Can NRI invest in mutual funds? Is there tax?
Yes NRIs can invest in Mutual Funds. NRIs are required to furnish a copy of their passport when investing in mutual funds. The relevant pages of the passport which include the name of the investor along with his/her address, date of birth and photograph must be furnished. It is also compulsory for NRIs to submit their overseas address. Essentially, the correspondence address or permanent address should be an overseas address.
NRIs who wish to invest in mutual funds will have to do so using the rupee. Indian mutual fund houses do not accept investments in any other currency except the rupee. Therefore, NRIs who wish to make investments in mutual funds will have to open either of the following 3 bank accounts: FCNR account (Foreign Currency Non-Resident Account), NRO Account (Non-Resident Ordinary Rupee Account), or NRE Account (Non-Resident External Rupee Account).
There is no differential taxation rate for resident Indians and NRIs. NRIs also have to pay tax on short-term capital gains on debt funds as per the person’s income tax slab and that on equity funds at a flat rate of 15%. On long-term capital gains on debt funds, they have to pay 20% tax with indexation and 10% tax without indexation, and no tax on the sale of long-term equity funds. However, for NRIs the tax is deducted at source while resident Indians have to make tax payments as per the advance tax schedule. Also, NRIs who live in countries that do not have a Double Taxation Avoidance Agreement (DTAA) with India will have to pay tax both in India and in their country.
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