Investment Techniques For NRI’s

The Indian Law doesn’t permit the Non-Resident Indians to possess regular savings accounts in India. A certified financial planner recalls a case where an NRI wanted to continue his savings a/c as he wanted to receive interest on it.
It is advisable to either close the account or change it to NRE or NRO accounts as the interest on these accounts is equivalent to savings account.

An NRE account allows you to only deposit foreign funds. This amount or any interest earned is Tax free and on the other hand, an NRO account allows you to deposit any amount earned in India. But not more than 1 million $ can be repatriated in a year and t is taxed flat at 30%.

NRI’s cannot resident FD’s. A joint account holder from the family has to notify to the bank about the status. If not this, then they may be asked to make a fresh account and break the previous one. Since January 1st 2011, with KYC for MF’s is made compulsory for all MF investor and the KYC’s need to be renewed even though the investments are regular.

A financial expert explains that, as the residential addresses would change, link your investments to NRE and NRO accounts. They must submit certified copy of passport and overseas address. Proof of identity or address in foreign language has to be translated in English. The documents can be attested by the consulate office or overseas branches of banks registered in India.

NRI’s cannot open a Public Provident Fund. They can hold the account till maturity or extend it every 5 years and twice thereafter.

The interest or dividend on investments in India will always be taxable as per the Income tax Act. There will be Tax exemption on PFF investments will continue in India.

An NRI needs to be present at the time of renewal as per the law. This is because he needs to do the paperwork for change in status. The privilege of renewing policies online is only for the residents of India or a safer way is to transfer the policy to the foreign partner.

NRE- Non Resident External
NRO- Non Resident Ordinary
MF- Mutual Fund
KYC- Know your customer

Source- http://www.rediff.com/business/slide-show
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