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NRI-FAQ

NRI INVESTMENT: Some FAQ’s answered.

Who is a non-resident Indian (NRI)?

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 any of grandparents was born in undivided India.

Who is an Overseas Corporate Body (OCB)?

An overseas corporate body (OCB) includes overseas companies, partnership firms, societies and other corporate bodies owned predominantly by non-resident persons of Indian nationality or origin outside India.

Who is a Foreign Institutional Investor (FII)?

A foreign institutional investor (FII) is a corporate registered by Securities and Exchange Board of India.

What is the difference between an NRE account, NRO account and FCNR account?

Non-Resident (External) Rupee (NRE) account is a Rupee account on a repatriable basis. It can be opened with either fund remitted form abroad or local funds, which can be remitted abroad.

Ordinary Non-Resident Rupee (NRO) account is a Rupee account and can be opened in with funds either remitted from abroad or generated in India. The amount in such account is non-repatriable.

Fully Convertible Non-Rupee (FCNR) account is similar to the NRE account except that the funds are held in foreign currency like US$, Dm etc.

Can I invest in mutual fund schemes?

Yes, NRIs can invest in any of the mutual fund schemes.

Do any mutual fund scheme assure returns?

No.

Do I need any approvals from the Reserve Bank of India to invest in mutual fund schemes?

Yes. Specific approval has to be taken from RBI but most of the AMC’s have taken the permission for NRI investments in their schemes, hence no permission is required for investing in the schemes of those AMC’s.
Only OCBs and FIIs require prior approvals before investing in our schemes.

Can I invest in foreign currency?

No. All investments have to be in Indian Rupees. A convenient way to invest would be through your NRE account.

How do I redeem?

In case of open ended mutual fund schemes by simply filing up the redemption slip and sending it to our offices or Investor Service Centres of AMC’s. The cheque is normally mailed to you within 3 to 5 business days from the day of receipt of the redemption request.
In case of close ended mutual fund schemes it has to be sold at the stock exchange where the scheme is listed through a registered stock exchange member.

Can I enroll in Systematic Investment Plan (SIP)?

Yes.

How will I be updated on the performance of the schemes?

You can opt to receive daily NAVs, weekly performances and other subscription services over e-mail by registering on our site myplexus.com. Our NAVs of all schemes are also updated on our web site daily.
Besides you will receive quarterly newsletter from the Asset Management Companies.

Can I gift units of mutual fund schemes to my relatives in India?

Yes.

Can I repatriate my 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.

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 investment have been made on a repatriation basis.

Where investment 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 fund 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.

What will be my tax liability on receipt of income or on redemption?

NRI investors are eligible for tax benefits under sections 112, of the Income Tax Act, 1961.
As per the Finance Act 1999, no tax will be deducted from income distribution in the form of dividend (The mutual funds are subject to pay distribution tax in debt oriented schemes.).
However, tax will be deducted on any capital gains in case the payee is a non-resident in terms of the provision of the Income Tax Act, 1961.
We have summarized below the tax implications for NRI investors :

Is the tax deducted at source for NRI investments?

As per the Finance Act 1999, tax will not be deducted from income distribution in the form of dividends to unit holders.
However, tax will be deducted on any capital gains.
In respect to short-term capital gains, that is gain on sale of investments held for less than twelve months, tax is required to be deducted at source at the rate of 30% if the unit holder is a non-resident non-corporate and at the rate of 48% if the unit holder is a foreign company as per the provisions of Section 195 of the Indian Income Tax Act, 1961.
Under Section 2(42A) of the Act, a unit of a mutual fund is treated as long-term capital asset if the same is held for more than twelve months. Tax is deductible at source @ 20% on capital gains arising from transfer of a long-term capital asset. The benefit of indexation is available in respect of long-term capital gains.
As per the judicial decisions of courts, in case of remittance to a non-resident of a country with which a Double Taxation Avoidance Agreement (DTAA) is in force, the tax should be deducted at the rate provided in the Finance Act of the relevant year or the rate provided in the DTAA whichever is more beneficial to the assessee. In order to claim the aforesaid tax benefit the non-resident investor will have to obtain a certificate from the Income Tax authorities relating to applicable tax benefit.

What is the tax rate on short-term capital gain?

In case of non-resident non-corporate - 30%.
In case of foreign company - 48%.



 
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