What mutual funds can NRI invest in? What is the process of investing?
AskedIt 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-Repatriable account (FCNR) Account: It is a term deposit account that can be maintained by NRIs and PIOs in foreign currency. This account can 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.