What to do with existing investment, after becoming NRI?

Q & A Forum › Category: Investments › What to do with existing investment, after becoming NRI?

KumarG_007 asked 8 years ago

Dear Sreekanth, I am seeking your advice on this topic. I am investing in mutual funds (via SIP) from past 5 years and recently started investment in stocks also. I am using FundsIndia platform for these investments. Status of this account in "Resident" since I was working in India during that time but now I am working abroad from past few years on a official assignment, so technically I am a NRI now but not sure how long I will be working abroad as its depending on my official assignment, which means I may go back to India in future and become "Resident" again. Now I want to know what is the impact of changing my resident status to my existing investment. Do I need to change my status in my investment portfolio from "Resident" to "NRI"? If Yes, then what are the implication/impact on my existing investments? What are the consequence if I don't disclose and change the status? My point is, in case if I change the status and tomorrow if I have to go back then the my investment period till now would be wasted. Also, because of this I have stopped my investment in PPF because of latest rules for NRI. Please suggest and provide your advice on this. Many thanks for your past guidance. God bless you and Take care! BR, Kumar!

10 Answers

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Sreekanth Staff answered 8 years ago

Dear Kumar, If your current Residential status is NRI, advisable to inform about your status change to your AMCs/FundsIndia. Related article : Residential Status – NRI or Resident? & NRI Taxation It may be noted that some Indian mutual fund companies do not allow US/Canada NRI to invest in the wake of FATCA norms. Read : FATCA Compliance Requirements & Impact on Your Mutual Fund Investments Residential status change will not impact your investment period.. You may also inform about your status change to your Demat service provider as well. You will need to inform the change of residential status to the bank where you have the resident demat account. A new NR demat account will be opened and securities would be transferred from the resident demat account to NR demat account. The resident demat account will be closed. Related article : Mutual Funds Capital Gains Taxation Rules FY 2018-19 (AY 2019-20) | Capital Gains Tax Rates Chart

KumarG_007 replied 8 years ago

Hi Sreekanth,

Thank you for your response.

What are the consequence if I don’t disclose this and don’t change the status? As it might possible that I may go back to India in future and become resident again.

BR,
Kumar!

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Sreekanth Staff answered 8 years ago

Dear Kumar, It is illegal for an NRI to continue to hold their normal Resident bank accounts. It is also necessary to inform all the companies of whose shares you hold, and UTI/MFs about change in your status. If you have a demat account, it is not necessary to inform the companies but informing the DP is a must. There can be issues with the Indian IT dept and/or US authorities So, choice is yours!

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vikasnair1 answered 8 years ago

Before becoming an NRI, there are a couple of things you need to manage with respect to your financials. Some of them are:

Converting your bank account to an NRO account
The withdrawals from the PPF account are non-repatriable and need to be deposited in the NRO account
If you are invested in any mutual funds, you need to update your mutual fund KYC with these fund houses

KumarG_007 replied 8 years ago

Hi Sreekanth,Vikas

Thanks for your response.

It was told to me (from funds India) that I need to stop my current investment as it is linked with my saving account and create new investment with new NRO account, so my current investment will be impacted.

My friend has suggested another option to open a demat account with my father/mother’s name and do your further investment using there account (as they are resident of India and senior citizen).
and let the current investment open with your current saving account unit you manually transfer/close current investment.

Can you share your comments on this? Any concern do you see with this?

BR,
Kumar!

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Sreekanth Staff answered 8 years ago

Dear Kumar, Yes, you can gift the amount to your Parents and then the investments can be made in their names. No issues on that front! In case, you transfer your investments, do watch out for Tax implications if any. Related articles :

KumarG_007 replied 8 years ago

Thanks again Sreekanth,

Do you see any complication or concern using parents account for own investments and while doing redemption/selling of stocks in future?

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Sreekanth Staff answered 8 years ago

Hi, Suggest you to Gift the monies to your parents via non-cash mode transactions only. They can also declare this in their Income Tax Returns as Exempted Incomes. Do note that Gifts are tax-free in this case. They in-turn can invest the monies in their names in MFs/Stocks as per your requirements. They can make you a Nominee for these investments (or) they can write a WILL accordingly.

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KumarG_007 answered 6 years ago

Hello Sreekanth, First for all, Wishing you a very Happy & Prosperous New Year 2020. I hope you already had a very good start of new year!! Based our your suggestion last year, I have stopped all my mutual funds investment with "Resident" status and have opened a new investments with "NRI" status. Since its already been one year of investment in below funds so I am seeking your review/advice on these funds invested in three different portfolio below: —————————————————————————————————————————————————— Portfolio#1: Child Education (30000 monthly) —————————————————————————————————————————————————— 1. SBI BlueChip Fund-Reg(G) – 7000 (monthly) 2. Mirae Asset India Equity Fund-Reg(G) – 10000 (monthly) 3. Franklin India Prima Fund(G) – 7000 (monthly) 4. HDFC Hybrid Equity Fund(G) - 6000 (monthly) —————————————————————————————————————————————————— Portfolio#2: Child Marriage (30000 monthly) —————————————————————————————————————————————————— 1. Aditya Birla SL Frontline Equity Fund(G) – 5000 (monthly) 2. SBI Magnum Multicap Fund(G) – 7000 (monthly) 3. Mirae Asset Emerging Bluechip-Reg(G) – 8000 (monthly) 4. HDFC Small Cap Fund-Reg(G) – 5000 (monthly) 5. ICICI Pru Equity & Debt Fund(G) – 5000 (monthly) —————————————————————————————————————————————————— Portfolio#3: Retirement (40000 monthly) —————————————————————————————————————————————————— 1. ICICI Pru Bluechip Fund(G) – 9000 (monthly) 2. Parag Parikh Long term Equity Fund(G) – 10000 (monthly) 3. HDFC Mid-Cap Opportunities Fund (G) – 8000 (monthly) 4. Franklin India Smaller Cos Fund(G) – 5000 (monthly) 5. Aditya Birla SL FRF-Long Term Plan (G) – 8000 (monthly) ———————————————————————————————————————————————— Note: 1. All these investments are for long term (more than 8 years) 2. Apart from this I have few FDs for emergency fund and PPF investment for Debt side. Few Questions: 1. Any Suggestions or Improvement areas in my all three portfolio, any switching or reshuffling in funds or SIP amount required? 2. As I have mentioned above, my previous mutual funds investments with "Resident" status is stopped but I have not redeemed it since I am not in a need of money for now. Is it okay to keep it until not required or should I redeem it and re-invest in my new MF portfolio with "NRI" status? I shall be grateful for your prompt suggestions/response. Thanks in advance, Kumar!

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Sreekanth Staff answered 6 years ago

Dear Kumar, Happy new year to you too! There is no need to redeem if you have already informed your broker/AMCs/RTAs about the change in your Residential status. Individually almost all of these funds are good ones. You may continue with these!

KumarG_007 replied 6 years ago

Hi Sreekanth,

Thanks for your response.

Any suggestion on Equity-Debt allocation ratio (and allocation ratio in Large/Mid/Small cap)?

BR,
Kumar!

KumarG_007 replied 6 years ago

Hi Sreekanth,

Let me rephrase my question.

1) Regarding asset allocation between Equity & Debt, what would be the ideal asset allocation between Equity & Debt when your goal is 8+ year away?

2) For Debt investment (assume 30% ~ 40%) of overall portfolio, currently I have only one debt fund apart from PPF investment and FD investment.

Which Debt fund is good to choose for long term investment (apart from PPF investment of 150,000 yearly) as I think my Debt allocation is not properly covered?
Also I am not sure how to consider lump-sum FD investment amount in overall debt allocation calculation.

3) In my 3 different portfolios, I have 4-5 mutual funds (I understand some of them creates overlapping of underlying stocks),
Shall I reduce the number of funds in each portfolio,if yes then which one you suggest to stop in each portfolio?

4) As I mentioned in point#2 for addition of new Debt funds for long term, do I really required 2 Hybrid funds which are already part of my portfolio?

5) One last (Sorry as asking too many questions), among equity allocation what would be the ideal asset allocation between
Large, Mid, Small and Multi-cap funds when your goal is 8+ year away?

Many thanks for your time and guidance.

Best Regards,
Kumar!

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Sreekanth Staff answered 6 years ago

Dear Kumar, Given a choice, for a 5 to 8 year goals with moderate risk profile, I will pick 50 : 50 Equity Debt Allocation. If my goal is say 15 or 20 years away like Retirement, I will stick to say 60:40 E D asset allocation. Personally, I prefer to invest in same set of funds with different SIP amounts for long term goals. Including too many Schemes may lead to over diversification/ higher overlap and may not be really beneficial. Also, may be very inconvenient to track and review their performances. As opined in my previous reply, all most all the listed funds are good individually. If you are ok to review them periodically without any inconvenience, you may go ahead with your investment plan. For a goal which is around 8 years away, I would prefer to allocate (Equity) more monies to Hybrid, and Large cap (index) funds.Some portion of Multi-cap funds. Will avoid Small cap funds. May I know your investment objective, risk profile and time-horizon for Debt side?? Related article : Mutual Fund Portfolio Overlap Comparison Tool

KumarG_007 replied 6 years ago

Dear Sreekanth,

Thanks for your response.

As mentioned in my question, investment objective is child education, wealth creation and retirement with moderate risk profile. My time horizon is 8+ and 10+ years respectively.

For 40% debt allocation, apart from yearly PPF investment (and existing debt fund “Aditya Birla SL FRF-Long Term Plan”), which other Debt fund (or any other debt option like RD) will you suggest for long term investment?

One more question, currently I have both “Muti-cap” and “Hybrid” mutual funds available in my portfolio, both having exposure to large-cap and mid-small cap funds,
do I really need to carry both or should I stop investing in “Hybrid” funds?

BR,
Kumar!

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Sreekanth Staff answered 6 years ago

Dear Kumar, As of now, its better to avoid investing in Debt mutual funds (except for liquid funds, arbitrage funds..). Debt funds with high exposure to company debentures, bonds, FDs etc need to be avoided. Gilt funds with low credit risk can be considered for now. Have a look at balanced advantage fund (dynamic asset allocation) as well. Ex : IPru balanced advantage fund. The portfolios of actively managed funds keep changing. You may continue with hybrid as well as multi cap fund.

KumarG_007 replied 6 years ago

Hi Sreekanth,

As I have mentioned above, my debt portion is 40% of my portfolio (with 60:40 Equity~Debt allocation), Investment for 60% of equity part is already finalized with the help of your suggestions.

Now for 40% debt part, apart from yearly PPF investment, I am bit confused in where to invest for long term Debt investment (8+ years).

Since you have mentioned to avoid investing in Debt mutual fund for now, is investment in FD or RD suitable for long term?
OR
Should I invest in my existing Hybrid mutual funds (e.g HDFC Hybrid fund) instead for debt part?
Any other option for long term debt investment?

Please advice.

BR,
Kumar!

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Sreekanth Staff answered 6 years ago

Dear Kumar, Regarding 'Debt' allocation, if your priority is high level of safety of capital then consider options like NRE FDs, Secured NCD issues (if NRIs are allowed to invest in specific NCD issues), Gilt Debt Funds, Dynamic Asset allocation funds, Arbitrage Funds etc.,