Providing high-end education for our children has become a dream for most parents.
📚 💰 Depending on the course and country the child wishes to pursue their studies in, there are several additional costs associated with foreign education. These include exorbitant university fees, accommodation, travel expenses, the risk of future rupee depreciation, interest on education loans, and inflation etc.
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💹 🏠 Considering the risk appetite and the investment horizon, Indian parents typically diversify their investments across various domestic financial products (such as equity oriented mutual funds, debt funds, Exchange Traded Funds (ETFs), fixed income bearing instruments, gold, real estate etc).
💲 One can also consider investing in domestic mutual funds that invest in overseas markets. However, due to a Regulators mandate, many of these funds are currently unable to accept fresh investments as they have breached the permissible asset under management thresholds. Discussions are ongoing with the Regulators to relax these thresholds, but the outcome is still pending.
💭 💭 An alternative to meet the rising forex fluctuation could be by allocating some percentage of overall education investment in overseas financial products via the Overseas Portfolio Investment route such as follows:
👉 Direct investment in foreign companies, listed on overseas stock exchanges, provided the acquisition is of non-controlling stake of than 10%;
👉 International Mutual Funds schemes which have exposure to international markets and which in turn invest in foreign stocks;
👉 Listed bonds of foreign government, listed corporate bonds of foreign entities etc. for steady income stream;
👉 Investment in the units (including sponsor contribution) of an investment fund or vehicle set up in an IFSC (GIFT City, Gandhinagar);
🌎 These investments can be made under the Liberalized Remittance Scheme, which allows remittance of up to USD 2,50,000 per person per year (approximately INR 2 crore) (and are subject to understanding the market risks involved).
🎓 It is important to note that LRS attracts TCS, and, depending on the remittance being made, the TCS rate may vary from 0.5% to 5% and to 20%.
✔ Interest on loan taken for higher education purpose may also be available for deduction under section 80E (which includes foreign education).