What are Mutual Funds?
A mutual fund is a professionally managed investment vehicle that pools money from multiple investors to invest in equities, bonds, and other securities. The fund's value is determined by its Net Asset Value (NAV), calculated based on the market value of its holdings after deducting expenses. Mutual funds are ideal for investors looking for diversified, professionally managed investments without the need for extensive market research. With a wide range of schemes catering to various financial goals—retirement, education, home purchase, and more—mutual funds offer flexibility and growth potential.
Can NRIs Invest in Mutual Funds in India?
Yes, Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) can invest in Indian mutual funds on both a repatriation and non-repatriation basis. However, they must comply with regulations under the Foreign Exchange Management Act (FEMA) and complete their Know Your Customer (KYC) process before investing. Read more:
FEMA Compliance: As per FEMA Notification No. 13 (May 3, 2000), an NRI is an individual residing outside India who is a citizen of India. This regulation governs where and how NRIs can invest.
Income Tax Act & Residential Status: According to the Income Tax Act, 1961, an individual is classified as a resident if they have stayed in India for 120 days or more in a financial year and at least 365 days in the preceding four years. If their Indian income exceeds ₹15 lakh, they must follow the 120-day rule.
Restrictions for US & Canada NRIs: Due to FATCA compliance, some mutual fund houses impose restrictions on NRIs from the US and Canada. However, we understand the complexities of these regulations and have partnered with AMCs, including Aditya Birla Sun Life Mutual Fund, Sundaram Mutual Fund, Quant Mutual Fund, Nippon India Mutual Fund, UTI Mutual Fund, and Navi Mutual Fund, that offer investment facilities for NRIs.
Investment Benefits for NRIs
SBNRI empowers NRIs and PIOs to achieve their financial goals through Indian mutual fund investments, offering benefits such as:
Start small and invest regularly with SIPs, a convenient way for NRIs to participate in the Indian market.
Mutual Fund Taxation for NRIs
Navigating the complexities of NRI taxation can be challenging. SBNRI is here to simplify the process for you. Our team of experts can provide personalized guidance on tax planning, DTAA benefits, and optimizing your investment strategies in light of the latest tax regulations.
Tax Implications
Capital Gains Tax (TDS): Tax is deducted at source (TDS) based on the fund type and holding period. The rates below reflect the recent changes and are effective as of 2024.
Equity Funds:
- STCG (less than 1 year): 20%
- LTCG (1 year or more): 12.5% (on gains exceeding ₹1 lakh)
Debt Funds:
- STCG (less than 3 years): Taxed as per the individual's income tax slab
- LTCG (3 years or more): 20% with indexation or 10% without indexation (for unlisted funds)
Dividend Taxation: Dividends are taxed as per the NRI's applicable income tax slab. Read more: Tax Slabs for NRIs
Tax Return Filing: NRIs may not need to file returns if income consists only of investment gains with proper TDS deductions. However, filing can help claim TDS refunds or if your total income in India exceeds the basic exemption limit.
Tax Benefits for NRIs
Investments in Equity Linked Savings Schemes (ELSS) funds continue to offer tax benefits under Section 80C of the Income Tax Act, allowing deductions up to ₹1.5 lakh.
How DTAA Benefits NRIs
DTAAs often specify lower tax rates on certain types of income, such as capital gains, dividends, and interest, than the standard rates.
How to Benefit from DTAA
To claim the benefits of a DTAA, you typically need to:
Check if a DTAA exists between India and your country of residence.
