Tips for NRIs to save for retirement

Among the most common areas of interest for overseas Indians is investing for retirement. We all want to enjoy a similar, if not better, standard of living after retiring. However, we cannot get there unless we plan for it.

Depending on your age, goals and financial appetite, you can choose from a variety of financial instruments. OIFC's knowledge partners-LIC, Kotak Mahindra Bank and Axis Bank-help provide advice.

If you are currently working and your desired retirement age is at least a decade away, consider investing in products that provide you a higher return on investment over a long term. Start with a regular and systematic investment in equity-related products. You could also consider investing in mutual funds, real estate or unit-linked insurance plans (Ulips). Investments in mutual funds can be done through a systematic investment plan (SIP) or you can put in a lump sum mode and use a Systematic Transfer Plan (STP) to change investments.

However, you will need the Know Your Customer (KYC) document along with a bank account and investment account to invest in mutual funds in India. For investments in equity or stock market, you will have to open a savings bank account, a Portfolio Investment Scheme (PIS) account, along with demat and trading accounts. Of course, intra-day trading is not allowed for NRIs. In case of Ulips, your returns will be tax free.

NRIs in the age group of 18-60 years of age can also invest in the latest New Pension System (NPS). For retirement, you'll be required to invest in a Tier I account. The minimum contribution in this is Rs 6,000 per annum. Withdrawal from this account is not possible as per norms prescribed by the Pension Fund Regulatory and Development Authority (PFRDA).

If you are planning to retire in the next two to three years, it will be best that you consider a combination of debt and equity and then invest in a pension fund upon retirement. Investing in monthly income plans (MIP) would be the most suitable. MIP funds are debt-oriented schemes that generally invest up to 80% of its corpus in debt instruments and the remaining in equity instruments. However, investing in mutual funds attract capital gains tax and, therefore, is best over a long period.

Finally, if you have just retired, it would be advisable to choose bank deposits. You can convert your NRI deposits to resident Indian deposits. You could also consider investments in mutual funds through a SIP. However, do so based on your risk appetite, time horizon and investment goals. If you have earned retirement benefits from your employers, transfer them to a non-resident ordinary (NRO) account. If tax has not been deducted at source, you will have be taxed as per the provisions of the Income Tax Act.

SUJATA SUDARSHAN
CEO, Overseas Indian Facilitation Centre