The procedure for NRI to invest in mutual funds is broadly similar to that of a resident individual. However, specific compliance to be undertaken before initiating investment transactions. The primary requirement for NRI to invest in mutual funds is to undertake KYC compliance.
In addition to the common KYC document applicable to resident individuals like attested copies of identity proof and address proof within India, NRI must provide some additional documents such as attested copies of passport, overseas citizen of India proof, if settled abroad, residential proof outside India etc. An in-person verification (IPV) may also be required for the investors residing outside India. Please contact us for additional information.
If investment is done through Power of Attorney (POA), one may require to undertake KYC for themselves and POA holder. Further, NRI investors must have an INR bank account (NRE or NRO account) to invest as foreign currency is not accepted for investment.
A NRI is liable for Indian tax laws only for income accruing or received within India. Any returns from mutual funds in India are deemed to be accrued within India, and accordingly, NRI are liable to pay tax on such returns. However, there may be Double Tax Avoidance Agreement (DTAA) provisions that apply to income from such investments. Such DTAA may help the investors to avoid dual tax liabilities in India and the country of residence. For instance, interest earned on NRI bank deposits attract TDS of 30%. However, under the DTAA that India has signed with other countries, tax is deducted at 10-15%. However, one must check the relevant DTAA provisions to check the actual tax incidence.
Mutual funds are categorized as equity-oriented mutual funds if at least 65% of that scheme’s net assets are invested in equity shares and equity-related securities. All other funds are categorized into the residual category of funds. The tax rates as applicable for different types of mutual fund schemes are summarized as under:
Equity/ Other than equity oriented schemes (Tax on dividend received) | As per slab rates |
Tax deduction at source (TDS) | 20%& |
Dividend distribution tax (DDT): (Payable by the mutual fund scheme) | Nil |
Equity oriented schemes**(units held for 12 months or less) | 15% + 4% Cess |
Other than equity oriented schemes(units held for 36 months or less) | 30%^ + 4% Cess |
Equity oriented schemes**(units held for more than 12 months) | 10% + 4% Cess |
Other than equity oriented schemes(units held for more than 36 months) | 20%‡ + 4% Cess (Listed)10% + 4% Cess (Unlisted%) |
Risk Factors – Investments in Mutual Funds are subject to Market Risks. Read all scheme related documents carefully before investing. Mutual Fund Schemes do not assure or guarantee any returns. Past performances of any Mutual Fund Scheme may or may not be sustained in future. There is no guarantee that the investment objective of any suggested scheme shall be achieved. All existing and prospective investors are advised to check and evaluate the Exit loads and other cost structure (TER) applicable at the time of making the investment before finalizing on any investment decision for Mutual Funds schemes. We deal in Regular Plans only for Mutual Fund Schemes and earn a Trailing Commission on client investments. Disclosure For Commission earnings is made to clients at the time of investments. Option of Direct Plan for every Mutual Fund Scheme is available to investors offering advantage of lower expense ratio. We are not entitled to earn any commission on Direct plans. Hence we do not deal in Direct Plans.
AMFI Registered Mutual Fund Distributor – ARN: 300324 | Date of initial registration – 01/07/2024 | Current validity of ARN – 30/06/2027
Grievance Officer: Preeti Adukia | preeti.adukia@piktonwealth.com