Every year, thousands of Indians venture abroad to pursue their dreams, whether for education or career opportunities, eventually settling in a new country. However, this transition often comes with its own set of financial challenges. Managing finances as a non-resident can be particularly daunting, especially when it comes to investing.
Every year, thousands of Indians venture abroad to pursue their dreams, whether for education or career opportunities, eventually settling in a new country. However, this transition often comes with its own set of financial challenges. Managing finances as a non-resident can be particularly daunting, especially when it comes to investing.
Despite the many good reasons for investing in India, non-resident Indians (NRIs) face numerous hurdles that can dampen their enthusiasm. While mutual funds seem like an effortless option, getting started involves significant hassle and paperwork. Existing NRI investors face the additional challenge of meeting new KYC (know-your-customer) norms, adding another layer of complexity to the process.
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Despite the many good reasons for investing in India, non-resident Indians (NRIs) face numerous hurdles that can dampen their enthusiasm. While mutual funds seem like an effortless option, getting started involves significant hassle and paperwork. Existing NRI investors face the additional challenge of meeting new KYC (know-your-customer) norms, adding another layer of complexity to the process.
These challenges are particularly discouraging for those not physically present in India, as they often require assistance navigating the formalities. However, with proper guidance and perseverance, NRIs can overcome these obstacles and successfully manage their investments.
Struggling process
One of the major hurdles NRIs face is changing their KYC status from resident to NRI and updating their existing investments and demat accounts.
Veera Nemmadi, a 34-year-old architect based in Singapore, experienced numerous challenges while managing his investments as an NRI. Having a portfolio before moving to Singapore in 2019, he had to convert his resident demat account to NRI. The extensive documentation required by the broker demanded significant time and effort.
“Extensive documentation required at Zerodha felt like a never-ending task to me. It involved a significant amount of paperwork and time. But the real challenge came with the need for attestation by a legal or gazetted officer. Getting documents signed at the Indian embassy in Singapore was prohibitively expensive,” he says.
The attestation process required for the account conversion process in India also posed a major obstacle, as most local authorities were unaware of the process. “I had to plan my attestations for when I visited India. However, finding lawyers in tier 3 cities who were familiar with this process was tough. Fortunately, my cousin, who works at the district court, came to my rescue and helped me with the attestation. Without his help, I might still be struggling with this step,” he adds.
Even after the demat account conversion from resident to NRI was completed, Veera had to manually adjust or frequently follow up with the broker to get accurate transaction prices, which took almost three months.
Akarsh Aggarwal, a software engineer based in Singapore, faced similar issues. It took several months to convert his demat account from resident to NRI. “It has been a painful journey. It took me almost nine months after trying to reach out to Zerodha. I did not face any issues with documentation, but the lack of support from customer service made it difficult,” says Aggarwal.
“Instructions aren’t clear while the customer service team asks you to send the documents. Once you send them, something would be missing again. It’s expensive to send the documents to India, and it’s painful to deal with them. They lack process understanding. If there are better returns elsewhere apart from Indian markets, I wouldn’t prefer investing in India at all, because of the complicated process,” he adds.
Seeking advice and tax implications
Apart from process challenges, NRIs often struggle to find the right investment advice for their goals. Financial and tax planning in two countries can be complex, with different regulations and compliance requirements. Many advisors lack expertise in cross-border investing, leading to poor investment strategies. This makes it hard for NRIs to get personalized, effective advice.
Palak Chauhan and her husband relocated to the US in 2014, facing unique challenges in managing their finances as NRIs. Navigating the Indian financial market from abroad proved difficult due to their limited knowledge and the complexities of tax implications.
“Initially, we relied on family advice to manage our investments in India. We did invest in mutual funds, real estate, and provident funds (PFs). However, as our investments grew in the US, we desired greater control and wanted to diversify our portfolio across both countries,” says Chauhan.
After struggling with investments for a few years, they finally sought guidance from an adviser. “After trying to figure things out on our own for a few years, which we regret since we lost out on crucial compounding years, we finally sought guidance from Vaibhav Tandon of Enriching Wealth Solutions. He helped us develop a customized mutual fund portfolio aligned with our risk tolerance, time horizon, and goals, ensuring compliance with NRI guidelines,” she says.
The complexities of tax implications in both countries posed another challenge. “The dual tax implications of US and Indian laws on our mutual funds added complexity. Filing FBAR and FATCA forms, along with estimating quarterly US taxes based on portfolio performance, required meticulous monitoring and a reliable tax partner. Finding competent professionals in India who understood our situation as NRIs proved to be a lengthy and difficult process,” she adds.
After a dedicated search, they finally found a tax professional who helped streamline their tax filing process.
Finding the right adviser helps
As NRIs, investing in India can be challenging due to the complex financial landscape and regulations, but finding a reliable adviser can make a big difference.
Akash and Vrushali, who have been working in Tanzania for the past three years, managed to save a significant amount and now have a monthly surplus they want to invest in India. Unsure of how to proceed, they reached out to Dipen Shah, founder of NRI FinOne, and a close friend of Akash.
Apart from investment advice, Shah guided them through the entire process online, from changing their status in PAN, opening NRE (Non-Resident External) and NRO (Non-Resident Ordinary) accounts, to completing central KYC (CKYC) for investment purposes, all without them needing to visit India.
“At NRI FinOne, we make it easier for NRIs to manage their investments in India. From guiding clients through the entire process, from updating their PAN status to opening NRE and NRO accounts, we handle CKYC for investment purposes, all online, so there’s no need to visit India,” says Shah.
Dos and Don’ts
When investing in India, NRIs should follow some essential do’s and don’ts.
Keep your KYC details updated, including your PAN status and bank accounts. Use NRE or NRO accounts for investments to comply with Indian regulations.
Diversify your portfolio by exploring options like mutual funds, index funds, and strategic ETFs.
Don’t overlook tax implications in both India and your country of residence; ensure you file necessary documents like FBAR and FATCA.
Avoid investing without thorough research or professional advice. Consulting a trusted financial advisor can help you navigate complexities and make informed decisions.
