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If you are an NRI thinking about investing in mutual funds in India, this simple guide will help you understand your options.
NRIs must follow the rules set under the Foreign Exchange Management Act (FEMA). (Pexels/Representative Image)
If you’re someone staying abroad and want to invest money back in India but don’t know how to go about it, you have come to the right place.
There are many investment tools, but mutual funds are one of the most popular choices because they offer a good chance to grow money and reduce risk by spreading investments. A common question among Non-Resident Indians (NRIs) is whether or not they can put money into mutual funds in India.
This simple guide will help you understand your options and how to get started with mutual funds.
NRIs are allowed to invest in mutual funds in the country, but they must follow the rules set under the Foreign Exchange Management Act (FEMA). These rules help ensure that all foreign investments are safe and legal. By putting money in these funds, NRIs not only grow their personal savings but also support the country’s financial progress.
There are several ways NRIs can start investing in India. One common method is through a Non-Resident External (NRE) Account, which allows NRIs to deposit their foreign income in India. The interest earned on this account is tax-free. Another option is the Non-Resident Ordinary (NRO) Account, which helps in managing income earned within India, such as rent, dividends or property sale proceeds.
They can also choose to invest directly by using their NRE or NRO accounts through regular banking channels. This method gives full control over investment decisions, allowing individuals to choose funds that match their goals. For those who are not able to manage their investments personally, appointing a Power of Attorney (PoA) can be helpful. A trusted person can then handle all investment decisions.
Many NRIs worry that they might have to pay double tax when investing in mutual funds. That’s not the case if India has a Double Taxation Avoidance Agreement (DTAA) with the country where the NRI lives.
Interestingly, India has such an agreement with the United States. This means that if an NRI pays tax on investment earnings in India, they can claim relief and avoid paying tax again on the same income in the US. When it comes to mutual funds, the tax on earnings depends on how long the investment is held.
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al…Read More
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al… Read More
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Delhi, India, India
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