Supporting everyone's personal finance journey

How can NRIs easily manage their parents’ finances in India?

This article shows the steps NRIs can take to easily manage their family’s finances in India.

How can NRIs easily manage their parents’ finances in India?

Posted on 07 Apr 2022
Author: Sayan Sircar
14 mins read
📢Join 2400+ readers on WhatsApp and get new post notifications!

This article shows the steps NRIs can take to easily manage their family’s finances in India.

How can NRIs easily manage their parents’ finances in India?

📚 Topics covered:

How to set up investments

This article will cover cases where NRIs can ensure that their parents in India have regular income with the least possible setup and maintenance hassles, simple taxation and low to no activities needed in the physical world by focusing on online transactions that can be managed from overseas.

For resident Indians: this article shows the steps to set up an investment portfolio for retirees with the help of their children.

We will focus on simplicity, ease of maintenance and safety for these investments. We will avoid situations that involve running around by elders like:

  • continuous bank visits to perform KYC and other activities
  • filling, submitting and depositing Form 15G/15H offline
  • dealing with real estate properties, renters, agreement signing, and related hassles

We will explore the following options:

  • RBI issued government bonds (Gilts) that pay guaranteed coupons every six months
  • Pension plans
  • Debt and equity mutual funds
  • NRE FD
  • dividend-paying stocks

Rules on gifting to family members in India

To gift by NRI to a resident of India, we must distinguish between relatives and non-relatives. Gifts to relatives are tax-free, and for non-relatives, there will be gift tax. The following are considered relatives relative to the individual NRI who is gifting the assets, while anyone not covered below are non-relatives:

  • parents, step-parents, grandparents
  • spouse
  • children and their spouses, step-children
  • grandchildren and their spouse
  • siblings and their spouses, step-siblings

To avoid hassles and maintain a clear record for tax purposes, please create a gift deed for gifts exceeding ₹50,000 in value to both relatives and non-relatives. If the items being gifted are shares or mutual funds, or anything that has a purchase date and price, include those details in the deed for making it easy to calculate capital gains in the future.

Read more: How much money can NRIs in the US gift to their parents in India without paying tax?

Did you know that we have a private Facebook group which you can join for free and ask your own questions? Please click the button below to join.

Setting up the infrastructure

NRIs need one or more Non-Resident Ordinary (NRO) bank accounts to be set up. This account is used for any income and investments in India. The features and uses are:

  • interest earned is taxable in India at current slab rates. The benefit of the Double Taxation Avoidance Agreement (DTAA) is available with most countries so that you do not pay tax twice
  • you can send both interest and principal out of India, but the principal must be within $1 million. A CA must certify that you have paid taxes on this income
  • you can make deposits in foreign currency and INR, and withdrawals is in INR
  • joint accounts are allowed with another NRI or a resident
  • funds can be transferred to only another NRO account and not to an NRE account
  • this account is used to receive income from interest, FD, rent, stock and MF dividend, and proceeds from selling real estate, stocks and mutual funds
  • can be used for stock and MF investing

In this case, set up the NRO account(s) jointly with your parents for them to receive the money you plan to send them for their expenses. Alternatively, since there is no gift tax for transferring to parents, you can transfer money to the resident accounts of the parents as well.

We prefer the joint account approach since the NRI is the primary holder:

  • there are no hassles of Form 15G/15H to be submitted by the parents
  • the parents don’t have to worry about tax filing and TDS
  • there is no concept of “life-proof” to be provided like required for pension schemes

We cannot change the situation if the parents already have a government pension or the assets that they manage themselves. We are also not advocating that the parents transfer any assets to the NRI children just for simplicity of managing.

Pre-requisites to be completed

Before creating a retirement corpus ensure that these are in place:

  • an emergency fund with 6-12 months of expenses
  • a sinking fund for insurance payments (health, car) and recurring known expenses (building maintenance, holiday travel etc.)
  • a health insurance policy for 10-15 lakhs as a base policy with a 50-100 lakhs super-top up. This will be expensive but essential in case such a policy is not already in place
  • no high-interest debt like credit card or personal loans. An outstanding home loan should be paid off at the point of retirement using the retiral benefits

Contribution to family expenses by the children

Dealing with existing assets

We will give some examples for managing existing assets in India in a simple way that reduces the effort needed in India to maintain them:

  • Government or other pensions: Existing pensioners should use the Jeevan Pramaan website to provide life proofs online instead of visiting the concerned offices
  • Rented properties: To buy/sell or sign the rent agreement for property in India, a specific Power Of Attorney (POA) may be given to a trusted family member to transact on the owner’s behalf. A POA holder has the authority to only sign on behalf of the property holder, and the original owner still receives the rent/sale proceeds of the property in their personal account. The POA does not become the owner of the property
  • Bank deposits: As soon as April comes, the flurry of giving Form 15G/15H starts. This exercise can be a hassle for elders since it is difficult for them to do online, or PSU banks require branch visits for simple tasks. In such cases, you can let the TDS get deducted and use a CA to file tax returns to get a refund if applicable. The cycle of TDS-Refund-TDS will stabilise after a year
  • Shares and mutual funds: switch to simple index funds and suitable debt funds instead of direct stocks and high-cost active funds to lower the effort in tracking them. The easiest option will be to consolidate everything into a single large AMC with the same folio for equity and debt funds
  • SCSS/POMIS: these may be continued if there are already in place but need not be renewed in favour of the options below

Dealing with new assets

The purpose of making these investments is only to take care of parents and their expenses in India. These investments are not for the NRI’s own goals like retirement or children’s education.

Direct remittance

Priority: High

Direct remittance to the NRE account is the standard practice of sending money to India. You may hold NRE accounts jointly with a resident relative but only in former or survivor mode. You can set up a standing instruction to transfer funds from our foreign account to your Indian NRE account to fund it regularly. You should transfer what is needed every quarter or six months.

The issue with this approach is exchange rate fluctuations will make it difficult to predict how much will end up in the target account in INR for future transactions. Generally the more the number of remittances you make, there will more charges. Bank account to bank account transfers are low cost while if you pay via a credit or debit card, the fees will be higher.

Since regular remittance has a dependency on having an active income, we will also explore options that are more fit-and-forget in line with the theme of this article.

RBI Bonds

Priority: Very high

RBI Retail Direct Scheme

NRIs have an option of buying an RBI issued long term bond that pays half-yearly coupons and gives back the principal at the end of the period. This is via RBI’s Retail Direct Scheme or via brokers like Zerodha. You can think of this as a very long term FD with interest payments every six months. These bonds are available with maturities from 91 days to 40 years and investments may range from ₹10,000 to ₹2 crores per PAN.

The biggest benefit of this scheme is that due to the government of India guarantee on coupon payments and return of principal, there is no dependency on the NRI child’s own finances after the bond is purchased. In case there is a disruption of income due to health issues, immigration or job loss, your parent’s income will continue. The interest payments that they will receive are fixed and will not increase over time with inflation.

It will be prudent to hold these bonds in a joint mode with your parents so that transmission, in case of their demise, is hassle-free.

NRIs will have to use their NRO account for investing in and for receiving interest from RBI/Gilt bonds.

For example, if you buy a 2062, 7% coupon bond at ₹106 by investing ₹50 lakhs, then you get:

  • notional value of the bond purchased = 100 * 50/106 = ₹47.17 lakhs
  • interest payment every six months = 0.5 * 7% * ₹47.17 lakhs = ₹1.65 lakhs (this is taxable) and comes without TDS into the bank account
  • ₹47.17 lakhs come back in 2062 in the bank account when the bond matures without any TDS or capital gains tax
  • this bond gives an income of 2 * 1.65 lakh * (1-30%) [assuming 30% tax rate] = ₹2.3L/year or approximately ₹19,250/month. Splitting the investment in the name of both parents will reduce the tax impact

You can spread out buying the bond over a few months to allow income every few months like this:

RBI bond coupon payment schedule

The example above shows two bonds purchased three months apart, allowing interest payments every three months.

You can use this formula to calculate monthly income from bond price and coupon rate:

Monthly income = 100 * Coupon * Investment / Price / 12 * (1 - TaxRate)

Here, investment = 50 lakhs, price = 106, tax = 30%, coupon = 7% and hence the monthly income = 100 * 0.07 * 50,00,000 / 106 / 12 * (1 - 0.3) = ₹19,250

Steps to follow:

  • choose how long you need this income to be there based on the expected lifespan. For example, if you expect your parents to be alive until say mid 2050s, then choose a 2060 maturity bond
  • calculate the income based on the current bond price and coupon rate for the 2060 bond based on the formula above
  • if more income is needed a few years later due to prices increasing in India, then buy a new bond to generate additional income
  • buy bonds in each parent’s name to minimise the loss due to taxes. If the taxable income per head is below ₹5L/year per parent, using the benefit of Section 87A, then this income will jump from ₹19,250 (4.6% yield) to ₹27,500 (6.6% yield)
  • RBI direct bond account can be opened and maintained online or alternatively use brokers like Zerodha

The concept of RBI bonds is explained in detail here: How to use the RBI Retail Direct Scheme to get guaranteed income?

Pension plans

Priority: Medium

Pension plans that generate a fixed income for life may be an option for someone looking for an excellent fit-and-forget solution. You can gift the money to your parents and let them take a pension plan in their name. The annuity rate should be compared with the RBI bond return before purchasing.

There are a few problems:

  • returns post-tax may be low
  • 1.8% GST is levied on the premium paid. This means that you pay 1.8 lakhs extra per crore of premium when you purchase the policy
  • the requirement of giving life certificate every year

Tax free NRE FDs

Priority: Medium

Unlike NRO FDs, which have 30% TDS, the interest on NRE FDs are tax free and can be used to generate an income for parents. The issue with this approach vs buying RBI bonds, is two-fold:

  • FDs are available for up to 10 years while RBI bonds are available for longer duration
  • As the Indian economy matures, interest rates will continue to fall. Newer FDs will be created at lower rates while the return from RBI bonds are fixed over the life of the bond

More on NRE FDs: Frequently asked questions on NRE Fixed Deposits (NRE FD): the complete guide

Note: NRE FDs may give a lot lower return even after paying zero tax in India when repatriated: Should NRIs invest in India for higher returns and later repatriate?.

Mutual funds

Priority: Low

NRIs should not invest in mutual funds in India solely for the purpose of income generation for parents. Mutual funds require a degree of active management that may not be possible all the time sitting in a foreign country. If active maintenance is possible, a combination of equity and debt funds, as per this post on choosing mutual funds, may be followed. If active management is not possible, then mutual funds should be avoided.

High dividend-paying stocks

Priority: Very low

We do not recommend that NRIs invest in direct stocks in India due to the research and tracking overhead involved. However, since stock dividends have the potential for providing inflation-indexed returns, NRIs may consider if they are comfortable with the extra effort needed.

Read more here on choosing dividend-paying stocks: How to plan for retirement/FIRE using dividend income?

Other options

Priority: Avoid

These options should be avoided at all costs:

  • NPS: this scheme is unsuitable for the purpose since the money is locked until the investor turns 60
  • Bonds apart from government bonds: an individual investor does not have the means to gauge the risks associated with corporate bonds or NCDs of any issuer. Do not chase yields by investing in state government or state agency bonds or corporate NCDs. The only reason their interest rate is higher than FDs is due to their disproportionately high risk
  • Debt mutual funds which invest outside central government bonds or have large exposure to interest rate risk

What's next? You can join the Arthgyaan WhatsApp community

You can stay updated on our latest content and learn about our webinars. Our community is fully private so that no one, other than the admin, can see your name or number. Also, we will not spam you.

To understand how this article can help you:

If you have a comment or question about this article

The following button will open a form with the link of this page populated for context:

If you liked this article, please leave us a rating

The following button will take you to Trustpilot:

Discover an article from the archives

Previous and next articles:

<p>A Step-by-step guide for finding out how much money you need to FIRE in India.</p>
What is the net-worth needed to FIRE in India?

A Step-by-step guide for finding out how much money you need to FIRE in India.

Published: 3 April 2022


<p>This article shows you an easy way to calculate the equity allocation for your retirement corpus.</p>
Asset Allocation Retirement
How much equity should you have in your retirement portfolio?

This article shows you an easy way to calculate the equity allocation for your retirement corpus.

Published: 10 April 2022


Latest articles:

<p>This article provides a clear guide to navigating the insurance requirements when securing a home loan, helping you make informed decisions.</p>
House Purchase Loans Insurance
Understanding Insurance Requirements for Home Loans in India: What's Mandatory and What's Optional?

This article provides a clear guide to navigating the insurance requirements when securing a home loan, helping you make informed decisions.

Published: 15 May 2024


<p>This article discusses the steps for investors in high-income brackets but hesitant to commit to a home loan due to the fear of job instability.</p>
Behaviour House Purchase Loans
How to manage a home loan if you are worried about job loss?

This article discusses the steps for investors in high-income brackets but hesitant to commit to a home loan due to the fear of job instability.

Published: 14 May 2024


Topics you will like:

Asset Allocation (21) Basics (8) Behaviour (13) Budgeting (12) Calculator (25) Case Study (6) Children (17) Choosing Investments (40) FAQ (12) FIRE (13) Gold (22) Health Insurance (5) House Purchase (33) Insurance (17) International Investing (12) Life Stages (2) Loans (20) Market Data (8) Market Movements (17) Mutual Funds (47) NPS (8) NRI (19) News (18) Pension (8) Portfolio Construction (53) Portfolio Review (27) Reader Questions (8) Real Estate (7) Research (5) Retirement (38) Review (16) Risk (6) Safe Withdrawal Rate (5) Set Goals (28) Step by step (15) Tax (59)

Next steps:

1. Email me with any questions.

2. Use our goal-based investing template to prepare a financial plan for yourself.

Don't forget to share this article on WhatsApp or Twitter or post this to Facebook.

Discuss this post with us via Facebook or get regular bite-sized updates on Twitter.

More posts...

Disclaimer: Content on this site is for educational purpose only and is not financial advice. Nothing on this site should be construed as an offer or recommendation to buy/sell any financial product or service. Please consult a registered investment advisor before making any investments.

This post titled How can NRIs easily manage their parents’ finances in India? first appeared on 07 Apr 2022 at

We are currently at 401 posts and growing fast. Search this site:
Copyright © 2021-2024 All rights reserved.