On H1B /Green Card Investing in India Think AGAIN?
Ask yourself a question: why do you and should you invest anywhere other than you live???
Sanjay, 40, and his wife Swetha, 38, are both professionals living in Sunnyvale, California. They are both H1B holders and have been in the US for a little over 5years.
Most of their immediate family members are also in the US. Her parents Stay in India and they keep visiting USA.
They are in queue to get Their Greencards. Sanjay always keeps sending money to India and keeps it in safe deposit getting 8% interest and thinks that’s the best investment in the world – which is a myth.
Is it a good idea to Invest in India? Are investments in India safe? Is there any kind of insurance for assets in India?”
A lot Indian Americans are perhaps in the same confusion. They’ve settled in the US and see little chances of going back to India. But they do have an emotional attachment to their country of birth and keeping transferring money mainly due to confusion in long term investment strategy.
While it’s great to invest in India, it is important to have a diversified portfolio and a limited investment in India. Today, India might seem an attractive place to send money, given the rupee’s weakness against the dollar. However, think of what happens if the rupee continues to depreciate even at the time your investment matures and you want to remit the money out of India.
So the first question is how much of your total portfolio should be invested in India. “As a percentage of the portfolio, we broadly recommend to keep 20-25% in India which may be in the form of fixed deposits else real estate. Your investments in a country you don’t live should be no more than 30%.
How to invest in India?
Option 1: Invest in Indian securities directly like mutual funds, stocks and also Banks Fixed deposits which give approx 8-9% returns
* The greater risk in investing in India is from political and economic factors like reforms process, currency risk etc. However this is true for any geography and this risk can be mitigated by diversifying your investments geographically too.
* Further as an Indian American, there are several tax and regulatory aspects to take into account.
To begin with, all your global income such as dividends, interest and capital gains must be reported in the US tax return. The process can be cumbersome. You will first have to pay taxes in India and then claim a tax credit in the US. Secondly, you will have to follow regulatory and compliance procedures in both countries. In India, you will have to follow regulations such as Know Your Customer (KYC). In the US if your global financial assets in excess of $100,000 (for married filing jointly) you must report them in Form 8938 along with your tax return. Moreover, all mutual fund and ULIP investments must be reported under the complicated Passive Foreign Investment Company (PFIC) rules.
* Add to all the above the fact that you may not even be able to invest in Indian mutual funds. As per SEC rules, a foreign financial service provider may not sell his products to US persons unless he is registered in the US. So all Indian companies may not sell their products to you.
Option 2: Invest in India through US based funds
The easiest way for NRIs in the US to start investing in India is perhaps through India focused funds. Indian Americans can get exposure to Indian markets through US based ETFs. That way, you can be involved in the growth of Indian companies but at the same time, stay away from cumbersome regulatory and compliance processes.
Invest in real estate:
This is the best investment as India’s population and economic growth will fuel huge demand on real estate causing prices to rise. But you need to know on a long term if you don’t go back to India, who will take care of the property and ensure taxes and maintenance is kept up to date.
Surely its not a bad idea to have a house or a piece of land but do not put all your $$$$ in real estate in India .
YOU NEED TO KNOW THAT YOU ARE LIVING IN A DEVELOPED COUNTRY USA AND US DOLLAR IS FAR MORE SUPERIOR THAN INDIAN RUPEE AND WILL HOLD ITS VALUE MUCH STRONGER IN A GLOBAL MARKET THAN A RUPPEE DOES.
YOU NEED TO ACCEPT THE FACT THAT RUPEE IS NOT A STRONG CURRENCY TO KEEP YOUR INVESTMENT AND INDIA IA STILL A DEVELOPING COUNTRY WITH MAJOR ISSUES OF CORRUPTION,POLITICAL STABILITY,UNSTABLE FOREIGN POLICIES AND MONEY LAUNDERING AND MANY MORE.