NRI - Oppotunity to Invest in Indian Market

The Basic Information about NRI how to invest in Indian Market, Investment is repatriation allowed for Principal and Interest both.

 Here some FAQ are mention for NRI Investors

Who is a Non-Resident Indian (NRI)?
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)?
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)?
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) ?
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?
Yes. NRIs can maintain accounts in rupees as well as in foreign currency.
What types of rupee accounts may NRIs maintain?
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?
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?
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?
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.
Does an NRI, FII require any approval from the RBI to invest in mutual
funds?
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?
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?
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 Nonresident
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?
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?
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?
Redemption proceeds will be paid by cheque. The cheque will be payable to the
first unit holder 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?
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 nonrepatriable
basis?
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?
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?
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 shortterm
capital gains tax rate.
What is the tax liability for income received from your mutual funds?
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.
Can an NRI have a joint account in a mutual fund with a resident Indian?
Yes. An NRI investor can jointly own a fund account with a resident Indian or a
Non-resident Indian.
Can dividend received from a mutual fund in an NRO account be
repatriated?
Yes. Income generated from investments (dividend, in this case) done on a nonrepatriable
basis qualify for full repatriation.
Can an NRI fax a request followed by the original documents?
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?
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.