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SIP Investments for NRI: Top Plans, Benefits & More

Explore the top SIP plans for NRIs in India. Dive deep into the benefits, strategies, and how to make the most of SIP investments as an NRI
5
min read
February 7, 2024
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Content overview:

1. Introduction to SIP Investments for NRIs

2 .Why SIPs are a Preferred Choice for NRIs

3. Understanding the Basics: SIPs in India for NRIs

4. Top SIP Plans for NRIs in 2023

5. Quick SIP Tips for NRIs

6. SIP Mutual Funds: A Viable Option for NRIs?

7. Tax Implications for NRIs Using SIPs 

8. Best Practices for NRIs Starting SIPs in 2023 

9. Conclusion: The Future of SIP Investments for NRIs.

10. FAQs

Introduction to SIP Investments for NRIs 

Systematic Investment Plans (SIPs) have become a cornerstone for investors worldwide. For Non-Resident Indians (NRIs), SIPs represent a structured, disciplined, and hassle-free method to invest in the burgeoning Indian market. The Indian economy, with its consistent growth trajectory, offers a plethora of investment opportunities. The digital revolution has further simplified the investment process, making it accessible and straightforward.

Example: Consider Raj, an NRI based in the USA. He wants to invest in the Indian market but is wary of the market's volatility. By choosing SIP, Raj can invest a fixed amount monthly, thereby reducing the risk associated with market timing.

Why NRIs are Turning to SIP Investment 

The allure of the Indian market, combined with the benefits of SIP, has made it a preferred choice for many NRIs. SIPs offer rupee cost averaging, which means investors can buy more units when prices are low and fewer units when prices are high, leading to potentially higher returns in the long run. Additionally, the power of compounding ensures that both the principal amount and the interest earned earn interest over time.

Example: Let's take Meena, an NRI in the UK. She started a SIP of Rs 5,000 monthly for 10 years, with an average annual return of 12%, her investment would grow to Rs. 11.62 Lakh, showcasing the power of compounding.

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Physical SIPs vs. Digital SIPs for NRIs 

While traditional SIPs required paperwork and periodic visits to banks or financial institutions, digital SIPs have revolutionised the investment landscape. With a few clicks, NRIs can now start, manage, and even terminate their SIPs. Digital platforms also offer analytics, insights, and real-time tracking.

Example: Karan, an NRI in Australia, uses a digital platform such as Vance for his SIP investments. He receives real-time updates, performance analytics, and even tax-saving tips tailored for NRIs, making his investment journey smooth.

Top SIP Plans for NRIs in 2023

The Indian mutual fund landscape offers diverse opportunities for NRIs. Here's a snapshot of the top SIP plans for 2023:

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As of July 2023. Please note that these returns are past performance and are not a guarantee of future returns. It is important to do your own research and choose a SIP plan that is suitable for your investment goals and risk appetite.

Quick SIP Tips for NRIs

  • Diversify investments across fund types.
  • Regularly review your portfolio.
  • Align choices with financial goals and risk levels.
  • Stay updated on India's market trends.

SIP Mutual Funds: A Viable Option for NRIs?

SIPs in mutual funds allow NRIs to invest in a basket of stocks or commodities. Depending on the risk appetite, NRIs can choose between equity, debt, hybrid, or even thematic mutual funds. These funds are managed by professionals and offer diversification, reducing the risk associated with individual stock investments.

Example: Neha, an NRI in Canada, is passionate about technology. She chooses a SIP in a tech-themed mutual fund, allowing her to invest in top tech companies in India without the need to track individual stocks.

Tax Implications for NRIs Using SIPs 

Taxation is a crucial aspect of any investment. In India, SIPs have specific tax implications. Short-term capital gains from equity mutual funds are taxed if sold within a year, while long-term gains have tax exemptions up to a certain limit and are taxed beyond that. Debt funds have different tax structures, and it's essential to be aware of these nuances.

Example: Ravi, an NRI in Germany, consults a tax advisor to understand his potential tax liabilities from his SIP investments in India. This proactive approach ensures he's not caught off guard during the tax season.

Best Practices for NRIs Starting SIPs in 2023 

The investment landscape is dynamic, with market conditions, global events, and economic policies playing a significant role. For NRIs looking to start SIPs in 2023, it's crucial to stay updated, diversify investments, and review portfolios periodically. Digital tools, robo-advisors, and financial consultants can offer valuable insights.

Conclusion: The Future of SIP Investments for NRIs 

The consistent growth of the Indian economy, combined with the ease of digital transactions, suggests a promising future for SIP investments for NRIs. As the global economy recovers from the pandemic and India continues its growth trajectory, SIPs will remain a preferred investment choice for NRIs. By staying informed, diversifying investments, and leveraging digital tools, NRIs can harness the potential of SIPs to achieve their financial goals.

FAQs related to SIP investments for NRIs:

Q1. What is SIP?

SIP stands for Systematic Investment Plan, allowing investors to invest a fixed amount regularly in mutual funds.

Q2. Can NRIs invest in SIPs in India?

Yes, NRIs can invest in SIPs, but they need an NRE or NRO account.

Q3. Do NRIs need any special approval from RBI?

No, NRIs don't need special approval. They can invest in mutual funds on a non-repatriable or repatriable basis.

Q4. How can NRIs fund their SIP investments?

NRIs can fund SIPs through their NRE or NRO accounts.

Q5. Are there any tax implications for NRIs on SIP returns?

Yes, depending on the type of fund and the duration of investment, taxation varies.

Q6. Can NRIs manage and track their SIP investments online?

Absolutely, most mutual fund houses in India offer online platforms for tracking and managing investments.

Q7. What happens if an NRI becomes a resident again?

The individual must inform the fund house and change the status from NRI to resident.

Q8. Can NRIs invest in any mutual fund scheme through SIP?

While NRIs can invest in most schemes, certain funds might not accept investments from NRIs based in the USA or Canada due to regulatory issues.

Q9. Is the TDS applicable to NRIs on SIP investments?

Yes, TDS is deducted at source for NRIs on mutual fund redemptions.

Q10. What's the minimum amount for SIP investment for NRIs?

It varies across fund houses, but typically starts from INR 500 or 1000.

Q11. Can NRIs opt for a joint SIP account?

Yes, NRIs can have a joint SIP account with another NRI or a resident Indian.

Q12. How do NRIs redeem their SIP investments?

NRIs can submit a redemption request online or offline. The amount gets credited to their linked NRE/NRO account.

Q13. Are SIP returns guaranteed for NRIs?

No, SIP returns are market-linked and not guaranteed.

Q14. Can NRIs change the SIP amount?

Yes, by starting a new SIP with the desired amount and stopping the existing one.

Q15. Do NRIs need a PAN card for SIP investments?

Yes, PAN is mandatory for NRIs to invest in mutual funds in India.

Q16. How are SIPs beneficial for NRIs?

SIPs offer the benefit of rupee cost averaging combined with disciplined investing which are likely to result in the potential for higher returns over the long term.

Q17. Can NRIs pause their SIPs?

Yes, some fund houses allow pausing SIPs for a specified period.

Q18. What are the best SIPs for NRIs in 2023?

It depends on risk appetite, but diversified equity funds, hybrid funds, and top-performing debt funds are popular choices.

19. How do NRIs decide the best SIP for them?

It's advisable for NRIs to consult financial advisors, consider their financial goals, risk tolerance, and market conditions.

20. Is there a lock-in period for SIPs for NRIs?

Only if they invest in ELSS or tax-saving funds, which have a lock-in period of 3 years. Other SIPs don't have a lock-in period.

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Arnav is a dedicated product leader with a passion for finance and fintech. He graduated from IIT Bombay and IIM Calcutta and heads the Product team at Vance. He has extensive experience in the financial sector, with a deep understanding of the cross-border space. In his free time, he enjoys playing the guitar, rock climbing, and training for triathlons.

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