If you’re an NRI planning to return to India, one of your biggest concerns might be how to maintain a steady income without working. Some questions might scare you at night like, 

“Will I have enough money to maintain the same lifestyle as abroad?” 

 “How will I support my family without my overseas job?” 

The good news is that with smart financial planning, you can set up a passive income stream that pays you Rs. 2 lakhs every month—without the need to take up a job or start a business.  

A well-structured investment strategy, primarily through mutual funds and Systematic Withdrawal Plans (SWP), can help you achieve this goal. This article will guide you through the process of investing in India, understanding SWPs, and calculating exactly how much you need to accumulate to secure your financial future. 

Why Should NRIs Consider Passive Income in India? 

Returning to India as an NRI means you’ll no longer be earning in foreign currency. If you’ve been working in the U.S., U.K., or the Middle East, your income has likely been in dollars, pounds, or dirhams. But once you’re back in India, you’ll need a reliable income source to maintain a comfortable lifestyle. 

Passive income for NRIs is essential because: 

1. You want financial security – Not having to depend on a job or a business means peace of mind. 

2. You can retire early – With a steady income from investments, you don’t have to wait until 60 to retire. 

3. You can focus on what you love – Whether it’s travelling, spending time with family, or pursuing hobbies, passive income gives you freedom. 

4. You avoid market volatility worries – Instead of worrying about market ups and downs, you’ll get a fixed monthly payout. 

Now, let’s look at how NRI investments in India, especially mutual funds—can help you achieve this. 

Mutual Funds: Your Ticket to Financial Freedom in India 

There are various options to earn passive income for NRIs like real estate, fixed deposits, and stocks – they all have their place. However, mutual funds have emerged as a popular choice for NRI Investments in India due to their potential for high returns, professional management, and diversification benefits. 

• Professional Management: Mutual funds are managed by professional fund managers who have expertise in selecting the best stocks, bonds, and other securities. This makes them an ideal choice for NRIs who may not have the time or knowledge to manage their own portfolios. 

• Diversification: Don’t put all your eggs in one basket- You’ve heard this saying before, right? Well, it’s the golden rule of investing, and mutual funds make it easy to follow. They invest in a diversified portfolio of securities, spreading risk across various asset classes, sectors, and companies. This diversification is like having a safety net for your investments. 

• Liquidity: Mutual funds are the most highly liquid investment option where you can easily access your money whenever needed. This flexibility is essential for NRIs, especially when financial needs arise unexpectedly. 

• A Variety of Investment Options: The mutual fund industry offers a wide array of investment options catering to different risk profiles, investment horizons, and financial goals. NRIs can choose from various fund categories, including equity funds (for higher growth potential), debt funds (for more stable returns), hybrid funds (a mix of equity and debt), index funds (tracking specific market indices), and more. 

Getting Started: Your Step-by-Step Guide to Investing in Indian Mutual Funds 

To start investing in mutual funds in India, follow these steps: 

1. Open an NRE or NRO Account: 

• NRE Account: If you earn money abroad and want to bring it to India, an NRE account is perfect for you. 

• NRO Account: If you have income earned within India, an NRO account is the way to go. 

2. Complete KYC Formalities: 

• Gather necessary documents such as your passport, visa, PAN card, and proof of overseas address. 

• Ensure compliance with FATCA/CRS regulations. 

3. Choose Your Investment Mode: 

• Invest directly through online platforms linked to your NRE/NRO account. 

• If you would prefer someone else to manage your investments, you can appoint someone you trust as your Power of Attorney (PoA). 

4. Understand Tax Implications: 

• Taxes can get a bit complicated, but it’s important to understand how they apply to your investments. The taxes you pay on your investment profits can change depending on the type of mutual fund you’ve invested in (like stock funds, bond funds, or a mix of both). 

• There are special agreements between India and many other countries called Double Taxation Avoidance Agreements (DTAAs). These agreements can help you avoid paying taxes twice on the same income, so it’s worth exploring if they apply to you. 

Generating Passive Income for NRIs Through Mutual Funds: The Systematic Withdrawal Plan (SWP) 

While mutual funds primarily focus on capital appreciation, they can effectively generate regular income through a Systematic Withdrawal Plan (SWP). A SWP works by allowing you to take out a specific amount of money from your mutual fund investments at regular intervals. This can be a valuable strategy for NRIs returning to India who want a steady income without fully depleting their invested capital. 

Let’s look at some examples to show you how much you’d need to invest to generate Rs. 2 lakhs per month using a SWP: 

Scenario 1: 6% Annual Withdrawal Rate (A More Cautious Approach): 

If you want Rs. 2 lakhs each month (which is Rs. 24 lakhs per year) and you withdraw 6% of your investment annually, you’d need a total investment of Rs. 4 crores (Rs. 24,00,000 / 0.06 = Rs. 4,00,00,000). 

This is a more conservative approach because withdrawing a smaller percentage reduces the risk of running out of money, especially if the market goes down. It’s a good strategy if you prioritize keeping your investment lasting longer. 

Scenario 2: 8% Annual Withdrawal Rate (A More Aggressive Approach): 

To get Rs. 2 lakhs monthly with an 8% annual withdrawal, you’d need to invest Rs. 3 crores (Rs. 24,00,000 / 0.08 = Rs. 3,00,00,000). 

This approach offers a higher monthly payout with less money invested upfront, but it can make your investment less sustainable in the long run, especially if the market underperforms. Before selecting a higher withdrawal rate, carefully assess your risk tolerance and consider potential market fluctuations. 

Accumulating the Required Corpus 

To accumulate Rs. 3-4 crores for your SWP plan, consider these strategies: 

Start Early and Leverage Compounding: 

The power of compounding is a crucial factor in long-term wealth creation. Starting investments early allows your money to grow exponentially over time. Even small, regular investments can accumulate significantly over the long term, thanks to the compounding effect. 

Invest through SIPs: 

Through SIPs, you can make small investments regularly, say monthly, quarterly, etc. SIPs are an excellent way to grow your corpus substantially in the long term. It instils investment discipline and helps average out the cost of investment over time, mitigating the impact of market volatility. 

For example: 

To accumulate Rs. 4 crores in 15 years at a 12% annual return: 

You need to do a monthly SIP of around Rs. 85,000. 

To accumulate Rs. 3 crores under similar conditions: 

The monthly SIP required would be Rs. 65,000. 

Choose the Right Type of Mutual Fund: 

Selecting the appropriate mutual fund categories is essential for achieving your financial goals and managing risk. Consider your risk tolerance, investment horizon, and financial objectives when choosing between equity funds, debt funds, hybrid funds, or other specialised fund categories. 

Equity Funds: Ideal for long-term growth but come with higher risks. 

Debt Funds: Offer stability and are suitable for conservative investors. 

Hybrid Funds: Provide a balance of risk and return by investing in both equity and debt. 

Review and Rebalance Your Portfolio: 

Now, this is the most important step of your investment journey. You need to review your portfolio quarterly or annually to check your mutual fund performance is aligned with your financial goals. Rebalancing involves adjusting your portfolio’s asset allocation by selling some investments that have performed well and buying others that have underperformed. This helps to maintain the desired risk-return profile of your portfolio. 

Crucial Considerations for NRI Investments in India and Passive Income for NRIs 

• Understanding Repatriation: You must know how to return your investment earnings to your home country. This is important, especially if you’re planning to return to your home country in the future. 

• Tax Implications: Be aware of the tax implications of NRI investments in India and your country of residence. It’s a good idea to talk to a tax advisor who specializes in helping NRIs. They can help you find ways to minimize your tax burden. 

• Currency Exchange Rates:  The value of your investments can go up or down depending on how the Indian Rupee changes compared to your home currency. You can explore options like currency hedging or carefully timing when you convert your money to minimize the impact of exchange rate fluctuations. 

• NRI Investment Regulations: Stay updated on the latest regulations governing NRI investments in India, as these can change periodically. 

Conclusion 

If you’re an NRI thinking about coming back to India, building a steady stream of income without having to work every day is more than just about money. It’s about having peace of mind and making sure you can live comfortably just like you do now. Investing in mutual funds can be a great way to achieve this. 

The key is to start early and plan carefully. With the right approach, you can make your return to India a financially independent and fulfilling experience. If you’re an NRI planning to return to India, one of your biggest concerns might be how to maintain a steady income without working. Some questions might scare you at night like, 

“Will I have enough money to maintain the same lifestyle as abroad?” 

 “How will I support my family without my overseas job?” 

The good news is that with smart financial planning, you can set up a passive income stream that pays you Rs. 2 lakhs every month—without the need to take up a job or start a business.  

A well-structured investment strategy, primarily through mutual funds and Systematic Withdrawal Plans (SWP), can help you achieve this goal. This article will guide you through the process of investing in India, understanding SWPs, and calculating exactly how much you need to accumulate to secure your financial future. 

Why Should NRIs Consider Passive Income in India? 

Returning to India as an NRI means you’ll no longer be earning in foreign currency. If you’ve been working in the U.S., U.K., or the Middle East, your income has likely been in dollars, pounds, or dirhams. But once you’re back in India, you’ll need a reliable income source to maintain a comfortable lifestyle. 

Passive income for NRIs is essential because: 

1. You want financial security – Not having to depend on a job or a business means peace of mind. 

2. You can retire early – With a steady income from investments, you don’t have to wait until 60 to retire. 

3. You can focus on what you love – Whether it’s travelling, spending time with family, or pursuing hobbies, passive income gives you freedom. 

4. You avoid market volatility worries – Instead of worrying about market ups and downs, you’ll get a fixed monthly payout. 

Now, let’s look at how NRI investments in India, especially mutual funds—can help you achieve this. 

Mutual Funds: Your Ticket to Financial Freedom in India 

There are various options to earn passive income for NRIs like real estate, fixed deposits, and stocks – they all have their place. However, mutual funds have emerged as a popular choice for NRI Investments in India due to their potential for high returns, professional management, and diversification benefits. 

• Professional Management: Mutual funds are managed by professional fund managers who have expertise in selecting the best stocks, bonds, and other securities. This makes them an ideal choice for NRIs who may not have the time or knowledge to manage their own portfolios. 

• Diversification: Don’t put all your eggs in one basket- You’ve heard this saying before, right? Well, it’s the golden rule of investing, and mutual funds make it easy to follow. They invest in a diversified portfolio of securities, spreading risk across various asset classes, sectors, and companies. This diversification is like having a safety net for your investments. 

• Liquidity: Mutual funds are the most highly liquid investment option where you can easily access your money whenever needed. This flexibility is essential for NRIs, especially when financial needs arise unexpectedly. 

• A Variety of Investment Options: The mutual fund industry offers a wide array of investment options catering to different risk profiles, investment horizons, and financial goals. NRIs can choose from various fund categories, including equity funds (for higher growth potential), debt funds (for more stable returns), hybrid funds (a mix of equity and debt), index funds (tracking specific market indices), and more. 

Getting Started: Your Step-by-Step Guide to Investing in Indian Mutual Funds 

To start investing in mutual funds in India, follow these steps: 

1. Open an NRE or NRO Account: 

• NRE Account: If you earn money abroad and want to bring it to India, an NRE account is perfect for you. 

• NRO Account: If you have income earned within India, an NRO account is the way to go. 

2. Complete KYC Formalities: 

• Gather necessary documents such as your passport, visa, PAN card, and proof of overseas address. 

• Ensure compliance with FATCA/CRS regulations. 

3. Choose Your Investment Mode: 

• Invest directly through online platforms linked to your NRE/NRO account. 

• If you would prefer someone else to manage your investments, you can appoint someone you trust as your Power of Attorney (PoA). 

4. Understand Tax Implications: 

• Taxes can get a bit complicated, but it’s important to understand how they apply to your investments. The taxes you pay on your investment profits can change depending on the type of mutual fund you’ve invested in (like stock funds, bond funds, or a mix of both). 

• There are special agreements between India and many other countries called Double Taxation Avoidance Agreements (DTAAs). These agreements can help you avoid paying taxes twice on the same income, so it’s worth exploring if they apply to you. 

Generating Passive Income for NRIs Through Mutual Funds: The Systematic Withdrawal Plan (SWP) 

While mutual funds primarily focus on capital appreciation, they can effectively generate regular income through a Systematic Withdrawal Plan (SWP). A SWP works by allowing you to take out a specific amount of money from your mutual fund investments at regular intervals. This can be a valuable strategy for NRIs returning to India who want a steady income without fully depleting their invested capital. 

Let’s look at some examples to show you how much you’d need to invest to generate Rs. 2 lakhs per month using a SWP: 

Scenario 1: 6% Annual Withdrawal Rate (A More Cautious Approach): 

If you want Rs. 2 lakhs each month (which is Rs. 24 lakhs per year) and you withdraw 6% of your investment annually, you’d need a total investment of Rs. 4 crores (Rs. 24,00,000 / 0.06 = Rs. 4,00,00,000). 

This is a more conservative approach because withdrawing a smaller percentage reduces the risk of running out of money, especially if the market goes down. It’s a good strategy if you prioritize keeping your investment lasting longer. 

Scenario 2: 8% Annual Withdrawal Rate (A More Aggressive Approach): 

To get Rs. 2 lakhs monthly with an 8% annual withdrawal, you’d need to invest Rs. 3 crores (Rs. 24,00,000 / 0.08 = Rs. 3,00,00,000). 

This approach offers a higher monthly payout with less money invested upfront, but it can make your investment less sustainable in the long run, especially if the market underperforms. Before selecting a higher withdrawal rate, carefully assess your risk tolerance and consider potential market fluctuations. 

Accumulating the Required Corpus 

To accumulate Rs. 3-4 crores for your SWP plan, consider these strategies: 

Start Early and Leverage Compounding: 

The power of compounding is a crucial factor in long-term wealth creation. Starting investments early allows your money to grow exponentially over time. Even small, regular investments can accumulate significantly over the long term, thanks to the compounding effect. 

Invest through SIPs: 

Through SIPs, you can make small investments regularly, say monthly, quarterly, etc. SIPs are an excellent way to grow your corpus substantially in the long term. It instils investment discipline and helps average out the cost of investment over time, mitigating the impact of market volatility. 

For example: 

To accumulate Rs. 4 crores in 15 years at a 12% annual return: 

You need to do a monthly SIP of around Rs. 85,000. 

To accumulate Rs. 3 crores under similar conditions: 

The monthly SIP required would be Rs. 65,000. 

Choose the Right Type of Mutual Fund: 

Selecting the appropriate mutual fund categories is essential for achieving your financial goals and managing risk. Consider your risk tolerance, investment horizon, and financial objectives when choosing between equity funds, debt funds, hybrid funds, or other specialised fund categories. 

Equity Funds: Ideal for long-term growth but come with higher risks. 

Debt Funds: Offer stability and are suitable for conservative investors. 

Hybrid Funds: Provide a balance of risk and return by investing in both equity and debt. 

Review and Rebalance Your Portfolio: 

Now, this is the most important step of your investment journey. You need to review your portfolio quarterly or annually to check your mutual fund performance is aligned with your financial goals. Rebalancing involves adjusting your portfolio’s asset allocation by selling some investments that have performed well and buying others that have underperformed. This helps to maintain the desired risk-return profile of your portfolio. 

Crucial Considerations for NRI Investments in India and Passive Income for NRIs 

• Understanding Repatriation: You must know how to return your investment earnings to your home country. This is important, especially if you’re planning to return to your home country in the future. 

• Tax Implications: Be aware of the tax implications of NRI investments in India and your country of residence. It’s a good idea to talk to a tax advisor who specializes in helping NRIs. They can help you find ways to minimize your tax burden. 

• Currency Exchange Rates:  The value of your investments can go up or down depending on how the Indian Rupee changes compared to your home currency. You can explore options like currency hedging or carefully timing when you convert your money to minimize the impact of exchange rate fluctuations. 

• NRI Investment Regulations: Stay updated on the latest regulations governing NRI investments in India, as these can change periodically. 

Conclusion 

If you’re an NRI thinking about coming back to India, building a steady stream of income without having to work every day is more than just about money. It’s about having peace of mind and making sure you can live comfortably just like you do now. Investing in mutual funds can be a great way to achieve this. 

The key is to start early and plan carefully. With the right approach, you can make your return to India a financially independent and fulfilling experience.