What you need to know about investing in mutual funds in India
Is a non-resident Indian/United States citizen with no valid
Indian passport (surrendered after US citizenship), no person of Indian origin card or overseas citizenship of India
card eligible to get a global credit card, as we have NRO
(Non-Resident Ordinary Rupee) deposits in India (both
inherited and from US), which we want to spend in rupees
to charge purchases in and out of India. If this is not possible should we get a PIO card? Or OCI? Is this a requirement to get the global card?
— Vijaya Iyer
We are not aware of any requirement of necessarily having a PIO or an OCI card for getting an international credit card. The bank will have your KYC (Know Your
Customer) details with it, which must have been taken
when opening the NRO account. Also getting a PIO or
OCI card, while not necessary for the immediate purpose
under discussion, would be generally helpful so far as your
dealings with India are concerned.
I am an Indian passport holder and I am in the process of
— Rajeev Singh
acquiring US citizenship. I am a retired central government
employee of India and am getting pension. If I become a US
citizen will I still get pension in India?
You will continue to get the pension. Changing your citizenship does not affect your rights and obligations in any
I am a PIO. I continue to get my government of India pension through an Indian bank and credited to my NRO
account. I wish to repatriate the funds accruing in this
account once a year or so. My annual pension is below Rs
105,000 (approx). Do I have to pay income tax as the
amount is below the exempted ceiling (for seniors)? If I can
repatriate the funds once a year (it will be roughly CAD
2,750)? What are the formalities? (Apart from this I do not
have any income in India.)
1. The benefit of senior citizens is not applicable to NRIs.
2. The amount is repatriable after taxes have been paid
3. For repatriation, and the procedure thereof, you will
have to approach your bank in India.
1. I have an NRO account with Citibank for many years.
They deduct 30 percent tax at source from the interest I
earn. I have no permanent account number. I do not claim
any refund. I like to avoid taking PAN. How can I avoid tax
deduction at source? Also if I switch to an NRO account of
another bank, will it be same?
2. I have purchased some mutual funds as NRO account.
What will be treatment for tax deduction for it, for the
interest or dividends as well as if I sell them making some
1. The only method of claiming the refund is by filing the
tax returns. The TDS applicable will be the same no matter
which bank you have an NRO account with. Also, it is
mandatory to have PAN for filing IT returns. There is no
need to avoid taking PAN. Having a PAN does not mean
you have to pay tax or file tax returns. Until and unless your
Indian income is above Rs 160,000 (about $3,400) you do
not need to file tax returns. PAN is becoming increasingly
mandatory for all transactions and it is always better to
have one ready than need one at the last minute.
2. Equity-based MF schemes are governed differently
from the debt-based schemes. In both cases, dividend is
tax-free in the hands of the investor. However, there is a
dividend distribution tax @12.5 percent payable by the MF
directly to the exchequer in the case of debt-based ones,
whereas the equity-based are exempt from this tax. Equity-based schemes are also exempt from long-term capital
gains tax. The short-term capital gains are taxed @15 percent only.
In the case of debt-based schemes, short-term gains are
treated as normal income of the assessee and taxed at the
rates applicable to the assessee. The long-term gains will
attract tax @10 percent without indexation or @20 percent with indexation, whichever is more beneficial to the
1. To acquire NRI status does one have to be out of the
country for 182 days as per the calendar year or financial
year — April-March?
2. After transferring funds from outside India into an
NRO a/c, I invest in mutual funds and stay invested for
more than one year. Are my earnings in mutual funds tax-
1. It is the financial year. Please note that one has to stay
abroad (for employment or business) so that the stay in
India is less than 182 days during the FY.
2. The taxability depends upon the type of the scheme of
your choice and the period for which you hold it. For equity schemes, the dividend is tax-free and so are long-term
gains. Short-term gains are taxed at 15 percent. Please see
answer to earlier question for details on the tax incidence
on mutual funds.
3. FEMA section 6(4) has granted general permissions to
a person resident in India to hold, own, transfer or invest in
foreign currency, foreign security or any immovable property situated outside India if such foreign currency assets
were acquired, held or owned by such person when he was
resident outside India or inherited from a person who was
resident outside India.
Readers who wish to ask A N Shanbhag a question can
fill in the following details and mail the coupon to: The
Business Editor, India Abroad, 42 Broadway, 18th Floor,
New York, NY 10004
Or fax it to 212-727 9730
A N Shanbhag is an investment consultant and author of In the
Wonderland of Investment; How to Convert a Taxpayer into a
Taxsaver; NRI Investment Guide. This article does not constitute
tax or legal advice. Consult your tax or legal advisor before making
any tax- or legally-related investment decisions. The authors may
be contacted at email@example.com
Building income generating
portfolios in a low-interest-rate era
Corporate bonds: These bonds are issued
by corporate entities and are subject to
ordinary income tax rates. It is important
to pay attention to credit quality and maturity when purchasing corporate bonds.5 In
order to optimize on income taxes, corporate bonds may be suitable for tax deferred
accounts, but it is important to consult a
tax specialist to be sure this is the right
move for you.
International bonds: International bonds
are issued by sovereign nations as well as
corporate entities outside the US.
International bonds may be dollar based or
issued in local currencies. In addition to the
potential of a good income stream, this
asset class also provides currency diversifi-
cation. International investing presents
certain risks not associated with investing
solely in the US. These risks are heightened
when the issuer of the securities is in a
country with an emerging capital market.
1 BofA Merrill Lynch Global Research,
“Economic Analysis” 2 July 2010. 2 BofA Merrill Lynch Global Research, “Life as
a bond surrogate suits us fine” 7 July 2010. 3 GWM Investment Management, “Investing in
Municipal Bonds” July 2010. 4 GWM Investment Management, “Investing in
Municipal Bonds” July 2010. 5 BofA Merrill Lynch Global Research, “Life as
a bond surrogate suits us fine” 7 July 2010.