How can NRIs invest in mutual funds in India?


Non Resident Indian (NRI) is an Indian citizen who resides outside India for 182 day or more during a financial year and 365 days or more during the preceding four financial years.
             The role of mutual funds cannot be understate in this process. Over the years it has become a popular investment platform due to the advantages of professional management, easy accessibility and high liquidity. Mutual funds are helping the people to achieve financial goals like children education, Retirement, marriage etc.

Can NRIs invest in mutual funds in India?
              
Yes, NRIs can invest in mutual funds in India if they adhere to FEMA (Foreign Exchange Management Act) regulations

Investment process for NRIs in India
(a) Open NRE/NRO account: An individual cannot make an investment in foreign currency in the Indian market. So, an NRI needs to have rupee account in India. The are two types of bank accounts that ab NRI can open depending on their needs.
 
  ● NRE Account

NRE stands for Non Resident External Rupee Account. It can be opened in any bank account in India in the form of currency recurring, savings or fixed deposits account. One can deposit overseas earnings in this account. It is fully repatriable, which means we can transfer money from India to other countries.

    ● NRO Account

NRO stands for Non Resident Ordinary Rupee account. These are the accounts opened for depositing income earned in India by an NRI. But in this account, we can transfer only up to 1 million USD per financial year.

(b) Open Demat account and link it with NRE/NRO account.

(c) Transfer funds from NRE/NRO account.

(d) Start trading and investing in mutual funds:

Now an NRI can invest allocating funds in the stocks which he wants to invest.

Which documents are required for opening account?
▪︎ Passport

▪︎ Overseas address

▪︎ Indian pan card

▪︎ Two copy of passport photos

▪︎ Complete KYC form

Which fund houses allow NRI investments?
▪︎ SBI mutual fund

▪︎ HDFC mutual fund

▪︎ UTI mutual fund

▪︎ ICICI Prudential mutual fund

▪︎ L&T mutual fund

▪︎ Sundaram mutual fund

▪︎ Birla sun life mutual fund

▪︎ DHFL pramerica mutual fund

▪︎ PPFAS mutual fund

Mutual Funds Taxation for NRI
NRIs fear to invest in other countries because they think that they will pay double tax. But double taxation can be avoided if India has signed the Double Tax Avoidance Agreement (DTAA) treaty with respective country.





          For example, India has signed the treaty with Australia. So, NRIs residing in Australia can claim the tax relief in Australia, if they have already paid taxes in Indian.

Tax are almost same for an Indian Resident and NRIs.
● Dividends are tax free for both.

● In equity oriented funds, short term capital gains are taxed at 15%. Short term equity funds are the one which is held for less than one year.

● Long term capital gains in equity funds are taxed at 10% on gains exceeding 1 lakhs P.A. These are the funds that are held for more than one year.

● In debt oriented mutual funds, short term capital gains are taxed at 30%

● Long term capital gains in debt funds are taxed at 20% on listed funds and 10% on unlisted funds
                  

Advantages to an NRI by investing in mutual funds in India
(a) The benefit of economic diversification.

(b) Secure online access and management of funds.

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