personal finance

Things US-based NRI should know while investing in India

I am a US-based NRI and I want to invest in mutual funds in India. What is the process that I need to follow? Will the gains I make be taxable?

Jayant R. Pai, CFP and Head of Marketing, PPFAS Mutual FUND replies, “Over the years, several Indian fund houses have stopped accepting applications from NRIs based out of the US and Canada, owing to onerous provisions of the Foreign Account Tax Compliance Act (Fatca). Under Fatca, which is aimed at preventing tax evasion by the US citizens / residents, financial institutions, including mutual funds, are required to share certain transaction details of the US citizens and residents with the US government. However, if you want to invest in a fund house that accepts investments from the US, you need to be KYCcompliant in India and be in India whenever you invest. In other words, investing online is usually prohibited. While US citizens are usually taxed on their global income, often on accrual basis, they may get some relief as the US has signed a double taxation avoidance agreement with India.”

I have been investing Rs 5,000 per month in UTI MNC Fund for the past four years. The investment in the fund stands at Rs 2.4 lakh and its current value is rs 2.6 lakh. Should I switch to another fund?

Naveen Kukreja, CEO and Co-founder, replies, “MNCs tend to have stronger brands and better corporate governance standards compared to their domestic peers. Many MNCs also lead their respective sectors due to their technological edge and intellectual property. Hence, MNC-focused thematic funds tend to be less volatile and can protect the downside in your portfolio during market corrections. It is advisable that you continue with UTI MNC Fund, even though the MNC index has underperformed the broader markets over the past year. However, UTI MNC Fund does not offer the kind of diversification that diversified equity funds offer. So, you should also invest in large-, multiand mid-cap funds for effective diversification. You may consider investing in SBI Magnum Multicap, Franklin India Focused Equity and Aditya Birla Sun Life Equity for multi-cap investments. Axis Bluechip, ICICI Prudential Bluechip and Reliance Large Cap can be good options for largecap investment. For investing in the midcap category, you may consider Franklin India Prima, HDFC Mid Cap Opportunities or L&T Midcap.”


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