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.
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:
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:
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.
Most of the income of NRIs gets subjected to a heavy TDS (Tax Deducted at Source) and that often leads to NRIs paying more tax than they are normally liable for. Thus, knowing the applicable deductions and exemptions that can be availed is important.
The deductions that are allowed for an NRI are as follows: