Retirement plans are strategic investment tools that inculcate savings habits for the long term that resulting in corpus building, which can be utilised for post-retirement. These are effective plans that ensure efficient financial management, allowing a steady income flow even after your retirement.

Importance of a retirement plan

Retirement time is often regarded as one of relaxation and enjoyment, savouring the beautiful moments of life and spending worry-free time. However, simply picturing this is never enough. You need to work towards this goal from a very early age.

Although retirement might seem to be a far cry from the beginning of the career, however, that is the best time when you start thinking and working towards it. Only this will ensure a secure financial future.

Planning your retirement in India as an NRI

As an NRI, before planning your retirement, your key concern should be deciding on your retirement location before you plan your investments. This is essential as the costs and standards of living vary in India and abroad.

Consider essential factors like living costs, inflation rates, life expectancy, etc., in your preferred location.

A concrete retirement plan consists of 2 basic phases:

  1. Contribution phase: This implies regular contribution to specific investment schemes till your retirement age.
  2. Distribution phase: This involves utilising those savings to enjoy a hassle-free life.

NRI investment options for retiring in India

Considering the contribution phase, you can safely go for these promising NRI investment plans :

Equity-based investments:

Considering your financial targets and risk appetite, you can choose to invest in several funds like mutual funds, shares, stocks, etc. For equity investments, you must maintain a Portfolio Investment NRI Scheme-based NRI or NRO account, which needs to be linked with your NRI Demat accounts. These NRO accounts must be redesignated as usual NRO bank accounts according to RBI regulations.

Debt-based and fixed income investments:

To ensure stable returns, you might opt for investing in several term deposit plans like NRO, FCNR, NRE, government securities and FDs. These are reliable long-term investment plans, ensuring promising corpus growth.

Gold:

This is certainly not buying gold ornaments, although that too is a probable option. However, other easier methods include buying ETFs, digital gold, and gold mutual funds. However, the Sovereign Gold Bond investment option is not applicable for NRIs.

NPS:

The National Pension Scheme is open to both resident Indians and NRIs. But, Overseas Citizens of India and Persons of Indian Origin are not allowed to invest in this scheme. NRIs are only permitted to invest in Tier I NPS accounts. The concerned NRI must be aged between 18 and 60 years, possessing a valid Aadhaar card or PAN card, an active and valid Indian passport, and the designated mobile number must be Aadhaar-linked.

Note: Tier II NPS accounts are exclusively available for resident Indians holding active Tier I accounts.

Alternative investment funds:

These allow you to invest in hedge funds, venture capital, private equities and various other asset classes. Considering your circumstances, you can choose to invest in Category I, II, or III of AIFs.

Real estate:

As a qualified NRI, you are allowed to invest in both commercial and residential Indian properties. However, you will not be able to purchase any farmhouse, plantation property or agricultural land here. You can even consider investing in real estate through Real Estate Investment Trusts, ensuring a diversified portfolio in the real estate genre without direct ownership of land or property.

For the distribution phase, you must consider investing in:

Annuity plans:

These are insurance-based financial tools for retirement, allowing regular income either immediately after retirement or at a specific later date, which is termed as deferred annuity.

Pension plans:

These are annuity plans offering regular income with life coverage protection for your family to handle rainy days.

Debt instruments and fixed income:

These include options like NRO, FCNR-B, NRE, NRO, FDs, debt mutual funds, and corporate bonds. They involve comparatively lower risk and ensure stable returns.

Tax benefits for NRIs investing in India

Yes, there are several tax benefit options for NRIs investing in India. Life insurance investments usually qualify for a yearly tax deduction of up to INR 1.5 lakh per annum u/s 80C of the IT Act, subject to specific provisions and regulations.

Moreover, interest earned through NRE FDs remains tax-free here, provided the concerned NRI individual qualifies as a legal non-resident as per FEMA 1999 regulations.

However, the rate of tax benefit depends on the investment variants, current tax rates, and the total income earned.

Conclusion

Considering all the options, you can easily plan your comfortable post-retirement age back in your motherland.