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, business or vocation outside India, or stays abroad under circumstances indicating an uncertain duration.
Who is a Person of Indian Origin (PIO)?
A Person of Indian Origin means a citizen of any country (other than Bangladesh or Pakistan), if the person: (a) at any time held an Indian passport; or (b) or the persons parents or grandparents were citizens of India; or (c) is a spouse of an Indian citizen, or of a person referred to in (a) or (b) above.
Who is a Foreign Institutional Investor (FII)?
An FII is an institution established or incorporated outside India which proposes to invest in Indian securities and is registered with SEBI.
What are NRE, NRO and FCNR accounts?
Non-Resident Rupee External (NRE).This is a Rupee account from which funds are freely repatriable. It can be opened with either fund remitted from abroad or local funds which can be remitted abroad.
Non-Resident Rupee Ordinary (NRO).This is a Rupee account and can be opened with funds either remitted from abroad or generated in India. These funds are non-repatriable. However, under certain circumstances, these are allowed to be repatriated.
Fully Convertible Non-Resident Rupee (FCNR).This account is similar to the NRE account except that the funds are held in foreign currencies and can be maintained in Pound Sterling, U.S. Dollar, Euro and Japanese Yen. FCNR accounts can be maintained only in the form of term deposits, i.e. a deposit kept for fixed periods ranging from 6 months to 3 years.
Can an NRI, and FIIs invest in mutual funds in India?
Yes. The following summary outlines the various provisions related to investments by Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs) and Foreign Institutional Investors (FIIs) in the Schemes of the Mutual Fund and is based on the relevant provisions of the Income-tax Act, 1961 (the Act), regulations issued under the Foreign Exchange Management Act, 1999 and the Wealth-tax Act, 1957 (collectively called the relevant provisions). The following information is provided for general information only. However, in view of the individual nature of the implications, each investor is advised to consult with his or her own tax advisors / authorized dealers with respect to the specific tax and other implications arising out of his or her participation in the funds.
Can NRIs and FIIs invest in shares, debentures and units of Mutual Funds in India?
NRIs are permitted to make direct investments in shares/ debentures of Indian companies/ units of mutual fund. They are also permitted to make portfolio investments i.e . purchase of share / debentures of Indian Companies through stock exchange. These facilities are granted both on repatriation and non-repatriation basis.
Can an NRI invest in foreign currency?
An NRI cannot make the investment in foreign currency. He needs to give a Rupee cheque from his NRE, NRO, and FCNR bank account in India. He may also send a Rupee cheque from abroad payable in a bank in India. However, for an NRI to invest, it is mandatory that he maintains a bank account in India.
How does an NRI redeem funds?
In the open-end schemes of mutual fund units can be purchased or redeemed at any point in time. To redeem funds, submit the redemption request to the nearest Investor Service Centre. Your form must contain the investors folio number and the amount / units you would like to redeem. Redemption requests by telephone, telegram, fax or email that lack valid signatures will not be accepted.
What is the tax liability for income received from mutual funds?
As per Section 10(35) of the Income Tax Act, 1961, income received from mutual fund units specified under Section 10(23D) is exempt from income tax in India and the mutual funds are subject to pay distribution tax in debt oriented schemes. Hence all dividends are tax-free in the hands of non-resident investors and no TDS is applicable on the same.
What is TDS?
As per regulatory guidelines, Tax (if applicable) has to be deducted at source for all the profits done in the equity market transactions. Before crediting sales proceeds it is the responsibility of the broker and the PIS cell to determine the appropriate Tax and deduct it at source.
Is it mandatory to have a Permanent Account Number (PAN)?
Yes. Submission of PAN card copy (irrespective of the amount of investment) is mandatory for all existing as well as prospective investors including joint applicants / holders, guardians and NRIs for investing with Mutual Funds from January 1, 2008.
Can a Power of Attorney (POA) invest on behalf of the NRI investor?
Yes. Unlike banks where a POA holder cannot open an account on behalf of the NRI, in a mutual fund the POA has the authority to invest on behalf of the investor and sign documents for initial and additional purchases as well as redemptions.
While applying for purchase of units the POA holder needs to submit the original POA or a copy duly notarized should be submitted. The Power of attorney should contain the signature of both the first holder and the POA holder. Only when the POA is registered does the POA holder have the right to transact on behalf of the NRI investor. His signature will be verified for processing any transaction/request.
Is nomination by NRIs allowed in Mutual Funds?
Yes. It is allowed only for Individuals/HUFs.
Can a resident Indian have an NRI as nominee?
Yes. The same rules apply for nominees to resident Indian accounts. An NRI can be a nominee to an account which is in the name of a resident Indian.