Coming back to India after living overseas as an NRI gives you a one-time chance to re-evaluate your financial strategies and goals. This is the ideal time to maximize your investments and savings in order to build long-term financial security. The Indian economy is full of opportunities, but the environment may not be the same as the overseas markets you are used to. This blog will take you through five important areas in which you can maximize your savings and investments on coming back to India.
Review Your Savings Plan: INR vs Foreign Exchange
One of the initial steps on coming back to India is to consider where you’d like to keep your savings. Do you keep your savings in Indian Rupees (INR) or hold some in foreign exchange? Both have pros.
- INR Savings: All day-to-day expenses and most investments will be done in INR, so it is useful to convert your foreign exchange into INR. Interest earned on Indian savings accounts is generally higher than in many developed nations, and that is a good encouragement.
- Foreign Currency Savings: You can still keep some of your foreign currency savings by opening a Resident Foreign Currency (RFC) account. This is helpful if you are going to travel abroad often or if you anticipate a positive shift in exchange rates. Having your savings split between INR and foreign currencies can provide you with the ability to benefit from various financial environments.
Diversify Your Investment Portfolio
One of the wisest things to do after coming back to India is to diversify your investments in various asset classes. Although you might have invested in foreign markets earlier, India has a lot of profitable opportunities too.
- Mutual Funds: Investing in Indian mutual funds provides you with exposure to Indian economy sectors. Equity and debt mutual funds are the most sought-after options depending on your risk tolerance.
- Real Estate: Real estate is a sound investment option in India, particularly in emerging cities such as Bengaluru, Pune, and Hyderabad. It offers both rental yield and long-term appreciation.
- Gold and Precious Metals: Investment in gold has historically been perceived as an inflation hedge in India. Include gold ETFs or sovereign gold bonds in your portfolio. A diversified portfolio can spread the risks and generate consistent returns.
Utilize Tax-Saving Investments
When you return to India, you become a resident for tax purposes, hence your income becomes liable for taxation under Indian taxation laws. Nevertheless, there are several tax-saving instruments that will enable you to decrease your taxable earnings while increasing wealth.
- Public Provident Fund (PPF): You can invest up to ₹1.5 lakh every year in a PPF account, and the income earned is tax-free. It is among the safest investments available in India.
- National Pension System (NPS): NPS is yet another tax-effective method of saving for retirement with the advantage of additional tax relief under Section 80CCD(1B).
- Tax-Saving Fixed Deposits: These provide a secure and low-risk method to increase your funds while enabling you to claim a deduction under Section 80C of the Income Tax Act. By availing these tax-saving plans, you can save taxes while creating a strong financial future.
Create Emergency Funds
It is important to have an emergency fund for financial stability, particularly after returning to India. The purpose of an emergency fund is to meet unforeseen expenses such as medical emergencies, unexpected loss of a job, or immediate repairs at home.
- Liquidity: Make sure your emergency fund is liquid. You can invest this money in liquid mutual funds or high-interest savings accounts with instant withdrawal facilities.
- Size of the Fund: Your emergency fund should ideally be 6-12 months of living expenses, depending on your risk tolerance and stability of income. A well-sized emergency fund can provide you with peace of mind as you get settled back in India.
Plan for Your Retirement
Retirement planning after coming back to India is a long-term plan that needs to be thought through. The cost of living, inflation, and medical expenses must be considered while planning for retirement.
- EPF and NPS: Invest in retirement savings schemes such as the Employees’ Provident Fund (EPF) or the National Pension System (NPS), which provide tax relief and compounding growth over the years.
- Health Insurance: Medical expenses in India may be high, hence, investing in a good health insurance policy must be a high priority as a part of retirement planning.
- Diversified Investments: As you plan for your retirement, invest in diversified forms so that investment in various forms of assets occurs to reduce the risk and generate higher returns. Planning for your retirement early guarantees a financially secure future and also saves you from inflationary burden.
Conclusion
Maximizing your investments and savings upon your return to India involves a combination of prudent planning, diversification, and utilization of tax-saving tools. By analyzing your savings plan, diversifying your investments, creating emergency funds, and retirement planning, you can establish a strong financial base for yourself and your family. The Indian financial environment provides ample scope for growth, and by making the right decisions, you can ensure your financial future.
FAQs
- Is it possible to hold my foreign money in India on return?
Ans- Yes, you can keep foreign currency in a Resident Foreign Currency (RFC) account. - What are the top tax-saving investments in India?
Ans- Tax-saving investment includes PPF, NPS, and tax-saving fixed deposits. - How much real estate should I invest in India?
Ans- It varies depending on your financial objective, risk tolerance, and real estate market scenario in your city of choice. - Do I need to open a Resident Savings Account on return?
Ans- Yes, NRIs are required to convert NRE/NRO accounts to resident savings accounts upon return. - What is the minimum to open an NPS account?
Ans- You can open an NPS account with a minimum of ₹500 per contribution. - How do I save for retirement after coming back to India?
Ans- You can begin by investing in EPF or NPS and diversifying into mutual funds and property. - How much should be the size of an emergency fund in India?
Ans- Ideally, you should have 6-12 months of living expenses as your emergency fund. - Can I invest in Indian mutual funds once I return?
Ans- Yes, as a resident, you can invest in a large number of mutual funds depending on your financial goals. - Is PPF interest tax-free?
Ans- Yes, the interest received on PPF is tax-free. - What are the advantages of an RFC account?
Ans- An RFC account enables you to maintain foreign currency, which is convenient if you are going to travel or emigrate again.
Disclaimer: The information provided here is for educational and informational purposes only and should not be construed as financial, legal, or tax advice. Consult with a qualified professional before making any investment decisions. We do not accept any liability for errors or omissions in this information nor any direct, indirect, or consequential losses arising from its use.
