NRI Mutual Funds Investments

NRI’s guide to Mutual Funds while investing in India.

Make the most of the attractive investment opportunities in India. The Indian economy is booming like never before. But before you do that know all that you need to know about investing. You will get access to a wide range of mutual fund products and services, which will help your money, grow like never before.

Mutual Funds offer you the simplest way of investing in increasingly complex financial markets. With the advantages of diversification, liquidity, professional management, etc. available with Mutual Funds, you can be sure of peace of mind regards the growth of your hard earned money. To invest through online and offline mode in mutual funds, you need to fill up the few forms & submit to your branch or point of submission centre.

We are the leading distributors for various mutual funds in India, like: Axis Mutual Fund, Baroda Pioneer Mutual Fund, Birla Sun Life Mutual Fund, BNP Paribas Mutual Fund, BOI AXA Mutual Fund, Canara Robeco Mutual Fund, DSP BlackRock Mutual Fund, Edelweiss Mutual Fund, Franklin Templeton Mutual Fund, HDFC Mutual Fund, HSBC Mutual Fund, ICICI Prudential Mutual Fund, IDBI Mutual Fund, IDFC Mutual Fund, IIFL Mutual Fund, JM Financial Mutual Fund, JPMorgan Mutual Fund, Kotak Mahindra Mutual Fund, L&T Mutual Fund, LIC NOMURA Mutual Fund, Mirae Asset Mutual Fund,Motilal Oswal Mutual Fund, Peerless Mutual Fund, DHFL Pramerica Mutual Fund, PRINCIPAL Mutual Fund,Reliance Mutual Fund, Religare Invesco Mutual Fund, SBI Mutual Fund, Shriram Mutual Fund, Sundaram Mutual Fund, Tata Mutual Fund, Taurus Mutual Fund, Union KBC Mutual Fund, UTI Mutual Fund, etc. We also assist NRIs to open a mutual fund trading account in India. Advisor Broker Distributor Consultant IFA Agent Financial Planner in Pune

Key Highlights of NRI investments in Mutual Funds.

  • Professional management and research: Each Mutual Fund is managed by Professional fund manager who regularly monitors market trends and conducts in-depths research of Mutual Funds.
  • Risk diversification: Reap the benefits of a large and well-diversified portfolio even with little investment. Reduce your risks and augment your profits.
  • Convenience: Convenient features like dematerialized account statements, easy subscription and redemption processes, availability of NAVs and performance details, investing through Mutual Funds is hassle free and easy to track.
  • Liquidity: Open-ended funds provide the biggest advantage of redemption on demand—an extremely beneficial feature especially during rising or falling markets.
  • Tax advantages: Dividends from Mutual Funds are tax free in the hands of the investor (depending on latest Finance Act). Capital gain accrued from Mutual Funds investment for a period of over 1 year is treated as long term capital appreciation and is tax free.
  • Reduction in costs: Your investment costs are lowered given the very fact that Mutual Funds have a pool of money to invest and that they are involved in buying and selling of large amounts of securities.
  • Transparency (funds have to periodically make full disclosure of investments), flexibility in terms of needs-based choices, strict regulation by SEBI with stringent compliance requirements to investor-friendly norms.

NRI Investments- Very Simple:NRI Mutual Fund Investment Online

Sanriya.in is the best online investment platform powered by NSE-NMFII for Non Resident Indians (NRIs). You can make investments in mutual fund schemes in a completely paperless manner. Moreover, value-added services available for different life goals of NRI’s, like Systematic Investment Plans (SIPs), Systematic Transfer Plan (STP), Purchase, Redemption, Switch etc.

You can access details over Skype, email, phone and chat, making investing across borders a rewarding phenomenon. 

Sanriya.in is the most online-enabled, paperless way of investing in Mutual Funds in India.

 Open your NSE-NMFII account in just two simple steps.

1] Register on the www.sanriya.in website by providing your name, address and bank account details, nominee details and email us the soft copy of your documents. We will verify your documents and check KYC status.

2] If all details are in place, you will receive pre-filled NSENMFII application form along with password to operate, and download, print and send it to us along with a few supporting documents. Password will be activated once everything is in place.

Here are a few answers to some fundamental questions that you might have in your mind

Which schemes of Mutual Fund can NRIs invest in?

NRI Mutual Fund Investment options in India.The schemes that invest in shares are called as Equity Mutual Funds and schemes that invest in fixed deposits like instruments are called as Debt Funds. A mix of both is called as Hybrid Funds. And NRI can invest in Equity, debt, hybrid kind of mutual funds.

Are there any restrictions for NRI?

Non Resident Indians (NRIs) from all over the world can invest in all* the available Mutual Funds schemes. Residents of United States of America and Canada cannot invest in all mutual funds. However, only SBI Mutual Fund, Birla Sun Life Mutual Fund, L&T Mutual Fund, Sundaram Mutual Fund, UTI Mutual Fund and PPFAS Mutual Fund accept investment from US & Canada NRI. The fund houses has US-headquartered and the same fund house operate in India, do not accept money from a US-based NRI because there is a rule laid out by the US securities market regulator, Securities and Exchange Commission (SEC), which says only those fund houses, globally or locally, registered with SEC can accept US NRI or citizen’s money. To avoid such a situation, most of the fund houses don’t accept investment from N.R.I’s from the US. But if you are a non – USA based NRI or from a country where no such dual regulation is required, investing in mutual funds is not a very tough task.

 

1] What is NRI KYC?

Ans: KYC is an acronym for ‘Know your Client’, a term commonly used for Client Identification Process. SEBI has prescribed certain requirements relating to KYC norms for Financial Institutions and Financial Intermediaries including Mutual Funds to ‘know’ their clients. This would be in the form of verification of identity and address, providing financial status, occupation and such other demographic information to CDSL Ventures Ltd. (CVL), a wholly owned subsidiary of Central Depository Services (India) Ltd. (CDSL). Applicant must be KYC compliant while investing with any SEBI registered Mutual Fund.

W.e.f. January 1, 2011, all categories of investors irrespective of amount of investment in Mutual Funds are required to comply with KYC norms under the Prevention of Money Laundering Act 2002 (PMLA) for carrying out the transactions such as new/ additional purchase, switch transactions, new SIP/ STP/ DTP registrations received from effective date i.e. January 1, 2011.

2] Does the NRI investor have to repeat the KYC process with every Mutual Fund?

Ans: Once the KYC is duly completed in all respects, the investor needs to produce a copy of the Acknowledgement to the fund where the investor desires to invest. There is no need to repeat the KYC individually for each Mutual Fund investment.

3] Where and how does NRI get to be KYC compliant?

Ans: The Mutual Fund industry has appointed CDSL Ventures Limited (CDSL), a wholly owned subsidiary of Central Depository Services (India) Limited, to carry out the KYC compliance procedure. CVL through its Points of Service (POS) will accept KYC application forms, verify documents and provide the KYC Acknowledgement (across the counter on the best effort basis)

4] Should the NRI investor visit POS personally to obtain KYC compliance?

Ans: No. If the investor is not in a position to visit POS personally, the KYC application form along with the necessary documents (including originals if the copies are not attested) can be sent through the distributor or representative, who can arrange to fulfill the KYC obligation and obtain the KYC Acknowledgement through any of the POS.

5] Which supporting documents required investing in Mutual Funds and KYC?

A: If you are an Indian citizen (holding an Indian passport): Require following self-attested copy of

  • Permanent Account Number (PAN) card : 2 copy
  • KYC verification form with colour passport size photograph.
  • cancelled cheque leaf, or a recent account statement from your NRE/NRO account that is held with an Indian bank: – 2 copies
  • Foreign Address Proof–utility bill (phone/electricity), driving license with address, etc.: 2 copies.
  • Indian address proof – utility bill (phone/electricity), driving license with address, aadhar card, bank statement etc: – 2 copies.
  • Passport:- 2 copies
  • Tax File No, Citizenship Card No or green card no,: 2 copies.

B: If you are a foreign citizen (holding a foreign passport):

  • If you hold a PIO or OCI card, we will need, in addition to the documents above:
    – A photocopy of the foreign passport that has been attested by your local Indian embassy (in lieu of the Indian passport above)
    – A self-attested copy of your PIO or OCI card
  • We’ll also need the following supporting documents from you to get you Know Your Client (KYC) compliant (it is mandatory to be KYC-compliant to invest in mutual funds in India):
    – KYC form – duly filled and signed.
    – Recent color photo (signed across the photo)
    – Copy of PAN card, notarised (on an A4 size paper)
    – Copy of exact proof of overseas address, notarised (on an A4 size paper)
    – Copy of first and last pages of passport, notarised (if you are an Indian citizen)
    – Copy of foreign passport, notarised (if you are a foreign citizen)
    – Copy of PIO or OCI card, notarised (if you are a foreign citizen)

1] Who is a Non-Resident Indian (NRI)?

Ans: NRI is a person who is a citizen of India or Person of Indian Origin (PIO) who has stayed abroad for employment/carrying out business or vocation for 182 days or more or under circumstances indicating an intention for an unknown duration of stay abroad is a Non-Resident Indian (NRI).

Those who stay abroad on business visits, for medical treatment, study or such other purposes, which do not indicate an intention to stay there for an indefinite period, are not considered as NRIs.

2] Who is a Person of Indian Origin (PIO)?

Ans: A Person of Indian Origin (PIO) means a citizen of any country (other than Bangladesh or Pakistan), if :

  1. He/She at any time has held an Indian passport or
  2. He/She or either of his / her parents or grand parents was a citizen of India by virtue of the constitution of India or Citizenship Act, 1955 (57 of 1995) or He / She is a spouse of an Indian citizen or of a person referred above.

Who is a Foreign Institutional Investor (FII)?

Ans: FII means an institution established or incorporated outside India, which proposes to make investments in Indian securities and is registered with SEBI.

Mutual Fund distribution mostly served by mutual fund intermediary. NRI’s can approach mutual Funds intermediary.  Mutual Fund intermediary is also known as in some parts as Mutual Fund Advisor, Mutual Fund Distributors, Mutual Fund Brokers, Mutual Funds Consultants, Mutual Funds Agents, Mutual Fund Investment / Financial Advisors. NRIs can invest lumpsum as well as SIP /STP/SWP etc.from intermediary.

1] Does an NRI need any approvals from the Reserve Bank of India to invest in mutual fund schemes?

Ans: No. As an individual you do not need to take RBI permission for investing in mutual funds. You can invest through repatriable or non repatriable basis.

2] Can an NRI maintain a bank account in India?

Ans: Yes. NRIs can maintain bank accounts in rupees as well as in foreign currency. However, accounts in foreign currencies can be maintained with authorized dealers/ banks only.

3] What are the different types of rupee accounts that are permitted and can be maintained by NRIs?

 Ans: The 3 types of rupee accounts permitted, that can be maintained by NRIs are as follows :

  1. NRE : Non-Resident (External) Rupee Account
  2. NRO : Non-Resident (Ordinary) Rupee Account
  3. FCNR – B : Foreign Currency (Non –Resident) Accounts (Banks), Foreign Currency Non Resident USD, GBP, Yen, Euro Repatriable.

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, Deutsche Mark (upto December 2001), 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.

Note : With effect from 01/04/2002, both NRSR and NRNR deposit schemes have been discontinued.

4] What are NRE and NRO accounts and distinction between NRE and NRO A/c?

Particulars

Non-Resident (External) Rupee (NRE) Account Non-Resident Ordinary Rupee (NRO) Account
Freely repatriable. Non-Resident (External) Rupee (NRE) account is a rupee account from which funds are freely repatriable. It can be opened with either funds remitted from abroad or local funds maintained in NRE/ FCNR accounts, which can be remitted abroad. The deposits can be used for all legitimate purposes. The balance in the account is freely repatriable. NRO accounts cannot be remitted abroad but have to be used only for local payments in rupees.Non-Resident Ordinary Rupee (NRO) account is a rupee account and can be opened with funds either remitted from abroad or generated in India. The amounts in such an account are generally non-repatriable. However, funds in NRO accounts can be remitted abroad subject to/as per various directives in force at the time of repatriation.  
Interest Taxability Interest credited to the NRE accounts is exempt from tax in the hands of the NRI. Interest credited to the NRO accounts is taxable in the hands of the NRI.

Funds due to the non-resident accountholder which do not qualify, under the Exchange Control regulations, for remittance outside India are required to be credited to NRO accounts. More details can be found on the Reserve Bank of India (RBI) website www.rbi.org.in

5] Does an NRI, PIO, FII requires any approval from the RBI to invest in mutual fund schemes?

Ans: No special approval is required. NRIs/FIIs have been granted a general permission by RBI [Schedule 5 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000] for investing in/redeeming units of the schemes subject to conditions set out in the aforesaid regulations.

6] What is a PIO Card? Who Issues PIO Cards? How to get a PIO Card?

Ans: Person of Indian Origin (PIO) Cards are issued by Ministry of External Affairs (CPV Division), Government of India to persons of Indian origin through Indian embassy abroad. Specific information on rules, forms, particular offices, missions is available on the website

7] Can an NRI, and FIIs invest in mutual funds in India?

Ans: Yes. NRIs can invest in Mutual funds on a Repatriable/ Non-Repatriable basis as per the provisions of Schedule 5 of the Foreign Exchange Management (Transfer or issue of Security by a Person Resident Outside India) Regulations, 2000 (‘the Regulations’) as explained below.

A Common Application Form duly completed together with cheques or bank drafts should be submitted / mailed to any of the Official Points of Acceptance or our office. All cheques/demand drafts accompanying the application form must be made in favour of the scheme names. Investors can send their completed application forms to any of the Investor Service Centres or our office. All cheques/DDs must be drawn in favour of “Name of the Scheme” and crossed “A/c payee” only and payable at the place where the application is submitted at the official point of acceptance.

Repatriable Basis:-  To invest on a repatriable basis, NRI investor must have an NRE or FCNR Bank Account in India. The Reserve Bank of India (RBI) has granted a general permission to Mutual Funds to offer mutual fund schemes on repatriation basis, subject to the following conditions:

  • The amount representing investment should be received by inward remittance through normal banking channels, or by debit to an NRE / FCNR account of the non-resident investor.
  • The net amount representing the dividend / interest and maturity proceeds of units may be remitted through normal banking channels or credited to NRE / FCNR account of the investor, as desired by him subject to payment of applicable tax.

Non-Repatriable Basis :- The Reserve Bank of India (RBI) has granted a general permission to Mutual Funds to offer mutual fund schemes on non-repatriation basis, subject to the following conditions:

  • Funds for investment should be provided by debit to NRO account of the NRI/ FII investor. Alternatively, funds may be invested by inward remittance or by debit to NRE / FCNR Account.

FII Investors. :- FIIs may pay for their purchases with funds held in a Foreign Currency account or Non-resident Rupee account maintained in a designated branch of an authorised dealer [Clause 3(1) of the Regulations].

8] What is the mode of payment for Repatriation and Non-Repatriation Basis?

NRI Investor: –

Repatriable Basis. Non-Repatriable Basis.
Payments for the purchase of the units may be made by Indian Rupee drafts purchased abroad, or by cheques drawn on the NRE/FCNR Account of the investor, payable at the city where the application form is accepted. Payments for the purchase of the units may be made by Indian Rupee drafts purchased abroad, or by cheques / demand drafts drawn on the NRE / FCNR / NRO / NRSR / NRNR account of the investor, payable at the city where the application form is accepted.
The payment instrument must be drawn on NRE or FCNR account of the investor. It can be made by drawing payment instrument on NRE/ FCNR/NRO account of investor.

9] Can an NRI invest in foreign currency?

Ans: An NRI cannot make the investment in foreign currency. He needs to give us a Rupee cheque from his NRE, NRO 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.

10] Can an NRI Invest through Rupee draft/Bankers cheque?

Ans: If an NRI investor invests in Mutual Fund Schemes through Rupee draft/Bankers cheque, then any of the following documents should be attached along with the Application Form:

  • A Foreign Inward Remittance Certificate (FIRC) or
  • Confirmation letter issued by the bank confirming the source of funds or
  • A photocopy of the Rupee draft/Bankers cheque

11] How can an NRI carry out transactions like additional purchase / redemption / switching?

Ans: Investors can purchase /switch / redeem and also can be register SIP /SWP/STP through online mode as well as conventional mode too.

12] Will NRI’s have to pay service charges/fees for investing in mutual funds through Sanriya?

No. There are no charges at all for investing through us. It’s absolutely free! But you need to take into account the various loads charged by mutual fund companies.

13] Will the fund accept an NRI application with an overseas bank account detail?

Ans: No.

14] How will the redemption proceeds be paid?

Ans: Redemption proceeds may be paid by direct credit or cheque. Kindly fill the IFSC (NEFT/RTGS) code Updation Form to have your proceeds directly credited to your bank account. The cheque will be payable to the first unitholder and will include the bank account number. Alternatively the redemption proceeds may be credited directly to the investor’s (Unit Holder/ First Holder in the folio) bank account.

Redemption proceeds/repurchase price and/or dividend or income earned (if any) will be payable in Indian Rupees only. The fund will not be liable for any loss due to exchange fluctuations, while converting the Rupee amount into US Dollar or any other currency.

15] How can the redemption proceeds be repatriated or on a non-repatriable basis?

Ans: In case the NRI investor has opted for the online facility he can apply for redemption online.

16] Process for redemption proceeds where investments were made on repatriation basis

Ans: The investments shall carry the right of repatriation of capital invested and capital appreciation so long as the investor continues to be a resident outside India.

In the case of an FII, the designated branch of the authorised dealer may allow remittance of net sale/maturity proceeds (after payment of taxes) or credit the amount to the Foreign Currency account or Non-Resident Rupee account of the FII, maintained in accordance with the approval granted to it by the RBI [Clause 5(i) of the Regulations].

In any other case, where the investment is made out of inward remittance or from funds held in the NRE/FCNR account of the investor, the maturity proceeds/repurchase price of units (after payment of taxes) may be credited to the NRE/FCNR/NRO/NRSR account of the non-resident investor maintained with an authorised dealer in India [Clause 5(ii) of the Regulations].

Process for redemption proceeds where investments were made on non-repatriation basis

Where the purchase of units is made on a non-repatriable basis, the maturity proceeds/repurchase price of units (after payment of taxes) will not qualify for repatriation and may be credited to the NRO/NRSR account of the non-resident investor [Clause 5(ii) of the Regulations].

Where the investment is made out of funds held in a NRSR account, the maturity proceeds/ repurchase price of units (after payment of taxes) may be credited to the NRSR account maintained by the investor with an authorised dealer in India [Clause 5(ii) of the Regulations].

Similarly, investments in units purchased in Rupees, where the investor was a resident of India and subsequently becomes a non-resident, will not qualify for repatriation of repurchase proceeds of units.

The entire income distribution on the investment will, however, qualify for full repatriation. Investors are advised to contact their banks/tax consultants if they desire remittance of the income distribution on units abroad.

17] Is the income/dividend on mutual fund units repatriable?

 The investments shall carry the right of repatriation of capital invested and capital appreciation so long as the investor continues to be a resident outside India. In the case of an FII, the designated branch of the authorised dealer may allow remittance of net sale/maturity proceeds (after payment of taxes) or credit the amount to the Foreign Currency account or Non-resident Rupee account of the FII maintained in accordance with the approval granted to it by the RBI [Clause 5(i) of the Regulations]. In any other case, where the investment is made out of inward remittance or from funds held in NRE/FCNR account of the investor, the maturity proceeds/repurchase price of units (after payment of taxes) may be credited to NRE/FCNR/NRO/NRSR account of the non-resident investor maintained with an authorised dealer in India [Clause 5(ii) of the Regulations].

18] Will you transfer money to an investor’s overseas account?

Ans: No. Investors need to contact their authorised dealers for this service.

NRI Mutual Fund Taxation : NRI Taxation for Equity and Debt Mutual Funds Scheme

1] What is the tax liability on redemptions?

Ans: The tax treatment for NRI investors with respect to Mutual Fund investments is the same that is applicable for Resident Investors except that applicable tax would be deducted at source for NRIs.

2] What is the tax liability for income received from your mutual funds?

Ans: 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 deduction of 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. We request you to consult your investment advisor and/or Tax consultant for further details/ clarification.

3] What is the proof of the Tax Deduction at Source(TDS?

Ans: A TDS certificate is issued in the name of the Unit holder / First holder mentioning the details of the transaction and the tax deducted. The TDS certificate is commonly known as Form16 A.

Tax is deducted at source on capital gains made on investments by NRIs. Investments in equity funds held over 1 year are exempt from tax and hence no tax is deducted at source. A digitally signed TDS certificate is sent along with the redemption proceeds.

The tax rates for FY 2016-17 of AY 2017-18.

Capital Gain Tax for FY 2016-17 of AY 2017-18 for NRI

Transaction

Short Term Capital Gain (STCG)

Long Term Capital Gain (LTCG)

Equity Mutual Fund

15%

NIL

Debt Mutual Fund

Base on Individual Tax Slab

10%* (for unlisted) without indexation ) & 20% (for listed) with indexation

TDS applicable only to NRI Investors in case mutual fund investments for FY.2016-17

  Short term capital gains Long term capital gains
Equity Mutual Fund

15%

Nil

Debt Mutual Fund

30%

10%* (for unlisted) & 20% (for listed)

4] When will the TDS certificate be issued?

Ans: A TDS certificate (Form 16A) will be despatched to the investor at his or her registered address along with the redemption warrant. Also some companies despatched to the investors once in a quarter.

5] Is the indexation benefit available to NRIs?

Ans: Yes, if units are held for more than 12 months for equity /36 months for debt i.e. on long-term capital gains.

6] Are fund units liable to the wealth tax?

Ans: No, Units issued to FIIs/NRIs will not be treated as assets as defined under section 2(ea) of the Wealth-Tax Act, 1957 and hence will not be liable to wealth tax.

1] Can a Power of Attorney (POA) invest on behalf of the NRI investor?

Ans: 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 notarised 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/FII investor. His signature will be verified for processing any transaction/request.
  • To operate the mutual fund account, the POA has to be registered with the mutual fund.
  • POA or Power of Attorney is one of the ways NRI’s can invest in mutual funds in India.

2] How safe is it for NRI’s to sign the POA form?

Ans: Investing through Power of Attorney (POA) is one of the methods NRI’s can adopt for investing in mutual funds and is completely safe.

3] Is nomination by NRIs allowed in Mutual Fund Schemes?

Ans: Yes, It is allowed only for Individuals.

4] I’m an NRI. Can I invest in mutual funds jointly with my wife?

Ans: If you’re an NRI here’s how you can invest:
    a) Jointly
    b)   Either or survivor
    c) On first or survivor basis

5] Can a resident Indian have an NRI as nominee?

Ans: Yes, The same rules apply for nominees to resident Indian folio(s). An NRI can be a nominee to an folio(s) which is in the name of a resident Indian.

6] Where can I get the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 and Schedule 5 thereof?

Ans: Visit the Reserve Bank of India (RBI) website at http://www.rbi.org.in

7] Will the redemption/dividend amount be credited to the same account from which I made a mutual fund purchase?

Ans: Yes. The redemption/dividend amount will be credited to the same account

Will NRIs also be able to avail of the home pick-up facility in case of mutual funds?

Yes. The home pick-up facility is available for NRI in Pune & Mumbai*.

 

Leave a Reply

Your email address will not be published. Required fields are marked *


*