Non Residents Indians and Persons of Indian Origin can invest in mutual fund schemes in India. In case of NRIs no special approval is to be sought from authorities such as the RBI. They can invest in mutual funds on repatriable basis or non-repatriable basis. To invest on a repatriable basis you must have an NRE account or FCNR account with a bank in India. In this case the investment money should be remitted through usual banking channels or from the NRE/FCNR account of the NRI investor. Investment can be made on a non-repatriation basis as well with investment funds being provided from NRO account or NRE/FCNR account of the investor.
Income Tax Provisions for NRIs:
Based upon a set of specific guidelines and directives, it can be ascertained if a person is actually an NRI. Based upon that, income earned in India can be considered as taxable income. It is important to understand that the income earned by an NRI outside India will not fall under the jurisdiction of the Income Tax Act. However, if his/her income in India through aspects like capital gains from investments in shares, mutual funds, property rental and term deposits exceed the basic exemption limit as defined in the Income Tax Act, he/she would have to file a tax return.
Income tax for non-resident Indians differs from the income tax charged for resident Indians, that difference lies in the taxation slabs.
The major points concerning NRI taxation can be outlined as follows:
Income tax slabs for NRIs are based only on the income barring any gender, age or other specification
In case of TDS, all incomes of NRIs are charged irrespective of any threshold value
No nominal deductions are applicable on investment income except under specific situations
Tax filing isn’t normally required for NRIs if the income is subject to clauses under Section 115G of the Income Tax Act
Some specific provisions exist as per the Income Tax Act which relate how income tax would be charged for an NRI.
The brief of such provisions are mentioned below:
Section 115D: Computation of Tax
Section 115E: Tax on income from investment and long term capital gains
Section 115F: Non chargeable capital gains on transfer of foreign exchange assets in certain cases – Dealing with exceptions where the transfer of a foreign exchange asset will not incur any tax
Section 115G: Non-filing of returns of income in specific cases
Section 115H: Benefits of taxation after an NRI becomes a resident
Section 115I: Non-application of provisions for NRI taxation
All the above rules are subject to change as per the discretion and direction of the Central Government and the Income Tax Department of India.
Applicable Deductions and Exemptions for NRIs:
Section 80C:
Life insurance premium payment
Tuition fee payment
Principal payment on loan for purchase of house property
Investment in ULIPs
Deduction from House Property Income
Section 80D:
Premiums of health insurance of the immediate family and dependents
Up to a maximum of INR 5000 for preventive health check-ups
Section 80E: Deduction of interest paid on an education loan for the higher education of self, spouse, children or a dependent student subject to the earlier of a period of 8 years or till the interest is paid
Section 80G: Donations as per Section 80G
Section 80TTA: Maximum of INR 10,000 on interest from savings bank account
Long term capital gains from property held for 36 months or more can be invested in another property and the amount used in the transaction will be exempted.
*Mutual fund investments are subject to market risks. Read all scheme related documents carefully
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