registered as an Investment Adviser with SEBI. Hemant is also a member of the Financial Planning Association, U.S.A and registered as a life planner with Kinder Institute of Life Planning, U.S.A. He started his Financial Planning Practice in 2009 & is among the first generation of financial planners in India. He also authored Bestseller book "Financial Life Planning". 

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