Who is a Non-Resident Indian (NRI)?
An Indian citizen or a foreign citizen of Indian
origin who stays abroad for employment/carrying on business or vocation or
under circumstances indicating an intention for an uncertain duration of stay
abroad is a NON-RESIDENT INDIAN (NRI). (Those who stay abroad on business
visit, medical treatment, study or such other purposes which do not indicate an
intention to stay there for an indefinite period will not be considered as
NRIs).
Who is a Person of Indian Origin (PIO)?
A Person of Indian Origin (PIO) means a citizen of any
country (other than Bangladesh or Pakistan), if :
a. He/She at any time has held an Indian passport or
b. He/She or either of his/her parents or grand parents was a citizen of India by virtue of the constitution of India or Citizenship Act, 1955 (57 of 1995) orHe/She is a spouse of an Indian citizen or of a person referred to in (a) or (b) above.
a. He/She at any time has held an Indian passport or
b. He/She or either of his/her parents or grand parents was a citizen of India by virtue of the constitution of India or Citizenship Act, 1955 (57 of 1995) orHe/She 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)?
FII means an institution established or incorporated
outside India, which proposes to make investments in Indian securities and is
registered with SEBI.
What are the different types of rupee accounts that are
permitted and can be maintained by NRIs?
The three types of rupee accounts permitted, that can
be maintained by NRIs are as follows :
a. NRE : Non-Resident (External) Rupee Account
b. NRO : Non-Resident (Ordinary) Rupee Account
c. FCNR – B : Foreign Currency (Non –Resident) Accounts (Banks)
a. NRE : Non-Resident (External) Rupee Account
b. NRO : Non-Resident (Ordinary) Rupee Account
c. FCNR – B : Foreign Currency (Non –Resident) Accounts (Banks)
What are NRE and NRO accounts?
Non-Resident (External) Rupee (NRE) account is a rupee
account from which funds are freely repatriable. It can be opened with either
funds remitted from abroad or local funds maintained in NRE/ FCNR accounts,
which can be remitted abroad. The deposits can be used for all legitimate
purposes. The balance in the account is freely repatriable
Non-Resident Ordinary Rupee (NRO) account is a rupee account and can be opened with funds either remitted from abroad or generated in India. The amounts in such an account are generally non-repatriable. However, funds in NRO accounts can be remitted abroad subject to/as per various directives in force at the time of repatriation.
What is the distinction between NRE and NRO Accounts?
Balances held in NRE accounts can be repatriated
abroad freely, whereas funds in NRO accounts cannot be remitted abroad but have
to be used only for local payments in rupees. Funds due to the non-resident
accountholder which do not qualify, under the Exchange Control regulations, for
remittance outside India are required to be credited to NRO accounts.
Type of Account Currency Repatriable / Non Repatriable
NRE - Non Resident External INR Freely Repatriable
NRO - Non Resident Ordinary INR Non Repatriable, Repatriable subject to RBI conditions
FCNR - Foreign Currency Non Resident USD, GBP, Yen, Euro Repatriable
Type of Account Currency Repatriable / Non Repatriable
NRE - Non Resident External INR Freely Repatriable
NRO - Non Resident Ordinary INR Non Repatriable, Repatriable subject to RBI conditions
FCNR - Foreign Currency Non Resident USD, GBP, Yen, Euro Repatriable
Does an NRI, PIO, FII requires any approval from the RBI to
invest in mutual fund schemes?
No special approval is required. NRIs/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 schemes subject to
conditions set out in the aforesaid regulations.
Can an NRI, and FIIs invest in mutual funds in India?
To invest on a repatriable basis, you must have an NRE or
FCNR Bank Account in India. The Reserve Bank of India (RBI) has granted a
general permission to Mutual Funds to offer mutual fund schemes on repatriation
basis, subject to the following conditions :
The amount representing investment should be received by
inward remittance through normal banking channels, or by debit to an NRE / FCNR
account of the non-resident investor.
The net amount representing the dividend / interest
and maturity proceeds of units may be remitted through normal banking channels
or credited to NRE / FCNR account of the investor, as desired by him subject to
payment of applicable tax.
Non-Repatriable Basis
The Reserve Bank of India (RBI) has granted a general
permission to Mutual Funds to offer mutual fund schemes on non-repatriation
basis, subject to the following conditions :
Funds for investment should be provided by debit to
NRO account of the NRI/ FII investor. Alternatively, funds may be invested by
inward remittance or by debit to NRE / FCNR Account.
No permission of Reserve Bank either by the Mutual Fund or the NRI investor is necessary.
FII Investors. FIIs may pay for their purchases with funds held in a Foreign Currency account or Non-resident Rupee account maintained in a designated branch of an authorised dealer [Clause 3(1) of the Regulations].
Applications from FIIs should be accompanied by appropriate documentation supporting the status of the investor and should be sent to the AMC/ISC , so as to reach them not later than 7 days after the date of the subscription.
Similarly, in case of an application under a Power of Attorney or by an FII, the original Power of Attorney or the relevant resolution/authority to make the application (or a duly notarised certified true copy thereof), along with a certified copy of the Memorandum and Articles of Association and/or bye laws and Certificate of Registration should be submitted to the Mumbai ISC within 7 days from the date of the application. The officials should sign the application under their official designation.
The NRIs/PIOs/FIIs may also be required to furnish other documents needed to process their investments.
No permission of Reserve Bank either by the Mutual Fund or the NRI investor is necessary.
FII Investors. FIIs may pay for their purchases with funds held in a Foreign Currency account or Non-resident Rupee account maintained in a designated branch of an authorised dealer [Clause 3(1) of the Regulations].
Applications from FIIs should be accompanied by appropriate documentation supporting the status of the investor and should be sent to the AMC/ISC , so as to reach them not later than 7 days after the date of the subscription.
Similarly, in case of an application under a Power of Attorney or by an FII, the original Power of Attorney or the relevant resolution/authority to make the application (or a duly notarised certified true copy thereof), along with a certified copy of the Memorandum and Articles of Association and/or bye laws and Certificate of Registration should be submitted to the Mumbai ISC within 7 days from the date of the application. The officials should sign the application under their official designation.
The NRIs/PIOs/FIIs may also be required to furnish other documents needed to process their investments.
Can an NRI invest in foreign currency?
An NRI cannot make the investment in foreign
currency. He needs to give us 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?
NRI Investor :
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.
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.
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.
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
Non-resident 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.
How will the redemption proceeds be paid?
Redemption proceeds will be paid by cheque. The cheque
will be payable to the first unitholder and will include the bank account
number. Alternatively the redemption proceeds will be credited directly to the
investor’s bank account. This facility is available with select banks as
mentioned in our application forms.
Redemption proceeds/repurchase price and/or dividend or income earned (if any) will be payable in Indian Rupees only. The fund will not be liable for any loss due to exchange fluctuations, while converting the Rupee amount into US Dollar or any other currency.
Redemption proceeds/repurchase price and/or dividend or income earned (if any) will be payable in Indian Rupees only. The fund will not be liable for any loss due to exchange fluctuations, while converting the Rupee amount into US Dollar or any other currency.
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 [Clause 5(i) of the Regulations].
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 [Clause 5(i) of the Regulations].
In the case of NRIs:-, 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 [Clause 5(ii) of the Regulations].
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 deduction
of 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.
