Mutual Funds Investments and Taxation

NRIs can invest in any mutual fund schemes.

To invest in Indian Mutual Funds, the NRI has to open either of NRE, NRO or FCNR accounts with bank.

NRI need to take specific approval from the Reserve Bank of India to invest in mutual fund schemes. However, most of the AMCs have taken the permission for NRI investments in their schemes; hence no permission is required for investing in the schemes of those AMCs.

NRIs are not allowed to invest in foreign currency. All investments have to be in Indian Rupees. A convenient way to invest would be through NRE account.

NRI can enroll in Systematic Investment Plan.

Redemption of MF investments

  • In case of open-ended mutual fund schemes, simply fill up the redemption slip and send it to our offices or Investor Service Centres of AMCs. The cheques are normally mailed to within 3 to 5 business days from the day of receipt of the redemption request.
  • In case of close-ended mutual fund schemes, the redemption slip has to be sold at the stock exchange where the scheme is listed through a registered stock exchange member.
  • The redemption proceeds will be paid by means of a Rupee cheque payable to the NRE account of the investor, or else by a US dollar draft drawn at the then current rates of exchange subject to RBI procedures, where investments have been made on a repatriation basis.
  • Where investments have been made on non-repatriation basis, redemption proceeds will be paid by means of a Rupee cheque payable to the investor's NRO account.
  • Accompanying the redemption proceeds is an updated account statement, a TDS certificate and a covering letter that mentions whether the funds were invested out of NRE/FCNR/NRO accounts. The tax on capital gain is deducted (as explained below) after taking into consideration indexation benefits wherever applicable.

Repatriation of Redemption Proceeds

  • If the investment is made on a repatriation basis, the net income or capital gains (after tax) arising out of investment are eligible for repatriation subject to some compliance.
  • If the investment is made on a non-repatriation basis, only the net income, that is, dividend (after tax), arising out of investment is eligible for repatriation

As As per circular no. 728 dated October 30, 1995 issued by the CBDT, in the case of a remittance to a country with which a Double Tax Avoidance Agreement (DTAA) is in force, the tax should be deducted at the rate provided in the Finance Act of the relevant year or at the rate provided in the DTAA, whichever is more beneficial to the assessee. In order for the Unitholder to obtain the benefit of a lower rate available under a DTAA, the Unitholder will be required to provide the Mutual Fund with a certificate obtained from his Assessing Officer stating his eligibility for the lower rate.

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