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Investing Abroad — The Essential Guide

One can take the mutual funds route, buy gold, invest in properties and REITs, or purchase artwork. Here’s an essential guide about the avenues, processes and tax implications.

October 17, 2022 / 03:39 PM IST
Investing abroad has picked up in the last few years.

Investing abroad has picked up in the last few years.

For years, Indian investors have been obsessed over how much money foreigners bring into Indian markets. Now Indians have also increasingly started to invest abroad.

As per data by the Reserve Bank of India (RBI), Indians invested $19,611 million in 2021-22, up from $12,684 million a year before that. Smart investors have been investing a part of their money abroad for better diversification for quite some time, taking benefit of the Liberalised Remittance Scheme (LRS) of the Indian government, which allows every resident Indian individual to send $2,50,000 abroad per financial year. Over time, the RBI has increased this limit. When the scheme was started in 2004, it was just $25,000.

Traditionally, mutual funds have been offering international equities, particular US equities, to Indian investors. But Covid-19 has accelerated this pace. The strong recovery of the global stock markets, post the onset of the global Covid-19 pandemic, mainly due to the government money pumped in to support economies, found its way to the stock markets. Markets indices and several sectors, particularly the Information Technology sector stocks, picked up, on account of companies investing in technology to support work-from-home. In 2021-22 alone, Indians invested $747 million in international equity and debt investments, up from $472 million a year before.

But there are many other reasons for Indians to send money abroad. Aside from investments, the LRS allows you to send money for travel, holidays, medical treatment, gifts, donations, funding foreign studies and even buying property. In 2021-22, Indians bought property worth $113 million. From London to Dubai and New York and the Caribbean, Indian are buying residencies abroad. Experts say that attractive yields and the potential for capital appreciation are just one reason. But the ease of getting permanent residencies on the condition that you invest a sum of money abroad buying property is also an offer many rich Indians cannot resist.

For those who don’t wish the hassle of investing in physical property, Real Estate Investment Trusts (REIT) offer a slice of foreign property.  Read this story to know how you can benefit from REITs.

Then, of course, there are art and alternate investments. Art, artefacts and rare collectibles help investors diversify their portfolios into assets that are agnostic to stock markets and interest rate cycles. While the risk is high, there is also a potential for high returns if you pick the right piece. Read this piece to know more about how to collect art and why it’s important to also maintain it after purchase.

Indians love gold. But some of us have a fascination to pick up gold from Dubai and the rest of the Middle East because many feel they save on import duties. That’s a fallacy. Not only is bringing gold into India restricted and comes with conditions, but gold in Dubai also has high marking charges. Read this piece to understand why bringing gold from Dubai is not as sound an option as it looks.

With money coming into the country and moving out, the global Indian and the non-resident individual should also know how to manage their bank accounts. Read this story to find out which is the right bank account you need if you become an NRI.

Last, but not least, there are various charges, costs and taxes associated with sending and investing money abroad. Our video guides will explain the nitty-gritty.
Moneycontrol PF Team