Moving abroad? Here is what you need to do for your Mutual Fund investments


NRI is not just another term that your aunt may use to address you at every party. This term defines your tax status in India.

You are a Non Resident Indian as per Income Tax Act, 1961 if you fulfil any of the following criteria:

  • You have stayed outside India for more than 182 days in the previous financial year and for less than 60 days in the current financial year, or
  • You have stayed in india for less than 182 days in the previous financial year and for less than 365 days in the previous four financial years, or
  • You are leaving India for the purpose of employment, business, education, stay with parents/ children, with the intention of staying abroad for an uncertain period. In such cases, you become a NRI the moment you leave India, even if you have not stayed abroad for 182 days or more during the financial year.

So before you board that flight, here is a list of things you need to check off your list with respect to your investments -

Step 1. Change your bank account type

First thing first, it's mandatory for NRIs to convert their domestic savings bank account to NRO (Non Resident Ordinary) Savings account because according to the law, you are no longer allowed to hold a domestic savings account in India. You can visit your local bank branch to get this conversion done.

NRO bank account is an account to manage your income earned in India. You can deposit all your earnings from India (rent, interest etc.) in this bank account and make any expenses in India (EMIs, premiums etc.) through this account. The transfer of money (‘repatriation’) from NRO account to overseas account is subject to some restrictions.

Apart from converting your existing savings account to NRO, you might also want to open another bank account called an NRE (Non Resident External) account if you want to transfer your foreign earnings to India. This is also a Rupee-denominated account but the money in an NRE account is freely repatriable without any restrictions.

Step 2. Get your KYC status updated

You will need to get your KYC status modified from Resident Indian (RI) to NRI. Following changes will need to be made in your KYC:
a. Resident status (from RI to NRI)
b. Communication Address as per Overseas address proof
c. Permanent address as per your passport.
d. Mobile number (if required)

Step 3. Get your bank account type updated in your existing folios

After getting your Resident savings account with the bank changed to NRO savings account, the same needs to be updated in the folios of all the Mutual Funds that you have invested in.

We'll take care of KYC update and bank details change in your Mutual fund folios with us. You can just let us know and it'll be a completely paperless and hassle free process for you.

Impact on taxes

Once your tax status has changed from Resident Indian to NRI in the Mutual Fund records, your gains from the investments will be taxed a bit differently.

Although the tax liability remains almost the same as that of a resident investor (difference is only in terms of LTCG tax of Debt funds), any applicable taxes will now be deducted via TDS by the Mutual Fund companies at the time of redemption (Resident Indians have to calculate and pay the applicable taxes themselves before the financial year is over).
Here is a more detailed blog on how Mutual funds are taxed for NRIs as well as RIs - https://blog.goalwise.com/how-are-mutual-funds-taxed/

US/Canada based NRI

If you are moving to US or Canada, unfortunately you don't have as many options as Resident Indians or other NRIs have.

Not all the Mutual Funds in India allow US/Canada based NRIs to invest online at present (some accept offline investments through paper based applications). This is due to certain compliance issues relating to a US tax law called FATCA (Foreign Account Tax Compliance Act). There are limited MF companies allowing online investments at present. Here's the list (as of March 14th 2019):

L&T India Mutual Fund
UTI Mutual Fund
Sundaram Mutual Fund

You may be required to furnish some extra documentation while investing as a US/Canada based NRI.

Your existing investments in any Mutual Fund made when you were a resident can remain invested and you don't have to necessarily redeem them.

However you won't be able to make further investments and SIPs would need to be stopped if they are in Mutual Funds other than those mentioned above. Tax applicability would be as per your resident status at the time of redemption.

At Goalwise, we are not accepting investments from US/Canada based NRIs at present. A workaround used by many people is investing in the name of other family members who are based in India, eg: spouse, parents, in-laws etc. You can consider doing this if it's something you'd be comfortable with (transfering your savings to your parents is completely legit and tax-free).

You can just ping us on chat or email us at care@goalwise.com and we'll be happy to help!

Resources:
https://www.axisbank.com/progress-with-us/save/difference-between-nro-and-nre