Mutual Funds - NRI
Mutual Funds - NRI
Mutual Funds - NRI
NRI can invest in a mutual fund. For an NRI to make investments in mutual funds in India, the person
needs to open an NRE (Non-Resident External) account or an NRO (Non-Resident Ordinary) account.
The reason being, under FEMA (Foreign Exchange Management Act) an NRI cannot invest with regular
savings account in a bank. NRIs cannot invest in foreign currency as well; they have to invest in Indian
Rupees.
Before investing in Mutual Funds, an NRI must fulfill two major requirements.
NRIs investing in mutual funds in India but living in the US and Canada has to undergo through
paperwork under FATCA (Foreign Account Tax Compliance Act).
NRIs can make investments in listed stocks, ETFs, Debt Funds, NCDs, etc.
• For long-term capital gains (LTCG) on listed equity shares or equity-oriented mutual funds - TDS is
deducted at 10% same as LTCG is taxed.
• In the case of LTCG, non-equity-oriented funds include debt funds, gold funds, international funds,
etc. TDS is applicable at 20% for NRI income from investments. However, the unit holders can claim
indexation benefits while filing ITR.
• Short-term capital gains (STCG) on equity-oriented mutual funds (STT paid) are taxed at 15%, and
so is the TDS for NRI on income on investments.
• In the case of non-equity fund TDS rate on short-term capital gain is 30%. Surcharges and cess are
also levied wherever applicable.
Dividend taxation
Dividends from both equity and non-equity dividend plans will be treated as income for the year and
taxed at the appropriate tax slab rate.
The Benefits
NRIs investing in Mutual Funds in India can benefit from the Double Taxation Avoidance Agreement
(DTAA), which prevents double taxation and allows them to offset taxes paid in India against their tax
liability in their home country. Additionally, they can enjoy tax deductions of up to ₹ 1,50,000 under
Section 80C by investing in Equity Linked Saving Schemes (ELSS).