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The NRI retirement guide for investing in India in 2022

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By Vivek Jain, Head Investment, PolicyBazaar

There’s no dearth of NRIs who might have moved to other countries for greener pastures but still want to be a part of India’s growth story. They even look for viable options here in order to save up for their golden years. Even at the World Economic Forum’s Davos 2022, it was reiterated that the best time to invest in India is now. This is because the country is fully capable of becoming a reliable partner in the Global Supply Chain, has the technology to empower the 21st-century world, and the start-up culture is in full swing. The sentiment of considering India as a viable investment option is high due to a number of reasons. The RBI has projected India’s GDP growth rate at a promising 7.8% for FY 2022-23. Furthermore, India is also among the economies with a leading bounce back from COVID-19.

Vivek Jain, Head – Investments, PolicyBazaar.com: “NRIs looking for effective retirement investment plans in India should ideally opt for a diverse portfolio. Guaranteed Return Plan, Unit Linked Insurance Policy (ULIP), Capital Guarantee Plan, Annuity Plans.But, before selecting any one or multiple schemes, ensure you have done a thorough online research about the various funds and read all documents carefully. After all, investing your hard-earned money in a growing economy should generate desirable results. So, Invest Smart and Invest Right.”

Guaranteed Return Plan is a viable option for Overseas Citizens of India as it comes guarded with a twin feature of life insurance and guaranteed returns thus, making it a better proposition than Fixed Deposits. It also offers investors a fixed return at a pre-defined percentage, i.e. no surprise at the end of the term. Another factor that makes the policy apt for NRI’s is that it can be purchased for up to 45 years, which spares them from the formalities of renewing it. Additionally, the flexible payout option that varies from monthly, quarterly, half-yearly, yearly, or the entire amount as a lump sum payment also provides more financial security. It also assures cash flow at critical milestones, such as higher education, child marriage, or a home loan payment. Since the Guaranteed Return Plan is exempted under Tax deduction under Section 10(10D), the NRIs between 18 and 60 years can consider buying it by complying with the KYC norms. Most importantly, NRIs who hold non-residential external accounts in India are entitled a GST refund which is an added bonus on the investment.

NRIs should look for Unit Linked Insurance Policy (ULIP) as an investment option as it follows a hybrid investment that combines both insurance and investment. The premium is split into two parts- a life cover, while the other is invested in the financial markets. For NRIs, this alternative offers an opportunity to take advantage of the country’s stock market upside, which can yield better returns. Also, the longer your money remains invested, the more favorable returns you can get. Thus, objectives like creating an emergency fund for a child’s education, parent’s illness etc., are easier to meet. Another significant feature of ULIPs that makes them better than others, like Mutual Funds, is the life cover from day one. Amid these uncertain times brought upon us by the pandemic, the insurance component makes the plan more dependable. Also, most insurers allow switching funds without any cost and partial withdrawals after 5 years. Keeping the volatility of market in mind, one can opt for systematic investment or investing a fixed amount at regular intervals which allows for rupee cost averaging. However, you must submit the necessary documents and abide by the KYC norms for this fund.

The Capital guarantee solution offers you a mix of both the above plans – guaranteed returns and ULIPs. This is again a combination of investment and insurance. The plan protects the principal amount of the investor from any losses by investing 50-60% of the amount into debt which assures capital protection and the remainder in equity. Furthermore, any underlying losses are instead absorbed by the fund company. Since it offers a 100% guarantee on premiums paid throughout the policy tenure, it is a good source for those who want to accumulate funds for the long-term or want to save for their retirement. Thus, for NRI who are investing for the first time and are between 18 to 65 years, they can consider purchasing these plans and reap tax-free returns. Besides, they can also avail tax rebate under Section 80C and 10 (10D) for their investments. This is great for new or first-time investors as it automatically allows an apt and hassle-free diversification of portfolio which is highly recommended by all experts.

An annuity plan is one of the most suitable and popular plans for retirement as it provides regular payments (monthly/quarterly/yearly) for a lifetime in return for investing a lump sum. Designed for a comfortable post-retirement life, this plan invests your money and pays back the returns that assure monetary safety to the policyholder. Often called pension plans, one can opt for annuity at any point of their life. There are two types of annuity plans – Deferred and Immediate Annuity. While the former helps you accumulate the corpus for a particular period with which you can later receive the income, with the latter you can immediately start receiving pension. What makes this scheme more attractive for the investors is that it secures the insurer’s initial amount used to purchase the annuity and returns it to the nominee in case of the policyholder’s death.

Therefore, an annuity plan is a suitable investment option for risk-averse NRIs who want to improve cash in hand when the payouts start. However, the minimum age for this scheme is dependent on the insurance provider though it starts from 18 years and varies to 80-99 years.

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