It is no secret that NRIs earn attractive salaries and indulge in affluent lifestyles. Although NRIs reside and work overseas, their Indian citizenship remains intact. This implies that they can easily remit funds back to their home country anytime without undergoing time-consuming procedures. Non-resident Indians (NRIs) have long been known for tapping into lucrative investment opportunities, more so when the currency undergoes depreciation.
Just like any other currency, the strength of the Indian Rupee reflects the overall economic strength of the country. Since NRIs send Dollars home on a continuous basis, a weaker Rupee can translate into more value for money. Due to concerns over the outbreak of the Omicron variant, the Rupee hit a 20-month low on 15 December closing at 76.28 against USD.
Various other factors were responsible for the decline in Rupee’s value such as booming wholesale prices, risk-averse sentiments among investors etc. The fall in Rupee’s strength spells a golden chance for Non-resident Indians who have long been keen to derive good value from the Dollars they have earned abroad.
Without more ado, this blog will elaborate why NRIs should remit Dollars home and make investments in India. But before moving any further, let us highlight the types of bank accounts that can provide maximum advantages to NRIs.
Types of bank accounts for NRIs looking to remit funds to India
There are 2 types of accounts NRIs can open in India – non-resident external (NRE) and non-resident ordinary (NRO) accounts. In an attempt to speed up Dollar inflows in the country, RBI has implemented deregulation on interest rates in both NRE and NRO accounts. An NRE account is meant for transferring money from foreign countries to India.
It supports deposits only in foreign currencies and withdrawals in INR. The best part is that the funds held in the NRE account can be repatriated without any limit. At a time, two non-resident Indians (NRIs) can open a joint NRE account. On the other hand, an NRO account is used by NRIs for managing recurring incomes originating in India from different sources like house rent, pension, dividends etc.
Take note that an NRO account can be opened jointly either by two NRIs or one NRI and an Indian citizen. In the NRO account, funds can be received in both INR and USD. Money kept in the NRO account is repatriable but within set limits. With an NRO account at your disposal, you can send up to $1 million to your country of residence in a given year.
You can choose either of the accounts based on what best suits your requirements. Before sending money home from the USA, make sure you leverage an online currency converter tool to check live USD to INR conversion rate. This will help you determine the best time for remitting Dollars to your home so that you can enjoy maximum profits.
Why should NRIs invest in their home country?
There is no denying that investing in India can fetch NRIs unprecedented returns. NRIs staying in the US can benefit significantly by sending Dollars home. Bank deposits are the most popular form of investment opted by most NRIs. What’s good is that NRIs have swaths of investment options to choose from apart from bank deposits. Based on their investing preferences, they can park funds in the real estate sector, Indian stocks, mutual funds etc.
Government of India bonds are also an excellent option as they offer a remarkable yield of up to 7%. In recent times, retail bonds have been garnering interest from NRIs owing to their long tenures and potential to generate huge returns. Given below are the three major reasons why NRIs should consider making investments in their home country.
1. Rapidly growing and stable economy
It is a known fact that India has a fast-growing and stable economy which attracts investments from all parts of the world. However, the emergence of the coronavirus pandemic wreaked havoc on the country’s economic growth recently. Thanks to rapid developments, the country’s performance is back on track.
In fact, India’s GDP saw a growth of 8.4% in the 2nd quarter of FY 2021-22, primarily due to the boom in agricultural productivity. Since the country’s GDP is expected to rise even further, tapping into profitable investment opportunities can prove to be quite beneficial for NRIs.
3. Lucrative interest rates
A notable reason for NRIs to make investments in India is the ubiquitous availability of lucrative interest rates. There are a plethora of banks in India that offer good returns on interest on both NRO and NRE accounts. Interest rates on NRE accounts can be as high as 5.60%. On the other hand, NRO accounts offer interest in the range of 2.75% to 5.50%. Bear in mind that the interest rates will differ depending on the length of the tenure. The longer the tenure, the higher the interest rates.
3. Low Taxation
Low taxation is another benefit NRIs can avail when transferring money home. Non-resident Indians are exempted from taxes related to remittance if the transfers are not made for investment purposes. Luckily, the interest income from NRE accounts will not be subject to any taxes. However, the interest earned on NRO accounts is bound to attract up to 30% tax.
But there is no need to be concerned as India has entered into a Double Taxation Avoidance Agreement (DTAA) with the USA. This simply means that the tax imposed on interest earned from NRO deposits will be slashed by 15%.
In a bid to reap the benefits of Rupee’s weak position in the currency market, sending Dollars home has become a common practice among NRIs. NRIs frequently repatriate huge sums of money to their home country for many purposes like investing in properties, providing financial support to family members etc. While working and staying abroad has benefits of its own, nothing beats the contentment of sending hard-earned money back to your home country.
A weak Rupee works in the favor of NRIs seeking to extract the best value out of their hard-earned Dollars. It is no secret that the Rupee has emerged as one of Asia Pacific’s most stable currencies this year. However, renowned investment bank UBS has projected that INR will weaken to 79.5 against Dollar by the second half of 2022. This simply implies that NRIs looking to remit money in the upcoming year have a lucrative opportunity at hand.
Also read: An Investor’s Guide To FD Interest Rates