Process Of Investment in India For NRIs

When India looks for investments in various sectors, among others, it turns to the NRIs, the case in point being Resurgent India Bonds. The process of investment into India has progressively been made simpler and in many cases, no permission from the RBI is needed before investing in India.

However, before we discuss the actual process of investment for the NRIs, let us look at some of the issues faced by the NRIs when they invest in India currently. Investing in India is typically a one time event every year when they come to India. Massive mis-selling occurs due to time pressure and the need to close a deal.

The ‘MUST’ list

>>Get a PAN as it’s the most important document required by NRIs.
>>Open an NRE account to maintain repatriability of the funds invested in India.
>>Have a local representative to invest in illiquid assets.
>>Find a financial advisor to get legal and international tax advice.
>>The financial planner should help the NRI develop a long range financial plan for investment of his assets and insurance needs

Process of investing in India

Get a PAN: The most important document or registration required by NRIs is the Permanent Account Number (PAN). This is available to many first generation NRIs as a legacy of their stay and working in India. Getting a NRI PAN card is easy with the private PAN facilitation centres, which issue PAN within a few days.

Opening a banking relationship: Since all the investing transaction require a banking channel (buying and selling, parking funds, etc), opening a bank account is the next steps. Banks are more than eager for NRI accounts since they tend to maintain higher balances and offer great opportunities for cross selling. Open an NRE account to maintain repatriability of the funds invested in India. Banks allow NRIs to nominate a local representative who has the “mandate” to operate the banking account on their behalf.

Appoint a local representative: Investing in illiquid assets like real estate might require the NRI to appoint someone in India as his local representative. The NRI needs to give a “power of attorney” to the local representative detailing the powers that the representative can exercise on behalf of the NRI.

If the NRI does not want the hassle of writing cheques to his insurance company or to his mutual fund company, he can give his local representative the right to sign, invest and redeem on his behalf.

Identifying a financial advisor: Similar tests apply for the NRI when it comes to choosing a financial advisor. He needs to find someone who can win his trust. He needs to look at the ability of the advisor to service him. The client should not be too large or too small for the advisor.
Look at the ability of the financial advisor to provide legal and international tax advice. This can be important, especially since the NRI might do many transactions “sight-unseen” and across tax-geographies. In case of professionals, if the company has accredited financial advisors, then the professional knows where to go.

Deciding on asset allocation and insurance needs: The financial planner should help the NRI develop a long range financial plan for the investment of his assets as also for the insurance needs of the client. While it may not always be feasible for the advisor in India to research the market dynamics across the portfolio of his client, he should have a basic understanding of the risks on his client’s portfolio. Depending on the long-term needs of the client, the advisor needs to decide his India and Indian rupee allocation.

Understanding of the local laws (including taxes) and customs: There can be many quirks in the local law that the NRI should know. For example, while repatriation of sale proceeds of house property is allowed, it is limited to two such repatriations per individual. Similarly, capital gains bonds are available only up to Rs 50 lakh per person per year.

In case the NRI has made larger capital gains, he will need to pay the tax on that or reinvest in another property. Similarly, an understanding of the local customs can go a long way in helping the NRI set expectations correctly. While there is increasing professionalisation on the real estate development, there are many cases when the projects take much longer to complete.

Source: Economictimes