I have been holding some shares in India for more than 20 years. I hold a foreign passport with Overseas Citizenship of India. What is the procedure to open a demat account in India to sell these shares? —Philip Pereira

I am assuming these shares were bought by you when you were an Indian citizen residing in India. The answer proceeds on that basis. If you don’t already have an NRO (Non-resident Indian) account with a bank in India, you should open an NRO account with a bank. Choose a bank that can also open a demat account (non-repatriable basis – non-portfolio investment scheme) and can facilitate an online share trading account linked to this demat account. Once these accounts are opened you can get the physical shares dematerialised and credited to this demat account. Then sell those shares on the stock exchange through the share trading account.

The money will be credited to your NRO account. There will be no capital gains tax on sale of equity shares on the stock exchange since they have been held by you for more than 1 year. You can obtain relevant certification from a chartered accountant to enable you to remit the money from your NRO account to your overseas destination subject to a maximum cap of $1 million. You can consult an investment advisor or a stock broking company that can assist you in completing these formalities.

I wish to take policy in my grandson’s name. He is 7, and I would like to gift the policy to him for his future education. I am 68 years old and retired. I understand that the one-time premium paid is eligible for Benefit under Section 80C. The scheme will close on 9th May 2016. Can I avail this benefit as the child’s grandfather?

Unfortunately, the deduction under Section 80C is available only where the concerned investment is in the name of the taxpayer or spouse or any child of such taxpayer. So if the policy is on the life of your grandchild, it will not be eligible for tax benefit. You will need to invest in your own name if you want tax deduction benefits. You will not be able to get a life insurance policy easily or it will be very expensive. Given are suggestions keeping in mind the long-term education needs for your grandchild and tax benefits for investments as well as interest.

You can open a new public provident fund account in your own name (if you do not already have a PPF account) and nominate your grandchild as the nominee in the event of your death. Investment in the PPF account will be eligible for tax benefit and interest accrued is tax-free. Continue to make a nominal investment of Rs 500 every year to keep the account active. The return on PPF is better than any insurance policy. In the case of your death, the money will be paid to your grandchild if he has become a major by that time. If he is still a minor at that time the money will be paid to the person mentioned by you as the guardian.

On maturity, after 15 years, you can renew the account for a further period of 5 years each at a time indefinitely.Another option with better liquidity is the 5-year NSC which again you can take in your own name with the grandchild as a nominee. This is a one-time investment without any hassles. The interest accumulated is taxable but is available as a deduction under section 80C in the same year so effectively it is tax-free. In the case of death before maturity, the treatment is similar to PPF above.

On maturity, you can re-invest in a similar instrument available at that time. You might do well to consider that this money is meant for your grand child’s future and you need to protect the investment from the risk of inflation eating into its value. Since the need is after a long period of time, you can consider an investment in equity as well. For holding periods in excess of 10 years, the returns from equity beat inflation with a good margin and improves the value of the investment beyond just inflation. In that case, you can invest in a good ELSS plan and again have your grandchild as a nominee. The investment will be tax deductible in your hands and the returns are tax-free and will be paid to your grandchild on your death.