Who is a Non Resident Indian (NRI)?

A Non Resident Indian (NRI) means a person resident outside of India, who is an Indian citizen or a person of Indian origin.

Who is a Person of India Origin (PIO)?

A Person of Indian Origin means a citizen of any country (other than Bangladesh or Pakistan), if:

  • He at any time held an Indian passport; or
  • He or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or Citizenship Act, 1955 (57 of 1995); or
  • He is a spouse of an Indian citizen, or of a person referred to in (a) or (b) above.

Who is an Overseas Corporate Body (OCB)?

Overseas Corporate Bodies (OCB’s) means a company, partnership firm, society and other corporate body owned directly or indirectly to the extent of at least sixty percent by NRIs and includes overseas trust in which not less than sixty percent is held by NRI, directly or indirectly, but irrevocably.

Who is a Foreign Institutional Investor (FII)?

A Foreign Institutional Investor (FII) means an institution established or incorporated outside India which proposes to make investment in India in securities and which is registered by Securities and Exchange Board of India.

Can NRI, PIO, FII & OCB invest in mutual fund schemes in India?

NRIs, FIIs & PIOs can invest in any mutual fund schemes in India under the Portfolio Investment Scheme. However, OCBs are not allowed to invest in mutual fund schemes in India.

Repatriable Basis

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. The NRIs/PIOs may also be required to furnish other documents needed to process their investments.

Do NRI, PIO & FII require any prior approvals from the Reserve Bank of India to invest in mutual fund schemes?

NRIs and FIIs have been granted a general permission by the Reserve Bank of India [Schedule 5 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000] for investing in the units of the schemes of domestic mutual funds subject to conditions set out in the aforesaid regulations. However, PIO's need to attach a copy of the PIO card with the application forms at the time of investing.

Can NRI invest in foreign currency?

No. All investments have to be in Indian Rupees. NRI 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.

What is a PIO Card? Who Issues PIO Cards? How to get a PIO Card?

PIO Cards are issued by Ministry of External Affairs (CPV Division), Government of India to persons of Indian origin through Indian missions abroad. Specific information on rules, forms, particular offices, missions is available on the website http://www.passport.nic.in.

Can an NRI provide overseas bank details in the application form?

No.

What are the different types of rupee accounts that are permitted and can be maintained by NRIs?

1. NRE: Non-Resident (External) Rupee Account.
2. NRO: Non-Resident (Ordinary) Rupee Account.

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. (More details can be found on the Reserve Bank of India (RBI) website www.rbi.org.in).

How will the redemption proceeds be paid?

Redemption proceeds will be paid by Cheque/ Electronic Payout to the investor bank account. 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. Redemption proceeds 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.

Can NRI repatriate their earnings on redeeming from mutual fund schemes?

Upon the redemption of the units of any scheme of Reliance Mutual Fund by the NRI / PIO, Reliance Mutual Fund shall either issue a cheque or will directly credit the redemption amount to the bank account of the NRI / PIO. The NRI / PIO shall be eligible to repatriate their earnings arising therefrom in accordance with the extant provisions of the Foreign Exchange Management Act, 1999.

Can NRI enroll in Systematic Investment Plan (SIP)?

Yes.

Can NRI gift units of mutual fund schemes to their relatives in India?

No.

Is the indexation benefit available to NRIs?

Yes, as per the Income Tax Act, 1961 indexation is available in case of sale of units of non-equity oriented mutual Fund scheme/s held for more than 12 months. (now 36 months from FY 2015-16).

Can a NRI nominate in the folio?

Yes.

Can a Power of Attorney (POA) invest on behalf of the NRI investor?

Yes.

When will the TDS get deducted for NRI?

If the redemption/switch is done within one year by NRI investor then TDS will be deducted in Equity schemes if there is any taxable capital gain.

What is the proof of the Tax Deduction at Source?

A TDS certificate is issued in the name of the investor mentioning the details of the transaction and the tax deducted. The TDS certificate is commonly known as Form16A. Such certificate will be provided only to those investors who have provided PAN (Permanent Account Number provided by the Indian Income Tax Department).

What is the tax liability for income received from your mutual funds?

As per Section 10(35) of the Income Tax Act, 1961, income (dividend 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 dividend distribution tax in debt oriented schemes. Hence all dividends are tax-free in the hands of non-resident investors and no tax deducted at source (TDS) is applicable on the same.

Investments by U.S Person

There are certain mutual funds which do not permit investments in their schemes as these are entities who are also governed by the laws in US and the Schemes have not been registered in the United States of America under the Securities Act of 1933 which is a mandatory requirement for these fund houses. Applicants for Units may be required to declare that they are not a U.S. Person and are not applying for Units on behalf of any U.S. Person. The term "U.S. Person" shall mean any person that is a United States Person within the meaning of Regulations under the United States Securities Act of 1933, as the definition of such term may be changed from time to time by legislation, rules, regulations or judicial or administrative agency interpretations.

What is Portfolio Investment Scheme?

PIS—a scheme of Reserve Bank of India—enables NRIs and OCBs to purchase and sell shares and convertible debentures of Indian companies on a recognized stock exchange by routing such purchase/ sale transactions through their NRI Savings Account with a designated bank branch.

Requirements

For any transaction in secondary market on repatriable basis, you will require an NRE Savings Account with a Bank . For any transaction in secondary market on non-repatriable basis, you will require an NRO Savings Account with a Bank.

DISCLAIMER

For latest laws and guidlines please refer FEMA and RBI guidlines.