Financial Cocktail Samosas: Bitesized Money Morsels For You, 28/12/2023

I Am Settling Abroad. Should I Continue My Indian Investments? 

Col Amol Parekh has plans to settle down abroad after his retirement due soon. He has a few lakhs invested across various financial products here in India and wants to continue with his mutual fund SIPs including further contribution in future too. But he isn’t sure how it will be managed upon his becoming a NRI after his settlement abroad. Many Indians face this dilemma. Some useful pointers for them are as below.
  1. Investment avenues that can be continued – There is no restriction on NRIs investing in most of the Indian mutual fund schemes, but some other investments may require tweaking, eg, one cannot continue to deposit money in Public Provident Fund (PPF) any longer but the accumulated balance will earn interest at the post office savings account rate. Similarly National Saving Certificate also does not allow fresh deposits. Please check up the rules for the particular investment avenue that you are planning to continue or invest afresh into, including their tax rules.
  2. Complying with rules and requirement of Migration country – Do check whether the country of migration has a DTAA (Double Tax Avoidance Agreement) with India. A DTAA ensures that there is no double taxation on income or profits earned in one country while residing in the other. Tax treatment on mutual fund capital gains is the same for NRIs and Indians. However, for NRIs, TDS will be deducted by AMCs which will later be adjusted when income tax return is filed.
  3. Some other important aspects – NRIs could consider setting up a PIS (Portfolio Investment Scheme) account in India if they wish to invest in Indian direct stocks after becoming an NRI. The KYC submitted to your investing agency will need to be changed from Resident status to Non-Resident status. Similarly, the resident saving bank account would need to be changed to a Non-Resident Ordinary (NRO) Account and a Non-Resident External (NRE) Account may also have to be opened.

Additional requirements for those relocating to the US or Canada – There are additional compliance requirements for citizens or NRIs based in US or Canada under the Foreign Account Tax Compliance Act (FATCA) provisions. Some fund houses do not accept investments from such individuals to avoid hassles, but if your fund house does accept such investment, it is likely to get an additional FATCA declaration form filled from you, which though is a very simple form.

When planning a life-altering move to a different country, do plan many steps ahead and tie up all the loose ends to avoid hassles in the future.

(Contributed by Kritika Saini, Assistant Manager, Team Sukhoi, Hum Fauji Initiatives)

How to Prepare Financially for Your First Child?

A couple’s life is greatly enriched on becoming parents, more so for the first time. As soon as a woman learns she is pregnant, the expecting parents begin making plans for their future. From planning a maternity break, choosing a good maternity hospital, doctor and pregnancy-related tests, to preparation for the baby’s arrival, buying clothes for the little one, and decorating and welcoming the new baby into the home, parenting often entails assuming new roles and responsibilities.

Similarly, getting your finances ready is another one of the very important parts of preparing for your baby’s arrival. Here are a few factors you should take into account for your own financial stability.

Pre-Delivery and Post-Delivery Expenses – Regular medical tests, doctor’s consultations and quality care for the expectant mother. If the pregnancy has any complications, then expenses can multiply drastically. Therefore, you should have enough money to cover all of your expenses, even if you are covered by a Govt facility. Additionally, your monthly expenses will increase by 20 – 30% after delivery; therefore, start saving now to cover these costs.

Maternity Insurance Cover – It should be taken 2-3 years before planning a pregnancy because you will not get this cover during pregnancy in case you plan to use an expensive private hospital for the delivery.

Plan For Parental Leave – You should preplan your parental leave. Also factor-in loss of pay, if any, due to parental leave from work in case you work in the corporate sector.

Avoid Impulsive Purchases – In case of first child especially, you might impulsively buy premium products for your child, stressing your budget. Plan practically and avoid such purchases if you really shouldn’t be doing them. Stick to buying affordable but quality products which are financially sustainable for you.

Plan for Child’s Education – Education planning should begin as soon as a child is born since the cost of education truly gallops as time goes by! Planning for it at the earliest, ideally when a child is just born, fosters financial discipline and make the accumulation much more affordable since you get a huge compounding time for your money growth. SIPs in mutual funds are one of the best ways to do it.

(Contributed by Shaheen Akhtar, Relationship Manager, HNI Desk, Hum Fauji Initiatives)

Are You Ready to Take on a Financial Emergency?

Emergencies come unannounced in their timing as also in financial terms. How do you prepare for them? Following may help you navigate them better:-
  • Prepare a monthly budget – If you have a complete view of where your money is being spent each month, you would be better prepared to tackle emergencies. How to prepare a monthly budget? There are any number of online apps and video available to do help you do that.
  • List down the causes of financial stress – Start recognizing the key problems keeping you up at night. Finding the cause of your worry will help you decide what to do next, whether the issue is credit card debt or bill payments.
  • Create an emergency fund – Your financial worries can be significantly reduced by having money set up for emergencies like unforeseen requirements or illness. Always have an emergency fund which can tackle your three to six months of regular expenses.
  • Take outside assistance – If you do not see progress in dealing with urgent monetary requirements, take help from the trusted financial advisors who can analyse your situation and suggest you possible courses of action.

A systematic way to organize your income and expenses can lead your financial life to the right track.

(Contributed by Gautam Arora, Associate Financial Planner, Team Sukhoi, Hum Fauji Initiatives)

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