NRI Investment in Indian Mutual Funds

Once you have an NRE or NRO accounts, you can start investing in Mutual Funds in Indian Rupees through them. There are no particular rules and restrictions made by SEBI or RBI for the NRIs investment in mutual funds. Therefore, you do not need any approval.

There are online platforms to buy or sell the units in most of the Mutual Funds. Once the NRI has completed all the requirements, they can start buying the Mutual Funds online from any AMC. However, there are a few restrictions for the residents of the US and Canada.

The process of redemption is similar to the normal redemption process applicable to Indian residents. The redemption will be made directly into the NRE or NRO account of the investor from which investment was made. It will be made either through cheques or credit.

When investing through the NRE account, you can repatriate the money in full after paying the tax. You are liable to pay tax on the dividends or the capital gains you have earned. However, while investing through the NRO account, the repatriations will be governed by the NRO accounts rules. The tax liability will remain the same as it was while investing through the NRE account.

NRI investors can claim tax relief if India has signed the Double Tax Avoidance Treaty (DTAA) with the respective country. Paying double tax is one of the major quandaries among NRI investors. However, through DTAA, it can be avoided. For instance, India has signed this treaty with the United States. Therefore, if you already paid taxes in India, you can claim tax relief in the US.

The gains from equity funds are taxable and are based on the holding period. For the short term capital gains, the taxable rate is 15%, whereas, for the Long-term Capital Gains (LTCG) of more than Rs 1 lakh, it is 10%.

In debt funds, the taxable rate for the Short-Term Capital gains is 30%. If you hold the fund for more than three years, it will result in a 20% tax on the profits with indexation benefit. LTCG on non-listed funds will be taxed at the rate of 10% without indexation.

Things you should know when investing in India

• 1. It is mandatory to provide attested proof of your residential address in the resident country with the application.
• 2. You can repatriate the amount invested, and the amount earned only until you remain an NRI.
• 3. The compliance requirements in the US and Canada are more stringent as compared to other nations. As per the FATCA guidelines, if the investor is a US person, all the financial institutions must share the details of financial transactions that involve him and the US government.
• 4. Common Reporting Standard is a global reporting system that combats tax evasion. Check whether you are a resident of any of the 90 countries that have signed the Common Reporting Standard.

There are many policies, rules, and regulations that have made investing in the home country easier for the NRIs. Although there might come a few hassles in the initial process, in the long run, the investment would be worth it. At present, eight fund houses accept mutual fund investment from NRIs residing in the UA and Canada. So, you can certainly invest in one of the fastest growing economies and have financial benefits.