|
NRI Guide Book for mutual funds!
-
Who is a Non Resident Indian?
A Non Resident Indian (NRI) is an Indian citizen or a person of Indian origin who
stays abroad for employment/carrying on business or vocation outside India or stays
abroad under circumstances indicating an uncertain duration of stay abroad. A person
shall be deemed to be of Indian origin if he/she or either of his/her parents or
grandparents were born in undivided India.
-
Who is a Foriegn Institutional Investor (FII)?
A Foreign Institutional Investor (FII) is a corporate registered by Securities and
Exchange Board of India.
-
Can NRI invest in mutual fund schemes?
Yes, NRIs can invest in any mutual fund schemes.
-
How will an NRI invest in Indian MFs?
To invest in Indian Mutual Funds, the NRI has to open any one of the following three
kinds of accounts. He can open any of these accounts through the banks who provide
the facility. The three types of accounts are as follows :
- Non-Resident (External) Rupee (NRE) accounts are Rupee accounts on a repatriable
basis. They can be opened with either funds remitted from abroad or local funds,
which can be remitted abroad.
- Ordinary Non-resident Rupee (NRO) accounts are Rupee accounts and can be opened
with funds either remitted from abroad or generated in India. The amount in such
accounts is non-repatriable.
- Fully Convertible Non-Rupee (FCNR) accounts are similar to the NRE account except
that the funds are held in foreign currency like USD, GBP, etc.
-
Does NRI need any approvals from the Reserve Bank of India to invest in mutual fund
schemes?
- Yes. Specific approval has to be taken from RBI. However, most of the AMCs have
taken the permission for NRI investments in their schemes; hence no permission is
required for investing in the schemes of those AMCs.
- Only OCBs and FIIs require prior approvals before investing in our schemes.
-
Can NRI invest in foreign currency?
No. All investments have to be in Indian Rupees. A convenient way to invest would
be through NRE account.
-
How to redeem funds?
- In case of open-ended mutual fund schemes, simply fill up the redemption slip and
send it to our offices or Investor Service Centres of AMCs. The cheques are normally
mailed to within 3 to 5 business days from the day of receipt of the redemption
request.
- In case of close-ended mutual fund schemes, the redemption slip has to be sold at
the stock exchange where the scheme is listed through a registered stock exchange
member.
-
How will the redemption proceeds be paid?
- The redemption proceeds will be paid by means of a Rupee cheque payable to the NRE
account of the investor, or else by a US dollar draft drawn at the then current
rates of exchange subject to RBI procedures, where investments have been made on
a repatriation basis.
- Where investments have been made on non-repatriation basis, redemption proceeds
will be paid by means of a Rupee cheque payable to the investor's NRO account.
- Accompanying the redemption proceeds is an updated account statement, a TDS certificate
and a covering letter that mentions whether the funds were invested out of NRE/FCNR/NRO
accounts. The tax on capital gain is deducted (as explained below)
after taking into consideration indexation benefits wherever applicable.
-
Can NRI repatriate their earnings on redeeming from mutual fund schemes?
- 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 some
compliance.
- If the investment is made on a non-repatriation basis, only the net income, that
is, dividend (after tax), arising out of investment is eligible for repatriation.
-
Can NRI enroll in Systematic Investment Plan (SIP)?
Yes.
-
How to get updated on the performance of the schemes?
NAVs of all schemes are updated on AMFI web site every day.
-
Can NRI gift units of mutual fund schemes to their relatives in India?
No.
-
Is the indexation benefit available to NRIs?
Yes, in case units are held for more than twelve months.
Tax slab on capital gain
|
|
|
Tax Rates* under the Act
|
TDS Rate* under the Act
|
|
|
|
Residents
|
NRIs / PIOs
|
FIIs
|
Residents
|
NRIs / PIOs / other Non FII non-residents
|
FIIs
|
|
Short Term Capital Gain
|
Units of a non equity oriented fund
|
Taxable at normal rates of tax applicable to the assessee
|
30% without indexation benefit (u/s 115 AD)
|
NIL
|
30% for non residents non corporate,
|
NIL
|
|
40% for non resident corporates (u/s 195)
|
|
|
units of an equity oriented fund
|
10% on redemption of units where STT is payable on redemption (u/s 111A)
|
NIL
|
|
Nil
|
|
|
|
Long Term Capital Gain **
|
units of a non equity oriented fund
|
10% without indexation, or 20% with indexation, whichever is lower (u/s 112)
|
10% with no indexation benefit (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 where STT is payable on redemption [u/s 10(38)]
|
NIL
|
NIL
|
NIL
|
|
|
* In addition to the aforesaid tax, in the case of an individual, HUF or Association
of Persons (AOP), where the income exceeds Rs. 1,000,000 a surcharge of 10%, in
the case of domestic companies, where the income exceeds Rs.10,000,000 a surcharge
of 10%, in case of foreign companies, where the income exceeds Rs. 10,000,000, a
surcharge of 2.5% and in case of an artificial juridical person a surcharge of 10%
of such tax liability is also payable. A 3% education cess (inclusive of 1% of an
additional cess for Secondary and Higher Education) on total income tax (including
surcharge) is payable by all categories of taxpayers. ** 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.
- The long term capital gains on transfer of units would be exempt from tax under
Section 54EC of the Act, subject to fulfillment of certain conditions specified
in the section. This section requires investments in specified bonds. However, if
the amount invested is less than the capital gains realized, only proportionate
capital gains would be exempt from tax.
- As per circular no. 728 dated October 30, 1995 issued by the CBDT, in the case of
a remittance to a country with which a Double Tax Avoidance Agreement (DTAA) is
in force, the tax should be deducted at the rate provided in the Finance Act of
the relevant year or at the rate provided in the DTAA, whichever is more beneficial
to the assessee. In order for the Unitholder to obtain the benefit of a lower rate
available under a DTAA, the Unitholder will be required to provide the Mutual Fund
with a certificate obtained from his Assessing Officer stating his eligibility for
the lower rate.
|