NRI FAQs

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 / Authorized dealers with respect to the specific tax and other implications arising out of his or her participation in the scheme

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 / carrying on business or vocation outside India or stays abroad under circumstances indicating an uncertain duration of stay abroad.

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 grandparents was a citizen of India; or
• He is a spouse of an Indian citizen, or of a person referred to in (a) or (b) above.
Can an NRI maintain a bank account in India?
Yes. NRIs can maintain accounts in rupees as well as in foreign currency. Accounts in foreign currencies can, however be maintained with authorised dealers only.

What are the different types of rupee accounts permitted to be maintained?
Two types of rupee accounts viz.
• NRE: Non-resident (External) Rupee Accounts ,
• NRO: Non-resident Rupee (Ordinary) Accounts
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 which can be remitted abroad.

• 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 account are generally non repatriable. However, funds in NRO accounts can be repatriated subject to /a s per per various directives in force at the time of repatriation. More details can be found on RBI website www.rbi.org.in
What is the distinction among NRE, NRO and NRSR Accounts?
Balances held in NRE accounts can be repatriated abroad freely, whereas funds in NRSR and NRO account cannot be 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 account holder can only be credited to NRE accounts. Funds due to the non-resident account holder which do not qualify, under the Exchange Control regulations, for remittance outside India are required to be credited to NRO accounts.

The account holder can freely transfer funds from NRO/NRE/FCNR accounts to NRSR account but transfer of funds from NRSR account to other accounts of NRI is not permissible irrespective of the source of funds.

However funds in NRO accounts can be repatriated subject to / as per various directives in force at the time of repatriation. More details can be found on RBI website, www.rbi.org.in
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
NRSR – Non Resident Special Rupee INR Non Repatriable
FCNR – Foreign Currency Non Repatriable USD, GBP, Yen, Euro, DMK Repatriable
Can an NRI, OCB, & FIIs invest in mutual funds in India?
NRI & FIIs can invest in mutual funds in India.
OCB’s cannot invest in mutual funds in India

Does an NRI, PIO, FII require 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.

However, PIO's need to attach a copy of the PIO card with the application form at the time of investing.

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

TAXATION AND OTHER QUERIES

What is the tax liability on receipt of Income on Mutual Fund Units?
As per Section 10(33) of the Income Tax Act, 1961 ('Act') income received in respect of units of a mutual fund 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.

What are ‘Capital Gains’?
Under Section 2(42A) of the Income Tax Act, units of the Scheme held as a capital asset, for a period of more than twelve months immediately preceding the date of transfer, are treated as a long term capital asset, and in case of any gain, its known as ‘Long Term Capital Gain’, - thus attracting

long term capital gains tax rate.
In all other cases it would be treated as a short-term capital asset and would attract short-term capital gains tax rate.

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 Form16 A.

When the TDS certificate will be issued?
A TDS Certificate in Form 16A is dispatched within 10 days of the month following redemption date at the registered address of the investor. To obtain a duplicate TDS certificate, investor can write a letter quoting his account number requesting for a duplicate TDS Certificate.

Is the indexation benefit available to NRIs?
Yes, in case units are held for more than twelve months i.e. on long-term capital gains

what are the applicable Tax Rates and TDS Rates to NRI's / PIO's / FII's?

Equity Oriented Schemes Short Term Capital Gain Tax Long Term Capital Gain Tax Dividend Income Dividend Distribution Tax TDS
NRIs 15% Nil Tax Free Nil STCG-15%^ LTCG-Nil^
Other Schemes Short Term Capital Gain Tax Long Term Capital Gain Tax Dividend Income Dividend Distribution Tax-Other than Liquid/Money Market Schemes Dividend Distribution Tax-Liquid/Money Market Schemes TDS
NRIs As Per Slab 10% (20% with Indexation) Tax Free 14.163%(12.50% plus 10% surcharge plus 3% education cess) 28.325%(25% plus 10% surcharge plus 3% education cess) STCG-30%^ LTCG- 20%^ (after providing for indexation)

^ Plus applicable surcharge and secondary and higher education cess..

Are units of Mutual Funds chargeable in Wealth Tax?
No. Units issued to investors (including NRIs) etc. will not be treated as assets as defined under section 2(ea) of the Wealth-Tax Act, 1957 and hence will not be liable to wealth-tax.

Can a dividend from Mutual Fund credited to an investor's NRO account be repatriated?
Yes. Though an investment may be done on a non-repatriable basis, according to the provisions for NRI investments, the income generated from investments (dividend in this case) done on a non-repatriable basis qualify for full repatriation.

Is there any Tax liability on switching from one option to the other?
Yes. On switching from the Growth option to the Dividend option, the investor is liable to TDS at the applicable tax rate.

Is Securities Transaction Tax applicable to NRI investors?
Yes.

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/FIIs, 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/FII investor. His signature will be verified for processing any transaction/request.