|
|
|
|
|
|
|
-
Who is a Non-Resident Indian (NRI)?
|
Ans : 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)?
|
Ans : 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 person's 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)?
|
Ans : An FII is an institution established or
incorporated outside India which proposes to invest in Indian securities and is
registered with SEBI.
|
|
|
-
Who is an Overseas Corporate Body (OCB) ?
|
Ans : An OCB includes overseas companies, partnership
firms, societies and other corporate bodies owned predominantly by non-resident
persons of Indian nationality or origin outside India.
|
|
|
-
Can an NRI maintain a bank account in India?
|
Ans :Yes. NRIs can maintain accounts in rupees
as well as in foreign currency.
|
|
|
-
What types of rupee accounts may NRIs maintain?
Ans : There are 4 types:
1. Non-resident (External) Rupee Accounts (NRE)
2. Non-Resident (Special) Rupee (NRSR) Account
3. Ordinary Non-resident Rupee Accounts (NRO)
4. Non-resident (Non-repatriable) Rupee deposit accounts (NRNR)
|
|
|
-
What are NRE, NRO and FCNR accounts?
Ans : Non-Resident (External) Rupee (NRE).
This is a Rupee account from which funds are freely repatriable. It can
be opened with either funds remitted from abroad or local funds which can be remitted
abroad.
Non-Resident Ordinary Rupee (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.
|
|
|
-
How do NRE, NRO and NRSR accounts differ?
|
Ans : Balances held in NRE accounts can be repatriated
abroad freely, whereas funds in NRSR and NRO account cannot be normally remitted
abroad but have to be used only for local payments in rupees. Consequently, funds
remitted from abroad or local funds which can otherwise be remitted abroad to the
accountholder can only be credited to NRE accounts.
|
|
|
-
Can an NRI, and FIIs invest in mutual funds in India?
Ans :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 / authorised dealers with respect to the specific
tax and other implications arising out of his or her participation in the funds.
|
|
|
-
Purchase Applications.
Ans :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 remitted through Investor Service Centres. All cheques/demand drafts accompanying
the application form must be made in favour of the scheme names and crossed "A/c
payee" only and should be made payable at a city where the application is accepted
by any Investor Service Centres.
|
|
|
-
Repatriable Basis - NRIs, PIOs.
|
Ans : When NRIs and PIOs apply to purchase units
on a repatriable basis, payments may be made inward remittances, or by cheques drawn
on the NRE/FCNR account of the investor [Clause 3(2) of the Regulations] payable
at the city where the application form is accepted by any Investor Service Centres.
|
|
|
-
Non-Repatriable Basis - NRIs, PIOs.
|
Ans :When NRIs/PIOs apply for units on a non-repatriable
basis, payments may be made by inward remittances, or by cheques/demand drafts drawn
on the NRE/FCNR/NRO/NRSR account of the investor, payable at the city where the
application form is accepted by any Investor Service Centres.
|
|
|
-
FII Investors.
Ans :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. Payments may be made by cheques payable
at a city where the application is accepted by any Investor Service Centres..
Applications from FIIs should be accompanied by appropriate documentation supporting
the status of the investor and should be sent to the AMC/ISC , so as to reach them
not later than 7 days after the date of the subscription.
Similarly, in case of an application under a Power of Attorney or by an FII, the
original Power of Attorney or the relevant resolution/authority to make the application
(or a duly notarised certified true copy thereof), along with a certified copy of
the Memorandum and Articles of Association and/or bye laws and Certificate of Registration
should be submitted to the ISC within 7 days from the date of the application. The
officials should sign the application under their official designation.
The NRIs/PIOs/FIIs may also be required to furnish other documents needed to process
their investments.
|
|
|
-
Does an NRI, FII require any approval from the RBI to invest in mutual
funds?
|
Ans : No special approval is required. NRIs/PIOs/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 funds subject to conditions set out
in the aforesaid regulations.
|
|
|
-
Can an NRI invest in foreign currency?
|
Ans : An NRI cannot make the investment in foreign
currency. He needs to give a Rupee cheque from his NRE, NRO, NRSR 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.
|
|
|
-
What is the mode of payment for Repatriation and Non-Repatriation Basis?
Ans :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 by any Investor Service Centres.
Non-Repatriable Basis.
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 by any
Investor Service Centres.
FII Investors.
FIIs may pay for their subscription amounts by Indian Rupee drafts purchased abroad,
or from funds held in a Foreign Currency account or Non-resident Rupee account maintained
in a designated branch of an authorised dealer. The Indian Rupee drafts/cheques
should be made payable at a city where the application is accepted by any Investor
Service Centres.
|
|
|
-
When will my NRI purchase take effect?
|
Ans :If an application is received before the
3 p.m., Indian Standard Time on any business day, the allocation of units will be
based on the NAV of that business day. All applications received after the prescribed
time will be treated as having been received on the next business day and the units
allotted accordingly.
|
|
|
-
How does an NRI redeem funds?
|
Ans : 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 investor's 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.
|
|
|
-
How will the redemption proceeds be paid?
|
Ans : Redemption proceeds will be paid by cheque.
The cheque will be payable to the first unitholder and will include the bank account
number. Redemption proceeds/repurchase price and/or dividend or income earned (if
any) will be payable in Indian Rupees only.
|
|
|
-
How can the redemption proceeds be repatriated?
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.
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
|
|
|
-
What about redemption proceeds where investments were made on a non-repatriable
basis?
Ans :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.
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.
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.
|
|
|
-
Is the income/dividend on mutual fund units repatriable?
|
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. 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.
|
|
|
-
What is the tax liability on redemptions?
|
Ans : Under Section 2(42A) of the Income Tax
Act, units of the fund held as a capital asset for a period of more than 12 months
immediately preceding the date of transfer, will be treated as a long-term capital
asset for the computation of capital gains, thus qualifying for the long-term capital
gains tax rate. In all other cases, it would be treated as a short-term capital
asset and would be taxed at the short-term capital gains tax rate.
|
|
|
-
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 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.
|
|
|
-
Is it mandatory to have a Permanent Account Number (PAN)?
|
Ans :It is not mandatory to have a PAN for an
NRI even if the investment amount is greater than Rs. 50,000. PAN would however,
be required if the NRI is required to file a return in India or claim a refund of
any taxes paid.
|
|
|
-
How does one apply for a PAN?
Ans :An application is required to be made in
Form 49A (Download)
|
|
|
-
What is the proof of the Tax Deduction at Source?
|
Ans : A TDS certificate is issued in the name
of the investor mentioning the details of the transaction and the tax deducted.
The TDS certificate is commonly known as Form16 A.
|
|
|
-
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.
|
|
|
-
Can an NRI have a joint account in a mutual fund with a resident Indian?
|
Ans : Yes. An NRI investor can jointly own a
fund account with a resident Indian or a Non-resident Indian.
|
|
|
-
Is the indexation benefit available to NRIs?
|
Ans :Yes, if units are held for more than 12
months i.e. on long-term capital gains.
|
|
|
-
Are fund units liable to the wealth tax?
|
Ans : No. Units issued to overseas investors
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.
|
|
|
-
Can dividend received from a mutual fund in an NRO account be repatriated?
|
Ans : Yes. Income generated from investments
(dividend, in this case) done on a non-repatriable basis qualify for full repatriation.
|
|
|
-
Can an NRI fax a request followed by the original documents?
|
Ans : No. Units cannot be redeemed or allotted
on the basis of fax applications. A request that lacks a valid signature cannot
be processed due to legal restrictions.
|
|
|
-
Can a Power of Attorney (POA) invest on behalf of the NRI investor?
Ans :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 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 investor.
His signature will be verified for processing any transaction/request.
|
|
|
-
Is nomination by NRIs allowed in Mutual Funds?
|
Ans : Yes. It is allowed only for Individuals/HUFs.
|
|
|
-
Can a resident Indian have an NRI as nominee?
|
Ans : 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.
|
|
|
-
Investments by U.S Person
Ans :There are certain mutual funds which do
not permit investments in their schemes as these are entities who are also governed
by the laws in US (for eg Franklin Templeton Mutual Fund) and the Schemes have not
been registered in the United States of America under the Securities Act of 1933
which is a mandatory requirement for these fund houses. Applicants for Units may
be required to declare that they are not a U.S. Person and are not applying for
Units on behalf of any U.S. Person.
The term "U.S. Person" shall mean any person that is a United States Person
within the meaning of Regulations under the United States Securities Act of 1933,
as the definition of such term may be changed from time to time by legislation,
rules, regulations or judicial or administrative agency interpretations.
Funds presently not eligible for investments by US residents are:
- Fidelity Mutual Fund
- Franklin Templeton Mutual Fund
- HSBC Mutual Fund
- PNB Principal Mutual Fund
|
|
|
|
|
|
|