NRI Corner

Who is a Non-Resident Indian (NRI)?

The definition of Non Resident Indian (NRI) is notified under Income Tax Act or Foreign Exchange Management Act. As per the recent Income tax act, 1961, an NRI is

• Any Indian citizen or a foreign citizen of Indian origin who has stayed abroad for employment or for carrying out business or vocation for 182 days or more or
• Has moved out under circumstances indicating an intention for an unknown duration of stay abroad.
• Has moved out of India or staying abroad for employment purposes, or
• Has gone out of India or is staying abroad for business-related activities or vocational purposes, or

Click here to know the complete classification in order to assess your residential status.

Who is a Person of Indian Origin?

A citizen of any country (other than Bangladesh, Afghanistan, Pakistan, China, Iran, Bhutan, Sri Lanka, Nepal), is said to be a Person of Indian Origin if:

1. He at any time held an Indian passport; or
2. He or either of his parents or grandparents was a citizen of India; or
3. He is a spouse of an Indian citizen, or of a person referred to in (I) or (II) above.

Is Person Of Indian Origin similar to OCI?

No, a person of Indian Origin (PIO) is different from an overseas citizen of India (OCI). PIO refers to a foreign citizen who at any given point holds an Indian passport or who has Indian ancestry i.e. their parents, grandparents, or great-grandparents are/were citizens of India. Validity of visa of PIO Card holders is 15 years.

On the other hand, OCI is an immigration status that allows foreign citizens of Indian origin to study, work, or live in India on a long-term basis. Any foreign national, who as on 26.01.1950 was eligible to become citizen of India or was a citizen of India on or at anytime after 26.01.1950 or belonged to a territory that became part of India after 15.08.1947 is eligible for registration as Overseas Citizen of India (OCI). Minor children of such person are also eligible for OCI. However, if the applicant had ever been a citizen of Pakistan or Bangladesh, he/she will not be eligible for OCI. OCI cardholders’ visa validity is lifelong.

What is FII?

FII stands for Foreign Institutional Investor. It is an institution established or incorporated outside India, which proposes to make investments in Indian securities and is registered with SEBI. They play an important role in market liquidity and capital inflow to India. Further these NRI investment in India are highly volatile in nature and hence can greatly affect capital movement.

Can NRI Invest in India?

Yes, There are many options for NRI investment in India. NRI can invest in India through various mediums including Equity, Mutual Funds, Fixed Deposit, Government securities, Bonds among others. And this range of options has its own requirements to be fulfilled by NRIs. For example, in order to invest in stocks, NRIs will need a demat and trading account under the Portfolio Investment NRI Scheme (PINS) while to subscribe to Initial Public Offerings (IPOs) must have a Non-Resident External (NRE Account)/Non-Resident Ordinary (NRO) account.

Can NRIs invest in Mutual Fund schemes in India?

Yes, Finstreet accepts investments from NRI’s except from the below mentioned:

• United States Person as defined under the Laws of the United States of America, including, without limitation, the rules and regulations promulgated by the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission.
• A person who has elected to be treated as a US tax resident for US federal income tax purposes.
• Persons residing in Canada.
• Persons residing in any Financial Action Task Force (FATF) declared non-compliant country or territory from time to time.

Explore the best NRI investment in India opportunities to unlock best opportunities and benefits.

Does an NRI, PIO, FII require any approval from the RBI to invest in mutual fund schemes?

No special approval is required. Under Schedule 5 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, RBI has granted a general permission to NRIs and FIIs for investing in or redeeming units of the schemes. It is to be noted that such permissions are subject to conditions set out in the aforesaid regulations.

Can an NRI invest in foreign currency?

Yes, NRIs can invest in foreign currency as fixed deposits with banks by opening Foreign Currency Non-Resident (FCNR) accounts in designated foreign currencies. But an NRI cannot make the investment in foreign currency for equity and other types of investments. Transfer of funds in Indian rupees from his NRE/NRO/FCNR bank account in India is required in order to make an NRI investment in India. Moreover it is mandatory for an NRI to maintain a bank account in India to invest in mutual funds.

What are the pre requisites for NRI mutual fund investments?

To Invest in mutual funds by NRI, following are mandatory.

• The first prerequisite for NRIs is to be KYC compliant/Registered. To check your KYC status CVL KRA - © Copyright 2011. All rights reserved with CDSL Ventures Limited, India
• Secondly, NRI must have a NRE (Non-Resident External), NRO (Non-Resident Ordinary) or FCNR (Foreign Currency Non-Repatriable) Account with any Indian Bank.
• Thirdly, NRIs are required to update their Residential/Tax status as NRI on the Income Tax portal.
• Further, FATCA/CRS declaration is necessary.

What Is KRA & KYC?

KYC Registration Agency (KRA) is a SEBI registered agency regulated under the Securities and Exchange Board of India [KYC (Know Your Client) Registration Agency] Regulations, 2011, which centralizes investor record. On behalf of capital market intermediaries registered with SEBI, the KRA will maintain KYC records of the investors centrally. Currently, there are many SEBI-registered KRAs in India like CAMS KRA, CVL KRA, NDML KRA, Karvy KRA & DOTEX KRA.

How do I complete my KYC (Know Your Customer) formalities?

To complete your KYC (Know Your Customer) formalities as an NRI, follow these steps:

• Choose a SEBI registered KYC Registration Agency (KRA)
• Provide documents like passport (ID proof), overseas address proof (utility bill or bank statement), PAN card, passport-sized photos, and overseas address proof
• Complete the KYC form and upload the documents. KRA will verify the details and you may need to undergo In-Person Verification (IPV) via video call.
• After verification, you will receive a KYC acknowledgement confirming completion.
• Submit a FATCA declaration if you are a U.S citizen or green card holder.

Eligibility for NRI To Invest in Mutual Funds

NRIs can invest in India but they need to meet certain eligibility criterias in order to invest. These eligibility requirements are as follows:

• NRIs must have a bank account with Indian banks or other authorized institutions. They can either have one or more accounts among Non-Resident External (NRE) accounts, Non-Resident Ordinary (NRO) accounts, or Foreign Currency Non-Resident (FCNR) accounts. The choice of account affects the repatriation of funds and taxation but they can invest through any of these accounts.
• Holding a customer ID is a must i.e. the applicant needs to be an existing bank account holder.
• KYC Requirements: NRIs must complete Know Your Customer (KYC) compliance, which include providing identification documents, proof of address, and photographs.
• Tax and other compliance: Compliance with tax authority as well as other relevant laws and authority is essential. For example, duly meeting the needs of Income tax Act, Foreign Exchange Management Act, etc.
• The Account Opening Application Form has to be signed by the Mutual Fund Applicants.
• Specific Eligibility: Each route of investment has its own mandates and eligibility criterias which needs to be met by NRIs.
• PAN Requirement: PAN (Permanent Account Number) is mandatory for investments into mutual funds for all investors irrespective of the amount. All customers who wish to apply for an Online Mutual Fund (Investment services Account) are required to have a PAN.
• For NRI customers (Non-face to face): The PAN card copy is required to be attested by the Indian embassy post which the PAN cards can be sent to the home branch or the relationship manager. Actual processing of KYC documents is done by CVL Ventures Ltd. Any specific requirements raised by them have to be complied.
• The PAN cards are required to be attested by the Relationship manager as "Seen Original & verified" before attaching the same with the ISA form.
• Bank Account Linkage letter needs to be signed by the Bank Account Holders.

What are the different types of NRI accounts?

• NRE (Non-Resident External) Account: This account is mainly for foreign currency income earned outside India. This account allows for the repatriation of funds without any restrictions.
• NRO (Non-Resident Ordinary) Account: NRO account is maintained to deal with income earned in India or repatriated from abroad. There are certain restrictions on the repatriation of funds from this account.
• FCNR (Foreign Currency Non-Repatriable) Account: For foreign currency deposits that cannot be repatriated, an FCNR account is opened. This account is typically used for long-term investments.

What is NRE account?

The most common accounts maintained by NRIs are NRE and NRO Accounts. Non-Resident (External) Rupee (NRE) account is a rupee account from which funds are freely repatriable. It is specifically opened for NRIs to receive payments from abroad i.e. to receive payments in foreign currency. The foreign denominated funds are then converted into Indian Rupees. It can be opened with either funds remitted from abroad or local funds maintained in NRE Account or FCNR account, which can be remitted abroad. The deposits can be used for all legitimate purposes. The balance in the account is freely repatriable.

What is an NRO account?

Non-Resident Ordinary Rupee (NRO) account is a rupee account and can be opened with funds either remitted from abroad or generated in India. An NRO account is maintained to deal with income earned in India or repatriated from abroad, such as rental income, interests, dividends. The amounts in such an account are non-repatriable. However, funds in NRO accounts can be shared or remitted abroad subject to directives in force at the time of repatriation.

Investments from NRE account can be paid to either NRE Account or NRO Account or Savings account upon redemption of the funds/dividend payouts. However, Investments from NRO account can be paid only to NRO or a Savings account and not to a NRE account & cannot be repatriated.

What is a Portfolio Investment NRI Scheme (PINS)?

PINS is an RBI scheme that allows NRIs/PIOs/OCIs to invest in the Indian secondary markets like the equity market from foreign funds deposited in their NRE accounts. Each NRI will need a specific NRE (PINS) account, distinct from your regular NRE account with bank if you are willing to invest in securities.

What is FIRC, how is it relevant to NRIs?

FIRC is Foreign Inward Remittance Certificate which is issued by banks or any other authorized entity. A FIRC is a document which acts as proof of inward remittances to India. It acts as proof of the transfer when Indian exporters or sellers receive payment in foreign currency. It contains remittance's source, amount, and purpose, making it a crucial document for NRIs. It is also required as a legitimate source of compliance with Income Tax Act and Foreign Exchange Management Act.

For investment made through a pay cheque/ Demand draft, FIRC is required to ascertain the source of the funds. Alternatively, bank statements can also be submitted as evidence confirming the source of the funds.

What is PAN-Aadhar linking & will it be applicable to NRIs?

For better tax compliance, the Indian government mandated PAN-Aadhar Linking. Income tax authorities have mandated linking PAN with Aadhar for investment in mutual funds. Failing which the PAN becomes inoperative and investments in mutual funds becomes unacceptable.

Though NRIs need to maintain PAN if they have an income source in India or for some specific transactions, NRIs are exempted from the requirement of PAN-Aadhaar linking. However, they need to update their residential status as an NRI on the Income Tax portal, Government of India.

The POA holder's signature will be verified for processing any transaction/request. A POA holder cannot nominate on behalf of the Investor/NRI.

What is FATCA?

FATCA stands for the Foreign Account Tax Compliance Act. FATCA ensures that information about the financial accounts or investments held by U.S. taxpayers or foreign entities in accounts outside of the US in which U.S. taxpayers hold a significant ownership are provided by foreign financial institutions (FFIs). Indian financial institutions may also ask for FATCA compliance information from their US clients.

What is CRS?

CRS stands for Common Reporting Standard (CRS) which is similar to FATCA, and is also an information exchange institution. It is a global standard for automatic exchange of financial account information. In close cooperation with the G20 countries and the EU, OECD came up with CRS for information exchange. Under CRS, countries signing the multilateral agreement allow effective exchange of financial account information on an automatic basis. India is also one of the signatories.

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

Yes, the POA holder has the authority to transact on behalf of the investor/NRI. The POA holder needs to submit the original POA, or an attested copy duly notarized. Attestation of the photocopy of the POA can be done by:

• The Notary himself
• The Branch Manager of the bank where the NRI has his NRE/NRO Bank account. The name and designation/code of the Bank Manager should be clearly mentioned.

The POA document should contain the signature of both the investor and the POA holder, and a clause empowering the POA holder to invest in securities/mutual funds on behalf of the Investor/NRI. POA holder PAN is mandatory & should be KYC registered/Verified. The POA holder's signature will be verified for processing any transaction/request. A POA holder cannot nominate on behalf of the Investor/NRI.

Can I jointly invest with an Indian resident?

Yes. With mode of operation as Jointly or Anyone or Survivor, an NRI investor can have a joint holding not only with a Resident Indian but also with a Non-Resident Indian. The primary Unit holder must be one of the bank account holders from where the Investment cheque is issued. This ensures compliance with regulatory requirements, especially for redemptions and dividend payouts.

How can NRIs track their investments & do further transactions?

NRIs can register online through our website. Registered NRIs can track their investments & perform transactions like additional purchase, SIP, redemption, switch, Mutual Funds, etc. Updates are sent via the registered email ID with AMC. Transactions/requests can also be submitted at Investor Service Centers (ISC) of AMC or CAMS points of services.

How are redemption/dividend payments made to NRIs?

Redemption/dividend payments can be made via Direct Credit, NEFT, or RTGS. NRIs must ensure that their bank details, including IFSC, are updated. Only redemption proceeds paid to a registered NRE account can be repatriated. Proceeds in NRO accounts are non-repatriable.

Are there any tax implications for NRI investment in India?

At the time of redemptions or switches, Tax is deducted at source (TDS). Tax depends on the period of holding:

• Equity Mutual Funds: Short term capital gains (STCG) tax is 20%; Long Term Capital Gains (LTCG) exceeding Rs 1.25 Lakh are taxed at 12.5%.
• Debt Funds: Short Term Capital Gains are taxable at slab rate. Holding the fund for more than two years results in 12.5% tax on gains. Long Term Capital Gains on non-listed funds attract 12.5% tax.

For detailed Tax Reckoner, Click here.

Do NRIs need to File Income Tax Returns in India?

Yes. For all income earned in India, an NRI has to file an income tax return in India. NRIs are taxed on income that accrues, arises, or is received in India. Income includes:

• Salary earned in India
• Any income received in India
• Revenue from sale or rent of property in India
• Income earned outside India but received in India

Experts at Finstreet assist with income tax return filing, tax planning, and compliance. Connect via call/WhatsApp at 80943 52000 for guidance.

How can I change my Tax Status from NRI to Resident Indian & vice versa?

From NRI to Resident Indian (RI):

1. Stay in India for more than 182 days in a financial year or meet specific past stay conditions.
2. Inform banks and tax authorities to update status.
3. Submit a declaration form with documents proving residency.
4. Declare new Resident Indian status while filing Income Tax Return (ITR).

From Resident Indian (RI) to NRI:

1. Stay less than 182 days in India during the financial year.
2. Alternatively, stay in India for 60 days or less in the current year and 365 days or less in the last 4 years.
3. Inform banks and tax authorities about change in status.
4. File Income Tax Return (ITR) as NRI, declaring non-resident status.

When will the TDS certificate be issued?

For income subject to TDS, the deductor issues Form 16A quarterly, within 15 days of filing the TDS return. NRIs can apply/get TDS details online. If the NRI is an employee, Form 16 is issued after the financial year ends (by May 31) and emailed to the registered email ID.

How do I connect with Finstreet MF Customer Service from abroad?

Click here to connect or call/WhatsApp at 80943 52000.