| Who is an NRI? |
1. An Indian citizen or a foreign citizen of Indian origin who stays abroad
for employment/carrying on business or vocation or under
circumstances indicating an intention for an uncertain
duration of stay abroad is a NON-RESIDENT INDIAN (NRI).
(Those who stay abroad on business visit, medical treatment,
study or such other purposes which do not indicate an
intention to stay there for an indefinite period will
not be considered as NRI's.)
2. Students who go abroad for studies
with an intention to stay there for an uncertain period
and who stayed abroad for more than 180 days in the
preceding financial year will be treated as Non Resident
Indians. |
| Can NRI's invest in Mutual Funds in India? |
| Investments by NRI's in Mutual Funds can be made on a repatriable or on a non-repatriable basis, as preferred by the investment.
|
| Certain restrictions do exist in some of the host countries of NRI's like U.S., Canada etc.
on investment by NRI's in Indian Mutual Funds. These, NRI's will have to check themselves before investing or committing to invest in Indian Mutual Funds.
|
| Repatriable Basis |
| To invest on a repatriable basis, you
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 mutual fund should comply with the terms and conditions stipulated by SEBI.
- 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.
|
| 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 investor. Alternatively, funds may be invested by inward remittance or by debit to NRE / FCNR Account.
- The current income in the form of dividends is allowed to be repatriated.
|
| No permission of Reserve Bank either by the Mutual Fund or the NRI investor is necessary.
|
| Does an NRI need any approvals
from the Reserve Bank of India to invest in mutual fund
schemes? |
| No. As an NRI one does not need any
specific approval from the RBI for investing or redeeming
from Mutual Funds. Only OCB's and FII's require prior
approvals before investing in Mutual Fun. |
| Can NRI individuals make investments in domestic public/private sector Mutual Funds or Money Market Mutual Funds floated by commercial banks and public/private sector financial institution on non/repatriation basis? |
| Yes. |
| What are the investment restrictions on NRI's for investments
in Mutual funds? |
There are no investment restrictions on NRI's for investing in mutual funds. RBI does not restrict investment in mutual funds either on repatriable or non-repatriable bas.
|
| Can I gift Mutual Fund Units to my relatives in India? |
Yes. Certain funds do permit gifting of units. One should refer to the offer document of the
specific fund to know the detas.
|
| Can I repatriate my earnings on redemption? |
| If the investment is made on a repatriation basis, the net income or capital gains (after tax) arising out of investment are eligible for repatriation subject to regulatory guidelines in force at the time of repatriation. If the investment is made on a non-repatriation basis, only the net income, that is, dividend, arising out of investment is eligible for repatriatn. |
| Can I repatriate my initial investment, earnings (capital gains) from redemption and any dividend arising from it? |
| If the investment is made on a repatriation basis, the net income or capital gains (after tax) arising out of investment is eligible for repatriation subject to regulatory guidelines in force at the time of the repatriation. If the investment is made on a non-repatriation basis, only the net income, that is, dividend, arising out of investment is eligible for repatriatn. |
| Is there any ceiling on NRI investments in mutual fund schemes? |
| There are no ceilings on investments in mutual fund schemes by NRs. |
| What is the procedure for redeeming mutual fund units? |
| NRI's can redeem their Units by signing on the tear-off portion of the account statement &
sending it to any of the AMC or your personal MF investment advisor through post or by sending a letter requesting redemption with the signatures and the amount to be redeemed. The redemption request would be processed at the applicable NAV based price. The redemption proceeds will be sent directly to the bank branch where NRE/NRO account depending upon whether repatriable or non-repatriable account within three business days. The redemption proceeds will be net of tax deduction at source on the profs. |
| What is the tax liability on receipt of Income on Mutual Fund Units? |
| As per Section 10(33) of the Income Tax Act, 1961 ('Act') income received in respect of Units
of a mutual fund specified under Section 10(23D) is exempt from income tax in India and the mutual funds are subject to pay 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 se. |
| What is the tax liability on Redemptions? What is the rate of Tax Deduction at Source for NRI's / PIO's? What is the tax - rate on capital gains for NRI's / PIO's? |
| Under Section 2(42A) of the Income Tax Act, Units of the Scheme held as a capital asset, for
a period of more than twelve months immediately preceding the date of transfer, will be treated as a long term capital asset for the computation of capital gains - thus attracting long term capital gains tax re. |
| In all other cases it would be treated as a short-term capital asset and would attract short-term capital gains tax rate. Hence depending on the period of investments, long term or short capital gains and tax thereon is applicable on redemptios. |
| Though there is currently no long-term capital gain tax liability for redemptions from equity
schemes, there is a liability at the time of redeeming from the debt sches. |
| Tax Rates and TDS Rates to NRI's / PIO's / FII's? |
| I. Income from Units of a mutual fund specified under section 10(23D) of the Income-tax
Act, 1961 (the Act) is exempt in the hands of unit holders under section 10(35) of the Act. No income tax is deductible under section 194K and 196A of the Act on any income distribution by the Mutual Fd. |
| II. Capital Gains and TDS thereon: |
| |
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Tax Rates* under the Act |
TDS Rate* under the Act |
| |
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Residents
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NRI's / PIO's
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FII's
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Residents
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NRI's / PIO's / other Non FII non-residents
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FII's
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Short Term Capital Gain
|
Units of a non equity oriented fund
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Taxable at normal rates of tax applicable to the assessee
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30% without indexation benit
(u/s 115AD)
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NIL
|
30% for non residents non corpore,
40% for non resident corpore,
(u/s 195)
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NIL
|
Units of an equity oriented fund
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10% on redemption of Units where STT is payable on
redemption (u/s 111A)
|
|
|
Nil
|
Long Term Capital Gain **
|
Units of a non equity oriented fund
|
10% without indexation, or 20% with indexation, whichever is ler
(u/s 112)
|
10% with no indexation benit
(u/s 115AD)
|
NIL |
20% for non residents (u/s 195)
|
NIL |
Units of an equity oriented fund
|
Exempt in case of redemption of Units wre
STT is payable on redemption [u/s 10(38)] |
|
Nil
|
Nil
|
|
| *Plus surcharge as applicable: corporate,
co-operative societies, firms and local authorities: 10%;
Individuals/HUF's/BOI's/AOP's, with total income exceeding
Rs.10,00,000 : 10%; Artificial juridical person: 10%. |
|
** Capital Gains on redemption of Units held for a period
of more than 12 months from the date of allotment. |
*** As per section 111A of the Act, effective from 1/10/2004
short-term capital gains on equity oriented fund
is chargeable to tax at a Lower rate of 10 percent. |
.Long Term Capital Gains arising
from redemption of unit of a non equity oriented fund
are exempt from tax, if gains are invested in specified
bonds within 6 months from the date of redemption,
under Section 54EC of the Act or if gains are invested in
eligible equity issues within 6 months from the date of
redemption, under Section 54ED of the Act. |
.In order for the unit holder to
obtain the benefit of a lower rate under the DTAA, an
eligibility certificate from unit holder's Assessing Officer
should be provided to the Fd.
|
| Is the indexation benefit
available to NRI's? |
Yes, in case Units are held for more
than twelve months i.e. on long-term capital gas.
|
| Can an NRI
gift the Units of MF's to resident Indians? |
An NRI may gift the Units to any investor
Indian or an NRI. Units gifted by any person would not
be liable to any gift tax since the Units held under the
schemes are also not subject to provisions on the Gift
Tax act, 18.
|
| Are Units of MF's chargeable
in Wealth Tax? |
No. Units issued to investors (including
NRI's) etc. will not be treated as assets as defined under
section 2(ea) of the Wealth-Tax Act, 1957 and hence will
not be liable to wealth-x.
|
| Is Securities Transaction
Tax applicable to NRI investors? |
| s. |
1
| Is there any Tax liability
on switching from one option to the other? |
| Yes. On switching from the Growth option
to the Dividend option, the investor is liable to TDS
at the applicable tax. |
| Can NRI's invest their
funds in Government securities or Units of Unit Trust of India(UTI)? |
| Yes. NRI's are freely permitted to invest their funds in Government securities or Units of UTI through authorized dealers. Units can also be purchased directly from I. |
| Can NRI's make investments
in National Savings Certificates issued by Post Offices in India? |
| Yes. Investments in National Savings Certificates can be made by NRI's subject to the terms
and conditions applicable to the sale/issue of such certificates. However, NRI's are not permitted to invest in bearer securities like Indira Vikas Patra/Kisan Vikas Pratra |
| Can Government securities/Units
be freely transferred or sold? |
| Yes, provided the transfers/sales are arranged through an authorized dealer. Units can, however,
be repurchased directly by I. |
| How can I invest in Indian
equity markets? What is the procedure? |
Portfolio Investment Scheme: |
Under this scheme, NRI's can acquire
shares/ debentures of Indian companies or Units of domestic
mutual funds through the stock exchange(s) in India through
portfolio investment sche.
|
NRI's can also invest in unlisted companies
through portfolio investment scheme. The application is
to be submitted to Reserve Bank of India through a designated
branch of a bank in India in one of the prescribed fos.
|
| What is a designated branch? |
Reserve Bank of India has authorized
a few branches of each bank to conduct the business under
Portfolio Investment Scheme on behalf of NRI's. These
branches are the main branches of major commercial banks
located close to the stock exchange(s). These branches
are called designated branches. NRI's will have to go
through any of these designated bank branches. Each NRI
has to select one branch for this purpose for investment
on repatriation/ non-repatriation basis. It is advisable
to maintain a bank account with the designated branch
for administrative conveniee.
|
| What is the validity period
of Reserve Bank's permission? |
Reserve Bank of India's approval for
portfolio investment is valid for a period of five years
from the date of issue. Making a request by means of a
simple letter can renew this furtr.
|
| Is there any ceiling on
the investment under the Portfolio Investment Scheme? |
There is an overall ceiling of 10 percent
of equity share capital of the company/ paid-up value
of each series of convertible debentures for purchase
by NRI's/ OCBs. There is no such limit or restriction
in respect of portfolio investment in non-convertible
debentures and mastershares of UTI. The overall ceiling
can be raised to 30 percent if the company concerned passes
a Board resolution and a special resolution in its general
body meeting. Individually, NRI's/OCB's can make investment
up to 1% of the paid-up equity share capital/each series
of convertible debentures. However, there is no ceiling
on investment in domestic Mutual Fus.
|
| Is dividend/interest earned
in respect of investment made under the 100% Scheme freely
remittable to the NRI's abroad? |
Dividend/interest can be remitted freely
except in the case of consumer goods industries where
the outflow on account of dividend is required to be balanced
by export earnings of the company either in the year of
declaration of dividend or in the years prior to the declaration
of dividend, This requirement is enforced for a period
of seven years from the commencement of commercial productn.
|
Accounts to be opened
and Documents to be submitted:
|
| A. TOTAL ACCOUNTS TO BE OPENED. |
| 1. BANK ACCOUNT WITH DESIGNATED BANK. |
| 2. ACCOUNTS WITH BROKER. |
3. DEMAT ACCOUNT WITH DEPOSITY.
|
| B.TOTAL DOCUMENTS REQUIRED. |
| 1. PHOTOGRAPHS SIGNED ACROSS. |
| 2. PASSPORT COPY OF CLIENTS WITH VALIDITY
PAGE AND VISA PAGE. |
3. PROOF OF RESIDENCE (DRIVERS LICENCE,
ELECTRICITY BILLS, C.
|
| C) Can I repatriate my funds?
If yes, how? |
| Investment on repatriation basis: NRI's can make portfolio investment in shares and debentures
quoted in any stock exchange in India with full benefits of repatriation of capital invested and income earned on that capital. In the case of shares/ debentures/ bonds acquired by NRI's through stock exchanges under the Portfolio Investment Scheme, transfer can be done through stock exchanges provided the sale is arranged through the same designated branch through which they were purchased. In other cases, applications for necessary permission are required to be made to Reserve Bank of India on form TS4/ 3. |
| D) Am I subjected to paying tax? If yes, how and how much? |
| Taxes: As regards tax deduction at source/
remittance, seller can repatriate immediately the funds
to the extent of the cost of acquisition of investment
sold or the actual amount of sale proceeds realized, whichever
is less, without production of any objection / tax clearance
certificate. In case of long-term capital gains, on the
remaining amount capital gains tax would be charged and
the balance could be remitted. In case of short-term capital
gains the taxes are to be deducted at source by the buyer
but NRI's are advised to pay it as advance tax. |
