INVESTMENT: Some FAQ’s answered.
is a non-resident Indian (NRI)?
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.
is an Overseas Corporate Body (OCB)?
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
Foreign Institutional Investor (FII)?
institutional investor (FII) is a corporate
registered by Securities and Exchange Board of
is the difference between an NRE account, NRO
account and FCNR account?
(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.
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.
Non-Rupee (FCNR) account is similar to
the NRE account except that the funds are held
in foreign currency like US$, Dm etc.
I invest in mutual fund schemes?
can invest in any of the mutual fund schemes.
any mutual fund scheme assure returns?
I need any approvals from the Reserve Bank of
India to invest in mutual fund schemes?
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
Only OCBs and FIIs require prior approvals before
investing in our schemes.
I invest in foreign currency?
investments have to be in Indian Rupees. A convenient
way to invest would be through your NRE account.
do I redeem?
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
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
I enroll in Systematic Investment Plan (SIP)?
will I be updated on the performance of the schemes?
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.
I gift units of mutual fund schemes to my relatives
I repatriate my earnings on redeeming from mutual
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
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
will the redemption proceeds be paid?
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.
have been made on non-repatriation basis redemption
proceeds will be paid by means of a rupee cheque
payable to the investor's NRO
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
will be my tax liability on receipt of income
or on redemption?
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 :
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
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
is the tax rate on short-term capital gain?
of non-resident non-corporate - 30%.
In case of foreign company - 48%.