NRIs have access to numerous investment opportunities in the countries of their residence, allowing them to grow their wealth across global markets. By investing internationally, they have the potential to increase their wealth by tapping into developed markets and emerging economies. While there are enough opportunities for NRIs to invest in India, diversifying their portfolio by building assets outside of India helps reduce risks such as currency fluctuations and market volatility. By carefully planning investments and taxation, NRIs can optimize their returns and grow their wealth significantly. We look at the investment options in a few countries that have a sizeable NRI/ Indian expatriate population:
Check – Best Investment Options for NRIs in India
Global investment opportunities for NRIs
Singapore
Real estate: The property market is expensive, but there is high demand. It is considered a good investment due to the country’s political stability and government policies that regulate property ownership and prices. Foreigners can buy condominium units but might need special approval to purchase houses, bungalows, and properties under six stories tall. NRIs cannot purchase subsidized housing. It is important to note that average rental yields are lower compared to other Asian countries like Indonesia and Thailand, but there is good potential for price appreciation. It is important to note that the buyer’s stamp duty and additional buyer’s stamp duty are higher for foreigners. Gains from selling property are usually not taxable as they are considered capital gains. However, depending on the frequency and motive of transactions, the transaction can be regarded as a trading transaction, making the gains taxable.
Mutual Funds: Numerous asset management companies offer mutual funds with global or regional exposure in Singapore. Purchase and sale can be done through banks, online investment platforms and broking houses.
Stocks and ETFs: Foreigners have access to Singapore Exchange (SGX) and global markets via brokerage accounts. People can invest in index funds, stocks and REITs (Real Estate Investment Trusts).
Check: Best 6 Investment for NRIs in Singapore You Should Know
United Kingdom
Offshore investment bonds: Expats and non-UK residents have access to offshore bonds which are typically based on the Isle of Man, Jersey, Gibraltar, and Guernsey and other such regions. These bonds are tax efficient for expatriates as they are not subject to capital gains tax. Income tax is deferred and is applicable as per the country of residence on income earned from the bonds. However, these bonds are quite complex, and only investors who understand the product properly and have capital to manage the risk should opt for them. It is important to note that establishment fees, admin fees and adviser fees (if a wealth manager is involved) will be applicable on this investment.
SIPP: NRIs can also make use of self-invested personal pensions (SIPPs). These are ‘do it yourself’ (DIY) pension plans where they have the freedom to choose the investments and modify them as required. Investments can be made in investment trusts, deposit accounts, commercial property, stocks listed on a recognized UK stock exchange or overseas stock exchanges. NRIs also have the advantage of QROPS. It stands for Qualifying Recognized Overseas Pension Scheme. In this scheme, pension funds can be transferred to the country they live in after leaving the UK. It entitles NRIs to get tax-effective annuity benefits in their new country of residence or India. NRIs do not have to pay tax in the UK if they satisfy these conditions:
- Live in the country the QROPS is transferred to
- The transfer does not exceed the available overseas transfer allowance
Otherwise they will have to pay 25% tax.
The overseas transfer allowance is usually £1,073,100 but can be higher if they hold a protected allowance. Tax has to be paid on the transferred funds in India. Some funds give the option to withdraw up to 25% of the accumulated retirement corpus tax-free.
Stocks and Funds: Expatriates can open investment accounts with brokerages or banks and invest in stocks and investment funds.
Stocks and Shares Individual Savings Account (ISA): A UK resident can open a Stocks and Shares ISA account with a bank. You can use it to invest in shares without paying tax on dividend and capital gains up to a total amount of £20,000.
USA
NRIs living in the United States of America income are eligible to invest in a number of options as a resident alien ( per IRS for taxation purposes):
Stocks and funds: NRIs in the US can invest in US stocks, funds and ETFs (Exchange-Traded Funds) if they have a US-based bank account and a tax identification number (TIN). They can open a brokerage account for the same.
Savings/ Retirement plans: NRIs have three key investment options to consider – 401(k) plans, Traditional IRAs, and Roth IRAs.
A 401(k) is a retirement plan offered by employers based on certain conditions where they can contribute a portion of their pre-tax income. Many employers will match a percentage of the contribution. There are usually multiple options, from conservative to aggressive, on how the individual wants the money to be invested. The 401(k) plans come in two types—Traditional and Roth—the main difference being how they’re taxed. In a Traditional 401(k) plan, contributions are made pre-tax, and withdrawals are taxed, while in a Roth 401(k), contributions are made after-tax, but withdrawals in retirement are tax-free.
NRIs who do not have access to a 401(k) or want to supplement it, can open a Traditional IRA or a Roth IRA with a broker or robo-advisor. A Traditional IRA allows individuals to invest pre-tax income. Capital gains or dividend income taxes are not applicable until the beneficiary makes a withdrawal. In a Roth IRA, contributions are made with after-tax income. There is no tax on earnings and withdrawals. Withdrawal is penalty-free after the age of 59½
In all these accounts, account holders need to adhere to annual contribution limits and be aware of the schedules for required minimum distributions.
Must Read: NRI Real Estate Investments Outside India
Real estate: NRIs can also look at investing in real estate to increase their net worth. There are no restrictions on buying property in the US for non-citizens, but there are certain legal processes and documentation that must be managed. Also, there might be additional regulations and taxes in some states. NRIs need to have a taxpayer identification number (TIN) or an individual taxpayer identification number (ITIN) from the IRS to buy property. Foreign property owners must pay local property taxes just like the citizens. They will have to pay income tax on rental income and capital gains tax on sale of property.
NRIs can invest in the country of their residence to diversify their investment portfolio and the opportunity to get higher returns. They should conduct thorough research and seek professional advice before investing to manage risks and achieve their investment goals.
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