Being an NRI does not bar you from investing in follow url Indian Mutual Funds. However, mutual fund houses in India are not permitted to accept foreign currency investments. These houses, therefore, request you, the investor, to first open an NRO/NRE account with that particular bank, and then route your investments. You can invest in many asset classes ranging from NRE deposits and NPS to stocks and real estate. Until recently, you have always preferred asset classes such as NRE deposits and real estate. It is lately that your interest in Mutual Funds has grown. Therefore, we can find out how you can take the advantage of the Indian Capital Market through mutual funds.
Remember, you can remain overseas while you complete these procedures. However, if you visit India, you must get your IPV (in-person verification) done at the respective distribution house, AMC, Karvy or CAMS.
1. You can open two kinds of Indian rupee-denominated bank accounts- Non-Resident External (NRE) account and Non-Resident Ordinary (NRO) account
2. The NRE account helps in transferring foreign currency to Indian bank accounts and is disposed to foreign exchange risk. This account has no limits on repatriation. The interests earned on deposits are tax-free
3. The NRO account manages your income in India, and similar to the NRE account, it is also subject to foreign exchange risk. However, this kind of account has a set repatriation limit. The interest earned on deposits is also taxable
4. You can opt for the right type of account for your investment based on your source of income and repatriation decision.
5. You can also appoint a POA (Power of Attorney). Your POA can invest and redeem mutual funds on your behalf. However, you must provide your representative with a notarized copy of the POA or the original as you deem fit. Your representative will have to submit the same to the fund house before they start purchasing or redeeming fund units on your behalf.
If you are currently residing in Canada or the US, you must follow additional compliance and regulatory restrictions. There are various cumbersome compliance requisites because many fund houses do not accept US-based NRI’s. This is due to the various stringent compliance requirements of the FATCA (Foreign Account Tax Compliance Act). Nevertheless, most AMC’s do accept US and Canada-based investments but you surely need to check with the fund houses before making any investments. Do make a formal declaration before you invest. This enables you to sail smoothly through the various processes.
You can invest in either a short- or a long-term mutual fund. It could be equity or debt mutual fund. The taxation rate would depend on the type that you choose to invest in and the tenure of investment. If your debt mutual funds are held for more than 3 years, the LTCG will be taxed at 10% without indexation and 20% with indexation. If a debt fund is held for less than three years then your gains will be added to your income tax slab rate.