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As an NRI, you can invest in mutual funds easily. However, it is also important to know more about its tax aspect before making an investment.
As per the Foreign Exchange Management Act (FEMA), NRIs are allowed to invest in mutual funds in India. In case you have dependents or family back in India, investing in a mutual fund provides a diversified portfolio with an excellent mix of debt and equity securities.
The benefits of investing in a mutual fund for NRIs are
NRIs do not have to pay double tax when they invest in mutual fund in India, specifically if India has signed Double Taxation Avoidance Treaty (DTAA) with the country of their residence. In absence of this treaty, the gains from the mutual fund investment are taxable based on the holding period. Short-term capital gains attract tax at the rate of 15% while Long-Term Capital Gains (LTCG), exceeding Rs. 1 lakh a year, are taxable at the rate of 10%. In the case of debt funds, 20% tax on gains with indexation benefit.
There are two ways an NRI can invest in India: