Investing from Denmark as an NRI moving back to India?

Ans: Current Financial Situation
Income Sources
Company Pension: $36,000/year
Brokerage Dividends: $26,000/year
401k Dividends: $23,000/year
US Rentals: $27,000/year
Expenses
Refurbishment of Bangalore home: $250,000
Utilities and Groceries
Medical Insurance for you and your wife
Taxation in India
Income from Company Pension
Your company pension is taxable in India. The tax rate depends on your total income.

Dividends from Brokerage and 401k
Dividends from 401k are taxed in India. The rate is 20% with indexation. Ensure to declare these in your Indian tax returns.

US Rentals
Rental income from abroad is taxable in India. You need to pay tax as per Indian tax laws.

Double Taxation Avoidance Agreement (DTAA)
India and the US have DTAA. It helps avoid double taxation. Declare all income in both countries. You can claim relief under DTAA.

Medical Insurance
Importance
Medical insurance is crucial. It covers unexpected medical expenses.

Options
Many insurance providers offer plans for senior citizens. Choose a comprehensive plan for you and your wife.

Refurbishment Costs
Budgeting
Plan your refurbishment budget. Ensure it fits within your financial capacity. Consider any additional costs that may arise.

Living Expenses
Utilities and Groceries
Estimate your monthly expenses. Factor in inflation and lifestyle changes.

Final Insights
Your income sources are diverse. This provides stability. Plan your taxes to avoid penalties. Focus on budgeting your refurbishment. Choose the right medical insurance. Regularly review your financial plan.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Considering the complexity of query, we will need more details and we need to understand certain facts which can be done in face to face meeting. It is advisable to take service from tax consultant.

Ans: Your dedication to supporting your parents’ retirement is truly admirable. As an NRI with limited investment knowledge, making informed decisions will ensure financial stability for your parents. Let's assess and optimise your proposed plan while incorporating better strategies.

Evaluating the Current Plan
Fixed Deposit for Both Parents
Strengths: Fixed deposits (FDs) are safe and offer guaranteed returns.
Limitations: FD returns in India often fail to outpace inflation. Senior citizens get slightly higher interest rates.

Bajaj Allianz Smart Wealth Goal SIP
Overview: Likely a ULIP (insurance cum investment product). Combines life insurance with investments.
Limitations: ULIPs have high charges (administration and premium allocation fees). Returns are often lower compared to mutual funds.
Taxation: ULIPs are tax-efficient but lack transparency and flexibility.
TATA AIA Smart SIP Wealth Secure
Overview: Another ULIP-based product with insurance and investment components.
Limitations: Similar to the Bajaj Allianz plan, it has high costs and lower returns.
Taxation: Tax benefits under Section 80C but limited withdrawal flexibility.
Medical Health Insurance for Parents
Strengths: Investing in health insurance for your parents is a wise decision.
Suggestions: Opt for a plan with sufficient coverage, including critical illness and cashless claims.
Suggested Optimised Financial Plan
Step 1: Replace ULIPs with Equity Mutual Funds
Reason: Equity mutual funds provide higher returns compared to ULIPs.
Benefits: Actively managed funds offer better growth, diversification, and lower charges.
SIP Strategy: Start a SIP for Rs. 5,000 monthly (Rs. 60,000 annually) for 10 years.
Taxation: Equity LTCG above Rs. 1.25 lakh taxed at 12.5%; STCG taxed at 20%.
Step 2: Invest in Debt Mutual Funds
Reason: Debt funds offer better returns than FDs and are tax-efficient.
Allocation: Invest Rs. 1 lakh in short-duration or dynamic bond funds.
Taxation: LTCG and STCG on debt funds are taxed as per the income tax slab.
Step 3: Build an Emergency Fund
Importance: Allocate Rs. 50,000 to a liquid fund or short-term FD.
Purpose: This fund will cover unexpected medical or living expenses.
Step 4: Continue Health Insurance for Parents
Annual Premium: Rs. 40,000 annually is reasonable for comprehensive coverage.
Suggestions: Include riders like critical illness and hospital cash benefits.
Step 5: Diversify Using Sovereign Gold Bonds (SGBs)
Reason: SGBs are low-risk, inflation-proof, and provide 2.5% annual interest.
Allocation: Invest Rs. 50,000 into SGBs.
Taxation: Interest is taxable, but capital gains on redemption are tax-free.
SGBs are not available for NRIs.

Tax Implications for NRIs
Better Returns: Shift to equity and debt mutual funds for inflation-beating growth.
Tax Efficiency: Use tax-saving instruments and avoid high-tax liabilities on ULIPs.
Flexibility: Mutual funds and SGBs provide better liquidity and transparency.
Secure Future: Health insurance ensures medical expenses are not a financial burden.
Final Insights
Your proposed plan can be significantly improved with better investment choices. Focus on mutual funds, health insurance, and SGBs for long-term financial stability. Avoid ULIPs as they come with high costs and limited returns. With these steps, you can ensure a secure and comfortable retirement for your parents.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment