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Can an NRI/PIO invest in mutual funds in India?

Yes.
Note: U.S. Persons and Persons of Canada”are not allowed to make any purchase in any mutual fund in India.

Does an NRI need to take RBI permission before investing in mutual funds?

No. NRIs do not need to take RBI permission for investing in mutual funds. They can invest through repatriable or non repatriable basis.

How investment can be made on Repatriable basis?

To invest on a repatriable basis, NRI investor must have an NRE or FCNR Bank Account in India. The Reserve Bank of India (RBI) has granted a general permission to Mutual Funds to offer mutual fund schemes on repatriation basis, subject to the following conditions :

• The amount representing investment should be received by inward remittance through normal banking channels, or by debit to an NRE / FCNR account of the non-resident investor.
• The net amount representing the dividend / interest and maturity proceeds of units may be remitted through normal banking channels or credited to NRE / FCNR account of the investor, as desired by him subject to payment of applicable tax.

How investment can be made on Non-repatriable basis?

The Reserve Bank of India (RBI) has granted a general permission to Mutual Funds to offer mutual fund schemes on non-repatriation basis, subject to the following conditions :

• Funds for investment should be provided by debit to NRO account of the NRI/ FII investor. Alternatively, funds may be invested by inward remittance or by debit to NRE / FCNR Account.
• No permission of Reserve Bank either by the Mutual Fund or the NRI investor is necessary.

Can an NRI invest in foreign currency?

An NRI cannot make the investment in foreign currency. He needs to give a Rupee cheque from his NRE, NRO bank account in India. He may also send a Rupee cheque from abroad payable in a bank in India. However, for an NRI to invest, it is mandatory that he maintains a bank account in India.

What is the mode of payment for Repatriation and Non- Repatriation basis?

Repatriable Basis: Payments for the purchase of the units may be made by Indian Rupee drafts purchased abroad, or by cheques drawn on the NRE/FCNR Account of the investor.

Non-Repatriable Basis: Payments for the purchase of the units may be made by Indian Rupee drafts purchased abroad, or by cheques / demand drafts drawn on the NRE / FCNR / NRO account of the investor.

Will the Mutual Fund Ccompany accept an NRI application with an overseas bank account detail?

No.

What address should be mentioned on the application form? Can an NRI mention a local address for all communication?

The Overseas address is mandatory for NRI Investors. The Local address is optional and can be given as a communication address.

How will the redemption proceeds be paid?

Redemption proceeds may be paid by cheque. The cheque will be payable to the first unitholder and will include the bank account number. Alternatively the redemption proceeds may be credited directly to the investor’s (Unit Holder/ First Holder in the folio) bank account. Redemption proceeds/repurchase price and/or dividend or income earned (if any) will be payable in Indian Rupees only. The Mutual Fund company will not be liable for any loss due to exchange fluctuations, while converting the Rupee amount into US Dollar or any other currency.

How can the redemption proceeds be repatriated?

The investments shall carry the right of repatriation of capital invested and capital appreciation so long as the investor continues to be a resident outside India. Where the investment is made out of inward remittance or from funds held in the NRE/FCNR account of the investor, the maturity proceeds/repurchase price of units (after payment of taxes) may be credited to the NRE/FCNR account of the non-resident investor maintained with an authorised dealer(Bank) in India.

What about redemption preceeds where investments were made on a non-repatriable basis?

Where the purchase of units is made on a non-repatriable basis, the maturity proceeds/repurchase price of units (after payment of taxes) will not qualify for repatriation and may be credited to the NRO account of the non-resident investor.
Similarly, investments in units purchased in Rupees, where the investor was a resident of India and subsequently becomes a non-resident, will not qualify for repatriation of repurchase proceeds of units.
The entire income distribution on the investment will, however, qualify for full repatriation.

Will the AMC transfer money to an investor’s overseas account?

Will the AMC transfer money to an investor’s overseas account?

What will be the tax liability on redemptions?

Scheme
Long Term Capital Gains***
Short Term Capital Gains***
Dividend Distribution Tax $
Equity Schemes (Listed)
Nil
15% + 12% Surcharge + 3% Cess = 17.3040%
Nil
Equity Schemes (Unlisted)
Nil
15% + 12% Surcharge + 3% Cess = 17.3040%
Nil
Debt Schemes (Listed)
20% with indexation + 12% Surcharge + 3% Cess = 23.0720%
As per Slab rates + 12% Surcharge + 3% Cess
25% + 12% Surcharge + 3% Cess
Debt Schemes (Unlisted)
10% with indexation + 12% Surcharge + 3% Cess = 11.5360%
As per Slab rates + 12% Surcharge + 3% Cess
25% + 12% Surcharge + 3% Cess
*** In order to qualify as long-term capital asset, the units of mutual funds (other than units of an equity oriented fund) should be held for a period
$ For the purpose of determining the dividend distribution tax payable, the amount of distributed income shall be increased to such amount as would, after reduction of the dividend distribution tax on such increased amount at the specified tax rates, be equal to the amount of income distributed by the Mutual Fund.

What will be the tax liability for income received from your mutual funds?

As per Section 10(35) of the Income Tax Act, 1961, income received from mutual fund units specified under Section 10(23D) is exempt from income tax in India and the mutual funds are subject to deduction of distribution tax in debt oriented schemes. Hence all dividends are tax-free in the hands of non-resident investors and no TDS is applicable on the same.

What is the amount of TDS deducted?

 
Short Term Capital Gains
Long Term Capital Gains
Equity oriented Schemes (Listed)
15% + 12% Surcharge + 3% Cess = 17.3040%
Nil
Equity oriented Schemes (Unlisted)
15% + 12% Surcharge + 3% Cess = 17.3040%
Nil
Other than Equity oriented schemes (Listed)
30% + 12% Surcharge + 3% Cess = 34.6080%
20% with indexation + 12% Surcharge + 3% Cess = 23.0720%
Other than Equity oriented schemes (Unlisted)
30% + 12% Surcharge + 3% Cess = 34.6080%
10% without indexation + 12% Surcharge + 3% Cess = 11.5360%

What is the proof of the Tax Deduction at Source?

A TDS certificate is issued in the name of the Unit holder / First holder mentioning the details of the transaction and the tax deducted. The TDS certificate is commonly known as Form16A.

When will the TDS certificate be issued?

The digitally signed TDS Certificates (Form 16A) are depatched to the investors once in a quarter. However, the same may vary from AMC to AMC.

Is the indexation benefit available to NRIs?

Yes, if units are held for more than 12 months i.e. on long-term capital gains.

Can an NRI fax a request followed by the original documents?

No, Units cannot be redeemed or allotted on the basis of fax applications. A request that lacks a valid signature cannot be processed/accepted.

Can a Power of Attorney (POA) invest on behalf of the NRI investor?

Yes, in a mutual fund the POA has the authority to invest on behalf of the investor and sign documents for initial and additional purchases as well as redemptions.
While applying for purchase of units the POA holder needs to submit the original POA or a copy duly notarised should be submitted. The Power of attorney should contain the signature of both the first holder and the POA holder. Only when the POA is registered does the POA holder have the right to transact on behalf of the NRI investor. His signature will be verified for processing any transaction/request.

Is nominations by NRIs allowed?

Yes. It is allowed only for individual NRIs.

Can a resident Indian have an NRI as nominee?

Yes, The same rules apply for nominees to resident Indian folio(s). An NRI can be a nominee to an folio(s) which is in the name of a resident Indian.

Can an NRI invest in mutual funds in a joint name with a resident Indian?

Yes. An NRI investor can have a joint holding with a Resident Indian or a Non-Resident Indian.

How are mutual funds different from Portfolio Management Schemes?

In Mutual Funds, the investments of investors are pooled to form a common investible corpus and the gain/loss to all investors during a given period are same for all investors. In the case of portfolio management schemes, the investments of a particular investor remain identifiable to him. Here the gain or loss of investors will be different from each other.