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Post-budget, NRIs have to spend more in India

Sunday March 06, 2011 02:28:43 PM, Kul Bhushan, IANS

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Non-residents Indians (NRIs) will have to spend a little more on their visits to India after the latest budget. As the air travel tax has gone up, NRIs now pay more when they buy their air tickets to travel back home and within India. Their stay at luxury hotels, guest houses and meals at good restaurants will cost slightly more as service and other taxes have gone up.

For medical treatment in India, NRIs will have to pay more because the service tax on healthcare is up. For example, if an NRI undergoes heart surgery, the charges go up between Rs.5,000 and Rs.10,000.

Increasing the income tax threshold marginally from Rs.160,000 to Rs.180,000 will benefit NRIs paying tax. Senior NRI taxpayers over 60 and very senior taxpayers over 80 will benefit more. But not in real terms. The inflation rate is higher than the relief. Most western governments have started announcing tax rates at least three years in advance so that people can plan ahead and India needs to follow this system, urges S.K. Gupta, an NRI chartered accountant.

Despite the recent negative news of scams and corruption, NRIs are still interested in buying property, investing in stocks or mutual funds, starting new ventures and even settling in India to retire. Should they take this plunge after this budget? Yes, considering the returns they can reap from their investments.

Suppose an NRI invests Rs.100,000 ($2,216 or 1,603 euros at current rates) in the three options of fixed deposits, equities and mutual funds (MFs). If an NRI puts down a fixed deposit of Rs.100,000 ,the total amount with interest will rise to Rs.113,000 for one year and Rs.174,000 after five years. If an NRI invests Rs.100,000 in equity, after one year the investment will more than double to Rs.226,000 and in five years, it will rise further to Rs.278,000. Now, if an NRI invests Rs.100,000 in MFs, it will go up to Rs.176,000 after one year more than triple to Rs.358,000 after five years with less risk than equities.

The highest returns come from MFs when compared to investing in fixed deposits or in Indian stocks. The initial paperwork for getting a Permanent Account Number (PAN) Card and getting KYC (Know Your Customer) takes a lot of time and effort and the budget has not addressed this problem, but the high returns make it worthwhile.

In a bold budgetary move, the Indian capital markets have been thrown open to foreign investors. This means that an individual foreigner can now invest in equity MFs. The NRIs still have an edge in the lower risk debt funds segment as foreigners cannot invest in the area, said Sanjay Durgan of Abundanze Wealth Management.

By holding the Pravasi Bharatiya Divas conferences in India and abroad with other initiatives, the Indian government has roped in rich NRIs to invest in India. NRIs who are also High Net Individuals (HNIs) continue to park their savings and investments in India because they see long-term stability and economic progress of this country. Middle class NRIs want security and steady returns on their savings and so they are also banking on India, said Vikas Vij, a practising accountant.

Ever keen to buy property in India, NRIs are daunted by the sky high real estate prices. But they fear the largely unregulated Indian real estate market. No steps have been taken to license and weed out unscrupulous real estate agents and property developers. Legislation on this problem is in the offing but too many NRIs have been duped. The stamp duty and the procedure for property registration are not uniform all over the country and this poses many problems for NRIs who want to buy property during their short visits. An Indian Stamp Act will be tabled to address this problem. Non-operational limited liability companies in India with NRI partners could not be easily wound up. Now the budget offers an Easy Exit Scheme to wind up these companies.

The total NRI remittances for 2010 were $55 billion. These were expected to rise further last year. This year, NRI remittances from the Middle East, especially Libya, will decline but the total amount is expected to remain at this level and may increase marginally.

Despite the slowdown following the 2008 financial crisis in the West and the current unrest in North Africa and the Middle East, NRIs still continue to look at India for depositing their savings and making investments, although they did not get any special incentive in this budget. Still, NRIs will send and keep their money in India where their heart is.


(Kul Bhushan worked abroad as a newspaper editor and a media consultant to a UN agency. He lives in New Delhi and can be contacted at:






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