Q: How do I remit funds for investing in India?
A: One of the ways is to invest thru your NRE account directly to the mutual fund and this also requires your active participation with sale and purchases. Please contact us for the best strategy applicable to you.
Q: Is the interest I receive in the NRE account taxable?
A: No, the interest is not taxable as per Indian tax system. But if you are filing taxes in US, the bank account interest will be taxable and you’ll receive a 1099-INT from the bank.
Q: How is capital gains calculated in terms of short-term and long-term assets?
A: The capital gains in the short-term asset sale is considered as a normal income and hence taxed at a normal income tax rate. On the other hand, the long term asset sale is considered a capital gains and will be indexed at that rate, which is 20% right now.
Q: Is the dividend paid on my assets taxable?
A: The dividend paid on the equity mutual funds (EF) is not taxable. But dividend on the Dept MF is taxable. In Equity MF the long term capital gains are also tax free. There might be dividend distribution tax (DDT) applicable to Debt MF.
- For Equity MF held for more than one year, there’s no capital gains tax but you do pay the Securities Transaction Tax (STT), although there are talks to remove STT.
- For Equity MF held for less than one year, you pay capital gains and CESS (education tax) and STT. In some cases you also pay surcharge
- For Debt MF held for more than one year, capital gains tax is 10% without indexation. Or it could be 20% capital gains tax with indexation. (whichever is less)
- For Debt MF held for less than one year, the capital gains tax rate is same as the personal income tax.
- If the asset management company (AMC) pays the DDT, then the dividends are tax free on both MFs.
A: All the gains from investing in India are taxable. Although if you have long term capital gain from Equity based Mutual Funds, the gains are tax-free.
Q: Do I need a PAN if I want to invest in India?
A: Yes. The PAN is a requirement now to invest in India. If you are investing more than INR 50,000 per year, then you also need a Mutual Fund Identification Number (MIN) which can be acquired free of cost.
Q: Are the gains from MF repatriable?
A: Yes, the gains are fully repatriable after all the applicable taxes have been paid.Q: How do I receive the proceeds from the MF sale (gains)?
A: Recent changes in the law require that funds after the sale are deposited back in the same bank account where the funds originated from for purchase. If you are using your NRE account to give the checks for MF investing then the money will directly go in your NRE account without any fee deductions. You’ll have to pay separately to the accountant or your financial advisor for any applicable fee. This is done to make sure that all the fees are transparent in the process.
