Mutual Fund Investment in India As An NRI


It is now common for many people to relocate abroad for work or study. In a few months, they settle down there and become NRIs (Non-Resident Indians). If you, too, are one of those people, a question might arise in your mind. What happens to your stocks and mutual funds investments if you leave the country?


Mutual Fund Investment For NRI


You can continue to invest in domestic mutual funds once your residency status switches to NRI (Non-Resident Indian). However, according to the Foreign Exchange Management Act (FEMA) of the Reserve Bank of India, you must modify your residential status in your bank accounts and other assets, like mutual fund schemes. While NRI mutual funds investment is not restricted in India, you must update your residential status and bank account information.


Things You Need To Keep In Mind After Becoming NRI


Even though there is not much difference between investing as a resident or as an NRI, there are some things that you need to keep in mind as an NRI while investing in mutual funds in India, such as:


Open an NRI bank account- You cannot maintain your regular account if your residential status switches to NRI, according to FEMA (Foreign Exchange Management Act) standards. Furthermore, Asset Management Companies (AMCs) in India cannot take foreign currency investments. As a result, you must open an NRE bank account or convert your ordinary account to an NRO account.


NRE and NRO account- You can save your foreign profits in an RBI-registered bank in India by opening an NRE (Non-Resident External) bank account. You can also open an NRO (Non-Resident Ordinary Account) account to deposit your Indian earnings, such as a pension, dividends, rental income, etc.


Update your Residential Area- After becoming a Non-resident of India, you must update your current residential address in your KYC (Know Your customer). You also need to inform the mutual fund house where you have invested. You can do it by submitting some documents like your PAN card, passport or address proof.


Taxation Policy For NRI’s


The mutual fund taxation rules for NRIs and residents of India are similar.


If the investment is made for a short period of time, such as one year or less, the tax rate will be 15% under the short-term capital gains taxation rules.


But if the investment is for more than one year or for the long term, then the tax charges will be 10% according to the long-term capital gains tax rules. If the gains reach Rs. 1 lakh, short-term capital gains are taxed at 15% and long-term capital gains at 10%.


However, If the NRI’s country of residence has not signed the DTAA (Double Tax Avoidance Agreement), the NRI has to pay taxes in both countries, the country of residence and India.


To Sum Up


In conclusion, as an NRI, investing in mutual funds in India is not significantly different from investing as a resident. However, understanding the taxation policy for NRIs is important, including the difference in tax rates for short-term and long-term investments and the impact of DTAA agreements. By considering these factors and investing wisely, NRIs can make safe and profitable mutual fund investments in India.


Source – Shoonya

Share on social media