Financial planning for NRIs: Charting your global financial journey

Financial planning for a Non-Resident Indian(NRI) differs from an Indian citizen’s financial planning in certain crucial aspects. To take one example, if an NRI wishes to live in a foreign country after retirement, they must consider the cost of living in the country at the time of their retirement and invest in advance to achieve that financial corpus. Similarly, an NRI must consider the cost of living in the country to provide for their family. The medical expenses of an NRI, too, might be subject to change, depending on their country of residence.

An increasing number of NRIs across the Western world consider India a favourable destination to earn higher returns through their investments. Efficient wealth management for an NRI must cut across asset classes. For instance, more than 50% of NRIs are looking to invest in the Commercial Real Estate sector today.

Key features of an effective NRI investment strategy:

1. NRIs must make tax-based considerations while planning their finances:

For making NRI Investments, they are subject to different tax regulations depending on their residential status. They must understand the tax implications in India and their country of residence. NRIs must plan their investments to optimize tax benefits and minimize liabilities.Wealth management for NRIs often involves investments that offer tax efficiency.

2. NRIs must decide their post-retirement country of residence and plan accordingly:

NRIs often face the choice of retiring in their country of residence or returning to India; a decision that significantly impacts their retirement planning. NRIs must consider various factors, including their financial goals, healthcare needs, and lifestyle preferences.Retirement planning for NRIs involves a careful analysis of retirement accounts, pension schemes, and investment portfolios. NRIs must have a diversified investment approach that provides a steady income stream during retirement years, irrespective of the chosen retirement destination.

3. NRIs can choose NRE/NRO Fixed Deposit accounts:

NRIs have access to NRE (Non-Resident External) and NRO (Non-Resident Ordinary) accounts, which serve different purposes. NRE accounts are suitable for parking foreign income that an NRI wants to save in foreign currency, as they are freely repatriable. On the other hand, NRO accounts manage income earned in India, and the interest income is taxable.As part of theirn strategy, NRIs can open Fixed Deposits (FDs) in both NRE and NRO accounts. NRE FDs are tax-free in India and offer competitive interest rates. NRO FDs, while taxable, provide a secure way to manage income generated in India.

4. NRIs must purchase sufficient health insurance:

Access to quality healthcare varies across countries, and healthcare expenses can be substantial. NRIs should purchase comprehensive health insurance that covers medical expenses in both their country of residence and India.Adequate health insurance offers peace of mind and ensures that healthcare expenses do not derail financial goals. NRIs should carefully assess their healthcare needs and choose insurance plans that provide adequate coverage for themselves and their families.

Ending note

Effective wealth management for NRIs requires a deep understanding of their financial goals, residency status, and the details of investments based out of India.

NRIs should approach their financial planning with a global perspective and a comprehensive strategy that aligns with their unique circumstances. Non-Resident Indians can achieve their financial aspirations and secure a prosperous future by understanding all the details of their investments.