Who is an NRI?
A person who does not satisfy the following conditions is an NRI-
a) He/she is in India for 182 days or more during the financial year or
b) If he/she is in India for at least 365 days during the 4 years preceding that year and at least 60 days in that year.

Ø Who is a person of Indian origin (PIO)?
1. A Person of Indian Origin (PIO) means a foreign citizen (except a national of Pakistan, Afghanistan Bangladesh, China, Iran, Bhutan, Sri Lanka, and Nepal) who at any time held an Indian passport.
2. OR who or either of their parents/grandparents great grandparents was born and was permanently resident in India as defined in the Government of India Act, 1935, and other territories that became part of India thereafter provided neither was at any time a citizen of any of the countries above (as referred above);
3. Who is the spouse of a citizen of India or a PIO?

Ø What are the different types of rupee accounts that are permitted and can be maintained by NRIs?
An NRI can maintain three types of rupee accounts in India as mentioned below -
1. NRE: Non-Resident (External) Rupee Account
2. NRO: Non-Resident (Ordinary) Rupee Account
3. FCNR- B: Foreign Currency (Non-Resident) 

Ø What are NRE and NRO accounts?
• Non-Resident (External) Rupee (NRE) Account —An RE is a rupee bank 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. TDepositscan be used for all legitimate purposes. The balance in the account is freely repatriable.
• Interest credited to the NRE accounts is exempt from tax in the hands of the NRI.
• Non-Resident Ordinary Rupee (NRO) Account - NRO is a Rupee (INR) bank account and can be opened with funds either remitted from abroad or generated in India. The amounts in such an account generally cannot be repatriable. However, funds in NRO accounts can be remitted abroad subject to/as per various directives in force at the time of repatriation.

Ø What is the distinction between NRE and NRO accounts?
•Balances held in NRE accounts can be repatriated abroad freely, while funds in NRO accounts cannot be remitted abroad but have to be used only for local rupee payments. Funds due to the non-resident accountholder who does not qualify, under the Exchange Control regulations, for remittance outside India are required to be credited to NRO accounts. 

Ø Which Mutual Fund houses (AMCs) accept investments from NRIs or PIOs?
All the Asset Management Companies (AMCs) in India don't allow NRIs, especially from the US and Canada because of the cumbersome compliance requirements under the Foreign Account Tax Compliance Act (FATCA) in these countries. However, the following fund houses do accept investments from NRIs from the US and Canada. From the following list of asset management companies, some of them may ask for a physical declaration from the investors when they invest in their schemes -
1.Aditya Birla Sun Life Mutual Fund
2. Axis Mutual Fund
3.Bajaj Finserv Mutual Fund
4. Bandhan Mutual Fund
5 .DSP Investment Managers
6.Edelweiss Asset Management 
7. Groww Mutual Fund
8. HDFC Mutual Fund
9. ICICI Prudential Mutual Fund
10. IIFL Asset Management
11. ITI Mutual Fund
12. Kotak Mahindra Mutual Fund
13.Motilal Oswal Mutual Fund
14. Nippon India Mutual Fund
15. PPFAS Mutual Fund
16. Quant Mutual Fund
17. SBI Mutual Fund
18.Sundaram Mutual Fund
19. Samco Asset Management
20. UTI Mutual Fund
21. Whiteoak Mutual Fund 

Ø Can NRIs from the rest of the world (except from the US and Canada) invest in Indian Mutual Funds?
NRIs from other countries can invest in almost all schemes of all asset management companies in India. They are allowed to invest in mutual
funds in India on a repatriable or non-repatriable basis subject to regulations prescribed under the Foreign Exchange Management Act (FEMA).
For NRIs (not from the USA and Canada) the process of investing in Indian mutual funds is the same as that of resident individuals.

Ø How the dividends and redemption proceeds are paid to NRIs?
Normally, dividends and redemptions are paid through direct credit to the designated bank account provided by the NRI in the scheme.

Ø What is the taxation of mutual funds for NRIs?
1. Equity or Equity-oriented Mutual Funds: Short-term capital gains (holding period < 1 year) are taxed at 20%. Apart from this tax, the applicable Surcharge and Cess is also payable on the capital gains tax. However, long-term capital gains (investments held for more than 1 year) are completely tax-free, if the capital gains in a year are less than/ up to Rs 1.25 Lakh in a financial year. Capital gains exceeding Rs 1.25 Lakh in a financial year are taxed at 12.5% + applicable Surcharge and Cess is levied on it.

2. Debt Funds: Capital gains (holding period < 3 years) are taxed as per the income tax slab of the NRI investor, plus the applicable Surcharge and Cess is also payable.

However, following the Amendment to Finance Bill 2024, the indexation benefit on debt mutual funds has been withdrawn. Debt funds will now be taxed at the investor's tax slab rate. These changes bring taxation of debt and debt-oriented mutual funds at par with fixed deposits for investments made from 1st April 2024 onwards.

The surcharge rates vary per income as shown below –

 

 

Ø How and when Tax is deducted (TDS) at source in case of NRIs?
• NRIs are subject to Tax Deducted at Source (TDS) at applicable rates on capital gains at the time of redemptions of mutual fund units, irrespective of any threshold value. The rate of TDS depends on the type of mutual fund and the duration of the investment.
• For Equity-oriented mutual funds, the TDS rate is 10% for long-term capital gains (LTCG) and 15% for short-term capital gains (STCG).
• For non-equity-oriented funds, the TDS rate is 20% with indexation for LTCG for listed schemes and 10% without indexation for unlisted schemes. TDS on short-term capital gains is as per the income tax slab rate of 30% assuming that the investor falls under the highest tax slab. Surcharge and Cess is payable, wherever applicable. 

Ø When the certificate of TDS is issued to NRIs?
Like resident individuals, TDS certificates (Form 16A) are issued every quarter to NRIs and emailed to their registered email ID with the AMC or sent through post. The same can also be viewed online after registering with TRACES (TDS Reconciliation Analysis and Correction Enabling System) https://contents.tdscpc.gov.in/  

Ø What are the KYC and FATCA requirements in the case of NRIs?
NRIs will need to submit the following documents to the AMC (mutual fund house) or the RTA (Registrar and Transfer Agent) to fulfill the mutual funds' KYC requirements -
1. Self-attested copy of PAN
2. Self-attested copy of Passport/ PIO Card
3. Address proof (both Indian and Overseas)
4  . Passport size photograph
5. Dulfilled in the  KYC Form along with a color passport-size photograph
6. Additional information required for FATCA (Foreign Account Tax Compliance Act) - Tax number of the country of residency (Other than India).
7. Income Slab
8. Occupation
9. Total net worth
10. Declaration, if you are politically exposed or not. 

Ø How to get KYC and FATCA requirements fulfilled in India?
• NRIs on a visit to India can simply contact a mutual fund distributor or visit any mutual fund registrar officer with the aforesaid documents and complete the KYC and FATCA process.
• Documents verification and IPV will be done at the same time and you are good to start investing in mutual funds. IPV or In-person verification is a process wherein an authorized official confirms your presence and verifies the copies of aforesaid documents with the originals in your presence.

 

Ø How to get In-person verification (IPV) done if the NRI is not in India?
• NRIs on a visit to India can simply contact a mutual fund distributor or visit any mutual fund registrar officer with the aforesaid documents and complete the KYC and FATCA process.
• Once IPV and mandatory document verification is completed, you can send the KYC form along with the aforementioned documents to their mutual fund distributor the fund house (AMC), or the mutual fund R&T agents (CAMS or K-Fintech). On submission, the KYC information will be updated in the system in a few weeks.
• Another way of doing this is to contact AMC's office or a distributor sitting in their respective countries which can initiate IPV of the documents and then those KYC forms and docs can be submitted via AMC houses or R&T Agents.
• The KYC details can be viewed by entering the PAN number here - https://www.cvlkra.com/ and then clicking on the 'KYCthe  Inquiry' tab.

Ø How to get In-person verification (IPV) done if the NRI is not in India?
• NRIs on a visit to India can simply contact a mutual fund distributor or visit any mutual fund registrar officer with the aforesaid documents and complete the KYC and FATCA process.
• Once IPV and mandatory document verification is completed, you can send the KYC form along with the aforementioned documents to their mutual fund distributor the fund house (AMC), or the mutual fund R&T agents (CAMS or K-Fintech). On submission, the KYC information will be updated in the system in a few weeks.
• Another way of doing this is to contact the AMC office or a distributor sitting in their respective countries which can initiate IPV of the documents and then those KYC forms and docs can be submitted via AMC houses or R&T Agents.
• The KYC details can be viewed by entering the PAN number here - https://www.cvlkra.com/ and then clicking on the 'KYC Inquiry' tab. 

Ø Can an NRI invest in Mutual Fund Tax Savings Schemes?
Yes, an NRI/PIO can invest in ELSS (Equity Linked Savings Schemes) of Mutual Funds if he or she is willing to avail tax rebate under Section 80C of The Income Tax Act 1961. Currently, the investment limit is Rs. 150,000 (Rupees One Lac Fifty Thousand only) in a financial year.