1. Who is a NRI?
According to the Foreign Exchange Management Act (FEMA), 1999, "an
NRI is a person resident outside India who is either a citizen of
India or a person of Indian origin (PIO)."A person who has been in
India for 182 days or more during a financial year and 265 days or
more during the preceding four financial years qualifies as a NRI.
NRIs can continue to enjoy non - resident status in India if their
presence in India is more than 60 days but less than 182 days in a
financial year, even if their stay in India during the past four
financial year is 365 days or more.Read more...
Also, a
person who has been deputed in a job overseas for more than 6
months, also qualifies for non-resident status.However, those who
stay abroad on business visits or medical treatment, study or such
other purposes which do not indicate or mean an intention to stay
there for an indefinite period are not considered NRI.
2. Who is a person of Indian
origin (PIO)?
• A Person of Indian Origin
(PIO) means a citizen of any country (other than Bangladesh or
Pakistan), if he or she at any time has held an Indian passport or
• He or she or either of
his/her parents or grandparents was a citizen of India by virtue of
the constitution of India
• He or she or either of
his/her parents or grandparents was a citizen of India by virtue of
the constitution of India
3. What is a PIO Card and how to
get it?
Person of Indian Origin (PIO) Cards are issued by Ministry of
External Affairs, Government of India to persons of Indian origin
through Indian missions abroad. Specific information on rules,
forms, particular offices, missions is available here http://mha.nic.in/pioscheme
4. What are the different types of
rupee accounts that are permitted and can be maintained by NRIs?
A NRI can maintain three types of
rupee accounts in India as mentioned below -
NRE: Non-Resident (External)
Rupee Account
NRO: Non-Resident (Ordinary)
Rupee Account
FCNR- B: Foreign Currency (Non
-Resident)
5. What are NRE and NRO accounts?
Non-Resident (External) Rupee (NRE) Account - NRE is a rupee bank
account from which funds are freely repatriable. It can be opened
with either fund remitted from abroad or local funds maintained in
NRE/ FCNR accounts, which can be remitted abroad. The deposits can
be used for all legitimate purposes. The balance in the account is
freely repatriable. Interest credited to the NRE accounts is exempt
from tax in the hands of the NRIRead more...
Non-Resident Ordinary Rupee
(NRO) Account - NRO is a rupee bank account and can be opened with
funds either remitted from abroad or generated in India. The
amounts in such an account generally cannot be repatriable.
However, funds in NRO accounts can be remitted abroad subject
to/as per various directives in force at the time of repatriation.
6. What is the distinction between
NRE and NRO accounts?
Balances held in NRE accounts can
be repatriated abroad freely, while funds in NRO accounts cannot be
remitted abroad but have to be used only for local payments in
rupees. Funds due to the non-resident accountholder which do not
qualify, under the Exchange Control regulations, for remittance
outside India are required to be credited to NRO accounts.
7. Which Mutual Fund houses (AMCs)
accept deposit from NRIs or PIOs?
All the Asset Management Companies (AMCs) in India don't allow NRIs
especially from US and Canada because of the cumbersome compliance
requirements under Foreign Account Tax Compliance Act (FATCA) in
these countries. However following fund houses do accept
investments from NRIs from US and CanadaRead more...
Birla Sun Life Mutual Fund
ICICI Prudential Mutual Fund
UTI Mutual Fund
SBI Mutual Fund
IDFC Mutual Fund
Reliance Mutual Fund
Sundaram Mutual Fund
L&T Mutual Fund
DHFL Pramerica
PPFAS mutual fund
ICICI Prudential Mutual Fund
8. What about NRIs from the rest
of the world (excepting US and Canada)?
NRIs from other countries can
invest in almost any scheme of any mutual fund in India. They are
allowed to invest in mutual funds in India on a repatriable or
non-repatriable basis subject to regulations prescribed under the
Foreign Exchange Management Act (FEMA). For general NRIs (not from
USA and Canada) the process of investing in Indian mutual funds is
as.
9. How the dividends and
redemption proceeds are paid to NRIs?
Normally, dividends and
redemptions are paid through direct credit to the designated bank
account provided by the NRI in the scheme.
10. Is the indexation benefit
allowed to NRIs?
Yes, the indexation benefit is
allowed to NRIs. Generally indexation benefit is required to be
taken into account, in context to mutual fund, while calculating
long term capital gains taxes for debt mutual funds.
11. What is the taxation of mutual
funds for NRIs?
Equity or Equity oriented Mutual Funds: Short term capital
gains (holding period < 1 year) are taxed at 15%. Apart from tax @
15%, 15% surcharge + 3% Cess is also payable. Thus, making it a
total of 17.7675%.Read more...
Long term capital gains
(investments held for more than 1 year) are however completely
exempt from capital gains taxes.
Tax is deducted at source (TDS)
@17.7675% in case of short term capital gains.
Debt Funds: Short term capital gains (holding period < 3
years) are taxed as per income tax slab of the NRI investor. A 15%
surcharge + 3% Cess is also payable. For example - If a NRI is in
30% tax bracket, he or she will have to pay 35.535% of taxes.
Tax is deducted at source (TDS)
@35.535% in case of short term capital gains (in case of 30% tax
bracket).
Long term capital gains (holding
period > 3 years) are taxed (provided the funds are listed) at 20%
after indexation. Surcharge and cess are also payable @15% + 3%
respectively. Thus, the total tax is 23.69%.
Tax is deducted at source (TDS)
@23.69% in case of long term capital gains in case of debt funds.
12. Is mutual fund dividends tax
free for NRIs?
Dividends are tax-free in the
hands of the NRI investors. However in case of dividends received
from debt or hybrid debt oriented mutual funds (MIPs), the mutual
fund houses pay dividend distribution tax (DDT) @ rate of 28.84%
before distributing dividends.
13. How and when Tax is deducted
(TDS) at source in case of NRIs?
• Tax is deducted at source
(TDS) @17.7675% in case of short term capital gains arising out of
equity or equity oriented mutual funds.
• Tax is deducted at source
(TDS) @35.535% in case of short term capital gains (Example - If
the NRI is in 30% tax bracket).
• Tax is deducted at source
(TDS) @23.69% in case of long term capital gains in case of debt
funds. No TDS is done in case of long term capital gains arising
out of equity mutual fund investments.
14. When certificate of TDS is
issued to NRIs?
Like resident individuals, TDS certificates (Form 16A) are issued
on a quarterly basis to NRIs and emailed to their registered email
ID with the AMC or sent through post. The same can also be viewed
online after registering with TRACES (TDS reconciliation Analysis
and Correction Enabling System) https://nriservices.tdscpc.gov.in/nriapp/login.xhtml
15. What are the KYC and FATCA
requirements in case of NRIs?
NRIs will need to submit following documents to the AMC (mutual
fund house) or the R&T agent for fulfilling the mutual funds KYC
requirements -Read more...
• Self attested copy of PAN
• Self attested copy of
Passport/ PIO Card
• Address proof (both
Indian and overseas)
• Passport size photograph
• Duly filled in KYC Form
along with colour passport size photograph
Additional information required
for FATCA (Foreign Account Tax Compliance Act) -
• Tax number of country of
residency (Other than India)
• Income Slab
• Occupation
• Total net worth
• Declaration, if you are
politically exposed or not
16. How to get KYC and FATCA
requirements fulfilled in India?
NRIs on a visit to India can simply contact a mutual fund
distributor or visit any mutual fund registrar officer with the
aforesaid documents and complete the KYC and FATCA process.Read more...
Documents verification
and IPV will be done at the same time and you are good to start
investing in mutual funds. IPV or In-person verification is a
process wherein an authorized official confirms your presence and
verifies the copies of aforesaid documents with the originals in
your presence.
17. How to get In-person
verification (IPV) done if the NRI is not in India?
NRI can approach authorized officials of overseas branches of
Scheduled Commercial Banks registered in India, notary public,
Court Magistrate, Judge, Indian Embassy/Consulate General in the
country of their residency. Such individuals are permitted to do
IPV along with verification of originals.Read more...
Once IPV and mandatory document
verification is completed, you can send the KYC form along with
the aforementioned documents to their mutual fund distributor or
the fund house (AMC) or the mutual fund R&T agents (CAMS or
Karvy). On submission, the KYC information will be updated in the
system in a few weeks.
The KYC details can be viewed by entering the PAN number here - https://www.cvlkra.com/kycpaninquiry.aspx
18. Can NRIs invest through Power
of Attorney?
After the NRI has made the initial investments, it may not be
possible for him to keep track of his money and take investment
decisions based on market movements that at times may call for
additional purchases, switches or redemptions etc. even when he is
away.Read more...
Mutual funds allow a
power of attorney (POA) holder to take these decisions on the
behalf of the NRI investor. All that the POA holder needs to do is
to submit the original POA or an attested copy of it to the fund
house (AMC). The POA should have signatures of both the NRI and the
POA holder. The POA holdersâ signature will be verified for
processing any such transaction.
19. Can a NRI make a nomination in
his investments?
An NRI can make a resident Indian
or NRI/PIO his nominee in the mutual fund schemes in which he has
invested. An NRI can also be the nominee for investments made by a
local resident Indian individual. Fund houses also allow an NRI to
have a joint holding with a resident Indian or another NRI / PIO in
a scheme.
20. Can a NRI invest in Mutual
Fund Tax Savings Schemes?
Yes, a NRI/PIO can invest in ELSS
(Equity Linked Savings Schemes) of Mutual Funds if he or she is
willing to avail tax rebate under Section 80C of The Income Tax Act
1961. Currently the limit is Rs. 150,000 (Rupees One Lac Fifty
Thousand only) per annum.
