Fi­nan­cial plan­ning for NRIS

Mint Asia ST - - Otherviews -

your change in res­i­den­tial sta­tus will need you to eval­u­ate your in­vest­ments too. “For your cur­rent hold­ings you don’t have to do much. But once your sta­tus changes to NRI, you will have to up­date your KYC doc­u­ments with the new res­i­den­tial sta­tus for mu­tual fund in­vest­ments, and the de­mat ac­count too. Once you are an NRI, you can­not source money from a res­i­dent In­dian ac­count. You will have to make in­vest­ments through your NRE ac­count. Some banks al­low you to change the sta­tus of your ex­ist­ing bank ac­count. How­ever, most banks re­quire you open a new NRE ac­count,” said Srikanth Meenakshi, co-founder and chief op­er­at­ing of­fi­cer, Fundsin­dia.com.

The prod­ucts for in­vest­ment also gets lim­ited. “Some mu­tual funds will no longer be avail­able to you. As of now only seven to eight mu­tual funds of­fer prod­ucts to the US and Canada, NRIS, such as L&T Mu­tual Fund and Sun­daram Mu­tual Fund. Some fund houses ad­di­tion­ally re­quire you to be phys­i­cally present in In­dia to make in­vest­ments,” said Srikanth, who says 7-8% of his in­vestors are NRIS.

For NRIS, some of the mu­tual fund prod­ucts that gave you tax breaks, may turn out to be in­ef­fi­cient.

“Prod­ucts such as ELSS (eq­uity-linked sav­ings scheme) and in­ter­na­tional funds turn in­ef­fi­cient for NRI in­vestors. If you are in Europe, you are likely to have much bet­ter funds to in­vest in,” said Meenakshi. Like mu­tual funds, most cor­po­rate fixed de­posits are also not avail­able to NRIS.

Loan prod­ucts

If you have any kind of loan in In­dia, you may want to re­con­sider do­ing the math. Many NRIS tend to re-eval­u­ate their loans in In­dia, if the coun­tries they are mov­ing to can of­fer them bet­ter in­ter­est rates.

For in­stance, if you had an ed­u­ca­tion loan at 12% in In­dia, and you now stay in a coun­try where you have ac­cess to a loan rate of 3%, you may want to do the cal­cu­la­tion to con­sider switch­ing the loan—if such an op­tion is avail­able.

“If you are get­ting a lower in­ter­est rate loan as an NRI in the coun­try of your res­i­dence, and you still save af­ter fac­tor­ing in the cur­rency cost, you should go ahead. If you have mul­ti­ple loans, you can do loan lad­der­ing— that is, pay off the loan with the high­est in­ter­est rates first,” said Ban­ga­lore-based Shyam Sun­der, man­ag­ing di­rec­tor, Peakalpha In­vest­ment Ser­vices Pvt. Ltd.

Check be­fore you leap

But be­fore mak­ing any changes in your in­vest­ment prod­ucts, you need to set­tle down in the new coun­try to un­der­stand your cash flows and ex­penses.

If you think you can’t han­dle the in­vest­ments and tax­a­tion process all by your­self, you should take help from an ex­pert. “You should tap into the lo­cal ex­per­tise in the coun­try of your res­i­dence if the tax­a­tion process and in­vest­ment prod­ucts are not easy for you to un­der­stand,” said Sun­der. And don’t get bogged down by all the changes that oc­cur due to change in your res­i­den­tial sta­tus. You can start the process slowly once you have set­tled down.

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