Hi Money Gurus! I am an NRI. I have following queries: 1. How can I bring money from my accounts in India (currently in MFs) to my UK account? Is there a tax-free limit? 2. Can I get a medical insurance in India?

Ans: Amount transferred from foreign bank account to Indian bank account is not taxable. Tax will be charged if resident earn income from outside India or if amount remitted is invested in India.

Ans: You have an excellent opportunity to grow your wealth by investing in mutual funds from Germany. Your current monthly SIP of Rs 10,000 can be increased to Rs 40,000 to align with your future financial goals. Let’s address your queries step by step.

1) Can You Invest Through an NRE Account?

As an NRI, you can invest in Indian mutual funds using either an NRE (Non-Resident External) or NRO (Non-Resident Ordinary) account. Here's a breakdown of how both accounts work for investment purposes:

NRE Account: You can invest directly through your NRE account. The money you transfer from abroad into your NRE account can be used for investments in mutual funds. Funds invested through the NRE account are fully repatriable, meaning you can easily transfer the money back to your foreign account, including the profits.

NRO Account: If your money is in an NRO account, it generally consists of funds sourced from within India (such as rent or dividends). Investments made from an NRO account are subject to certain repatriation limits, and the tax implications are different. This option is more suitable if you have Indian income sources that you wish to invest.

Recommendation: Since you are based in Germany and earning abroad, investing directly from your NRE account is simpler and tax-efficient. You won’t need to transfer funds to an NRO account unless you have local income in India.

2) Is Rs 40,000 Monthly Enough for a Rs 10 Crore Corpus?

Your goal of accumulating Rs 10 crores in 10 years is ambitious and achievable with the right strategy. However, investing Rs 40,000 per month alone may not be sufficient, depending on the expected rate of return. Let’s evaluate this:

Assumed Rate of Return: Equity mutual funds in India have historically given returns ranging from 12% to 15% per annum. However, achieving a corpus of Rs 10 crores in 10 years with a Rs 40,000 SIP would require an extraordinarily high return, which is highly improbable.

Possible Scenario: With Rs 40,000 per month, even assuming a 12-15% return, your corpus might reach around Rs 1.5 to Rs 2 crores. To bridge the gap between Rs 2 crores and Rs 10 crores, you would need to significantly increase your monthly investments or consider other strategies.

Alternative Strategy to Achieve Rs 10 Crore:

Increase SIP Amount: To reach Rs 10 crores, you would likely need to invest more than Rs 40,000 per month. Depending on the returns, increasing your SIP to Rs 1 lakh or more per month could bring you closer to your goal.

Lump Sum Investments: Consider making additional lump sum investments when possible. This can come from bonuses, salary hikes, or any other windfall earnings.

Diversify Investments: While equity mutual funds should be the core of your investment portfolio, you could also consider other avenues such as international funds to hedge currency risk and provide better returns. However, stay focused on your risk tolerance and long-term goals.

Stay Invested for Longer: If you can extend your investment horizon beyond 10 years, it becomes easier to reach your Rs 10 crore target with consistent SIPs. The longer you stay invested, the more power compounding has to grow your wealth.

3) Recommended Mutual Funds for Your Investment:

For a long-term goal like yours, equity mutual funds are ideal because of their potential to deliver inflation-beating returns. Here are some fund types that would suit your needs:

Small-Cap Funds: Small-cap funds can deliver higher returns, but they come with increased volatility. Over a long horizon, they can be an excellent wealth builder, provided you have the risk appetite.

Mid-Cap Funds: Mid-cap funds offer a balance between risk and return. They have the potential to outperform large-cap funds in the long run and are a good mix for a growth-focused portfolio.

Large-Cap Funds: Large-cap funds provide stability. They invest in the top 100 companies and are less volatile compared to small-cap and mid-cap funds. For a 10-year horizon, having a portion of your portfolio in large-cap funds is essential for risk mitigation.

Flexi-Cap/Multicap Funds: These funds invest across market capitalizations. They offer flexibility, allowing fund managers to shift between small, mid, and large caps based on market conditions. This adds diversification and balance to your portfolio.

Sectoral/Thematic Funds: If you want to bet on a specific sector like technology or banking, thematic funds are an option. However, they carry a higher risk as they are concentrated in one sector. Consider them only if you understand the sector well.

Active Management over Passive Investments:

Avoid index or passive funds for your goal. Actively managed funds have the potential to outperform the benchmark over the long term, especially in a growing economy like India. Passive funds, while lower in expense, will only deliver market-level returns and may not help you achieve a 10-crore target.

Regular Plans over Direct Plans:

While direct mutual funds have lower expense ratios, they require active monitoring and decision-making. Since you are an NRI, it is more beneficial to invest through a certified financial planner (CFP) via regular plans. The guidance from a CFP will ensure proper asset allocation, fund selection, and regular portfolio rebalancing based on market conditions and your life stage.

Other Important Considerations:


Rebalancing Portfolio: Over time, as markets change and your financial situation evolves, rebalancing your portfolio is essential. For example, you may want to move from high-risk small-cap funds to more stable large-cap or debt funds as you approach your goal.

Regular Reviews: Keep reviewing your portfolio at least once a year. This will help ensure that your investments are aligned with your financial goals. If required, make adjustments based on market conditions or your personal life changes.

Finally: A Path to Rs 10 Crore

Achieving a corpus of Rs 10 crores in 10 years is an ambitious goal. Here’s a quick action plan for you:

Invest through your NRE account for simplicity and repatriation benefits.

Increase your monthly SIP to more than Rs 40,000 to stay on track for your Rs 10 crore goal.

Diversify your investments across small-cap, mid-cap, and large-cap funds for optimal risk-adjusted returns.

Consider additional lump sum investments and stay disciplined with your long-term investment strategy.

Work with a certified financial planner (CFP) who can help you monitor and adjust your portfolio as needed.

With a well-planned strategy and disciplined investments, you can grow your wealth significantly and get closer to your goal.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Your plan to invest for your daughter’s future needs is thoughtful and strategic. Investing in mutual funds can provide growth and liquidity for marriage or other expenses. Below are insights addressing your concerns.

Can You Start a Mutual Fund in Your Daughter’s Name?
1. Eligibility of Investment
You can start a mutual fund in her name if she has a Resident Indian (RI) status.
As your daughter is studying in Canada, she likely qualifies as a Non-Resident Indian (NRI).
2. NRI Mutual Fund Investments
NRIs can invest in Indian mutual funds.
Investments should be made through her NRE or NRO account, not your bank account.
3. Joint Account Option
If she holds an NRE/NRO account, you can invest jointly.
She should be the primary holder, with you as the secondary holder.
Can You Transfer Money from Your Account?
1. Direct Transfer Limitations
Transferring directly from your account to her mutual fund investments may create compliance issues.
Regulatory norms require NRIs to use their accounts for investments.
2. Gift Option
You can gift money to her NRE/NRO account.
Gifts from parents to children are exempt from income tax in India.
3. Investment Process for NRIs
NRIs can invest in mutual funds using their NRE/NRO accounts.
Money invested through these accounts is subject to FEMA regulations.
Advantages of Mutual Fund Investments for Future Expenses
1. Growth Potential
Mutual funds offer inflation-beating returns over the long term.
They are ideal for goals like marriage or significant future expenses.
2. Flexibility in Contributions
You can choose between SIPs and lump-sum investments.
SIPs provide discipline, while lump sums maximise market opportunities.
3. Liquidity
Mutual funds are liquid and can be redeemed when needed.
Tax Implications for Your Daughter
1. Capital Gains Tax
If she is an NRI, capital gains from Indian mutual funds are taxable.
Equity mutual funds: LTCG above Rs. 1.25 lakh is taxed at 12.5%.
Short-term capital gains: Taxed at 20%.
2. Tax Deducted at Source (TDS)
NRIs face TDS on mutual fund redemptions.
This TDS can be adjusted while filing tax returns.
Steps to Start the Investment
1. Open an NRE/NRO Account for Her
Ensure she has an NRE or NRO account to invest as an NRI.
Use this account to fund the investments.
2. Choose Suitable Mutual Funds
Diversify across equity, balanced, and debt funds for stable growth.
Consult a Certified Financial Planner to align funds with goals.
3. Regular Review
Review the portfolio annually to ensure it meets her goals.
Adjust the strategy based on market trends and her needs.
Final Insights
Investing in mutual funds for your daughter’s future is a thoughtful step. Ensure compliance with NRI investment norms for a hassle-free experience. Gifting funds to her account is a tax-efficient way to proceed. Seek professional guidance for fund selection and compliance to achieve your goals smoothly.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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