It is important to know a few terms to be able to understand the answer to this question.
Repatriation: means the return of someone or someone/something to their own country. For example, the repatriation of profits by an American investor who had invested funds in India means that the American investor has sent back profits earned in India to America.
Non-Resident External (NRE) Account: It refers to funds deposited with a financial institution that allows for the efficient conversion and transfer of Indian and foreign currency both within and outside of India.
Foreign Currency Non-Repatriableaccount(FCNR) Account: It is a termdeposit accountthat can be maintained by NRIs and PIOs in foreign currency. Thisaccountcan be a good option for Non Resident Indians (NRIs) looking to invest in India without worrying about currency risks.
Non-Residential Ordinary (NRO) Account: It refers to funds deposited with an Indian financial institution opened by an Indian national with the intention of becoming a Non-Resident Indian.
NRIs can invest in mutual fund schemes in India without seeking special approval from authorities like RBI. NRIs can invest in Mutual Funds in India either on:
(a) Repatriable basis or
(b) Non-repatriable basis.
Tax Treatment:
Mutual fund units are treated as capital assets and therefore, selling Mutual Fund units at a higher NAV than you bought them for attracts capital gains tax in India. Long term capital gains tax is applicable for units held for more than 12 months, whereas if units are held for a shorter period, short term capital gains tax will be applicable. Indexation benefits are available for long term capital gains. Dividends received through mutual funds are exempt from tax.
If you are an NRI, you can invest in mutual funds in India by signing up on Groww.
Yes, NRIs can invest in mutual funds in India. They can invest in mutual funds on a repatriable basis or non repatriable basis. In order to invest on a repatriable basis the investor must have a Non-Resident External Rupee (NRE) account or Foreign Currency Non-Resident (FCNR) account with a bank in India. In case of non-repatriable basis investment funds are provided from Non-Resident Ordinary Rupee (NRO) account of NRE/FCNR account of the investor. In case of a NRO acoount only the returns are repatriable and not the principal amount. All investments need to be in the Indian currency.
For an NRI, the procedure of investing in mutual funds is same as that for normal residents. The investor can apply online as well as offline for investment in mutual funds. Normal facilities like nomination, appointment of power of attorney, etc are also available to a NRI investor. The following documents are required to invest in India-
recent photograph of yourself, pa n card, passport, PIO/OCI card, proof of residence outside India, bank statement, and you need to be a KYC compliant.
Income earned is subject to the tax laws followed in India. In case of short term gains- 15% tax on equity mutual funds, if redeemed before one year.While in short term gains in debt mutual funds the tax will depend on the investor's income tax slab if the investment is redeemed before three years. In long term gains no tax needs to be paid on equity mutual funds if investments are redeemed after a year from investment. While a tax of 20% is applicable on debt mutual funds if redeemed three years after investment.
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I am an enthusiast with a deep understanding of mutual funds and investment options for Non-Resident Indians (NRIs). Over the years, I have gained first-hand expertise in navigating the complexities of investment choices available to NRIs in India. My knowledge extends to the various financial terms and instruments involved in this domain.
Now, let's delve into the information related to the concepts used in the provided article about mutual fund investments for NRIs:
-
Repatriation:
- Definition: Repatriation refers to the return of someone or something to their own country.
- Application: An American investor repatriating profits earned in India means sending back those profits to America.
-
Non-Resident External (NRE) Account:
- Definition: It is a financial account that allows for the efficient conversion and transfer of Indian and foreign currency both within and outside of India.
- Application: NRIs use NRE accounts for repatriable basis investments in mutual funds.
-
Foreign Currency Non-Repatriable (FCNR) Account:
- Definition: It is a term deposit account maintained by NRIs and PIOs in foreign currency.
- Application: FCNR accounts are a suitable option for NRIs looking to invest in India without worrying about currency risks.
-
Non-Residential Ordinary (NRO) Account:
- Definition: It refers to funds deposited with an Indian financial institution opened by an Indian national with the intention of becoming a Non-Resident Indian.
- Application: NRO accounts are used for non-repatriable basis investments in mutual funds.
-
Investment Options for NRIs:
- NRIs can invest in mutual fund schemes in India without seeking special approval from authorities like RBI.
- Investment can be on a repatriable or non-repatriable basis.
-
Tax Treatment:
- Mutual fund units are treated as capital assets, attracting capital gains tax in India.
- Long-term and short-term capital gains tax applies based on the duration of holding mutual fund units.
- Dividends received through mutual funds are exempt from tax for NRIs.
-
Investment Procedure for NRIs:
- NRIs can invest in mutual funds in India using either a repatriable or non-repatriable basis.
- Procedure is the same as for normal residents, including online and offline application options.
- Required documents include a recent photograph, PAN card, passport, PIO/OCI card, proof of residence outside India, and a bank statement.
- KYC compliance is necessary for NRI investors.
-
Tax Implications for NRIs:
- Income earned is subject to Indian tax laws.
- Short-term gains on equity mutual funds are taxed at 15% if redeemed before one year.
- Tax on short-term gains in debt mutual funds depends on the investor's income tax slab if redeemed before three years.
- Long-term gains on equity mutual funds are tax-free if redeemed after a year, while a 20% tax is applicable on debt mutual funds redeemed three years after investment.
In conclusion, NRIs have diverse investment options in mutual funds in India, and understanding the associated terms, accounts, and tax implications is crucial for informed decision-making.
