I am a non-resident Indian (NRI) and have made several investments in Indian mutual funds. I will shortly be relocating back to India. What should I do about the mutual funds that I invested in as a non-resident after I come back to India? Should I sell them and start new investments based on my new resident status?

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Ans.Your earlier mutual fund investments will either carry the tax status of a non-resident external (NRE) account or a non-resident ordinary (NRO) account, depending on whether you used your NRE or NRO bank account to make the investments. When you shift to India, and your residency status changes to that of a resident, you can update the residency status in existing mutual funds. You do not need to sell your earlier investments. You can simply download a form from the mutual fund company website requesting a change in the tax residency status of your mutual funds. Along with the change in tax residency status, you will also need to update your new resident bank account details. In fact, the same form used to update your tax status will also give you the option to change the bank account mapping. Changing bank account mapping from an NRE/NRO account to a resident bank account is mandatory when changing the tax status from non-resident to resident.

I am 30 years old and have a five-year-old kid. My wife and I work in the private sector with a joint annual income of about Rs 1.7 lakh. When he grows older, we want him to get a good education in India or abroad. We also have an active home loan for which we pay Rs 35,000 in equated monthly instalments (EMIs). Barring two PF accounts, we haven’t invested in any financial instruments. Can you suggest some investment avenues to grow our money and take care of the home loan and the child’s education?

Ans.Your child will be starting college when she/he is 18 years old, which gives you an investing runway of close to 13 years. For an investment horizon that long, equity investments can be a large wealth generator. It is highly recommended that you start investing in equity mutual funds – even a small systematic investment plan (SIP) today can grow into a large education corpus due to the compounding effect of equities. For instance, if you would like to build an education corpus of Rs 75 lakh, a SIP of Rs 20,000 per month over 13 years can build that corpus, assuming equity markets provide a 12 per cent per annum return. If you can invest Rs 30,000 per month, the education corpus can grow to more than Rs 1 crore, which can absorb an international education as well.

I am a retired school teacher, 65, and live with my wife, 58. Our two children are married and live in different cities. We have inherited the house where we currently live. I have built another one nearby using a part of the money I got on retirement, and I intend to give it on rent, which will likely fetch around Rs 10,000. I do not have much savings left, about Rs 10 lakh. I also get a small pension, around Rs 22,000. We don’t want to bother our children for money as they have their own struggles. So, what more can I do to improve my finances and ensure steady cash flows?

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Ans.From the rental income and the pension, you are, in total, receiving a monthly retirement income of Rs 32,000. Given that this monthly retirement income is reasonably secure, you can take a higher risk with the Rs 10 lakh corpus to inflation-protect yourself in the future. Assuming that your pension will not increase every year and rental income may see an upward revision of only 5 per cent per annum, there is an urgent need to grow your capital so you can maintain your lifestyle with increasing inflation. After keeping Rs 3 lakh aside in debt mutual funds, which can act as an emergency reserve, the balance of Rs 7 lakh can be invested in equity mutual funds, preferably large-cap index mutual funds. This Rs 7 lakh should not be touched in the immediate future and needs to be given time to grow. After five years, small withdrawals can be made from this corpus to augment your monthly income.

The author is a CFA, a Sebi-registered investment adviser (RIA), and co-founder of www.samasthiti.in, a financial advisory platform.

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