After the USA and Europe financial market crashed, there has been a booming change in India’s equity market and mutual fund sector. After western markets were crashed the BRIC’s (includes Brazil, Russia, India and China) have generated awesome returns and became popular as emerging markets.
Huge Foreign Institutional Investor (FII) funds came into the Indian market. Until today like most emigrants, NRIs are perceived to be dedicated towards building assets to secure their financial future.
NRIs can take help of financial planners at http://indiamutualfunds.in/ to plan their MF needs in a professional manner.
Can NRIs invest in MFs in India?
- Through NRE or NRO route, open bank account in Indian rupees. Through this NRE account, NRIs can send home overseas earnings without restrictions.
- US citizens can certainly invest in MFs available in US itself that funds companies based in India.
- India has setup MF branches offshore or abroad to tap NRI funds (Singapore and Gulf).
How can NRIs invest in India?
- MF houses do not carry out business in foreign currency, so NRI needs to invest in Indian rupees only.
- NRI has to submit relevant passport pages including – name, date of birth, photo and address. Even the overseas address (permanent or corresponding) has to be essentially submitted.
- The investment made via drafts or cheques must include FIRC and pan card. Foreign inward remittance certificate is issued by bank, verifying the source of finances. FIRC is proof of payment made by an NRI in foreign currency.
- After you (an NRI) make MFs investment – managing funds, tracking market movements, purchasing additional units, redemption or switching of units is a challenging task as you are away. You can give POA to someone you trust.
- Fund houses permits an NRI to jointly hold MF with another NRI or an Indian resident.
- Redemption process is reimbursed through cheques or direct credits to NRI investor’s bank account. All returns through MFs are in rupees.
- Investments made from FCNR/NRE are entirely repatriable. Profits earned or units redeemed are also fully repatriable. However, with investments through NRO the capital appreciation is only repatriable, but not the principal.
How to decide?
- Select between rupees denominated Indian domiciled MF or dollar denominated offshore MF, investing in Indian companies.
- The benefit of investing in long term Indian domiciled MF certainly surpasses the offshore funds by exploiting the skills and awareness of local circumstances.
- Offshore funds include high entry loads – 5% to 6%. In India, the capital market regulators SEBI have eliminated entry loads.
- Taxation laws for Indians and NRIs are same.
- While investing in Indian MFs or offshore MFs any depreciation or appreciation in Indian rupees has a straight impact on the performance. (Currency is converted into Indian rupees and risk emerges during reconversion).
What is a NRIs MF taxation policy?
- NRI has to pay 15% tax on STCG regardless of other incomes.
- LTCG tax is 10% without indexation and 20% with indexation for both Indians and NRIs.
- NRIs from other countries have to pay tax on MFs only when they sell them.
Joseph Lodge writes about how investments in mutual funds can help you with your long-term financial goals. You can visit their website, http://indiamutualfunds.in, to learn more about investing in mutual funds.