r2i forum

All,
This is my first post on the new forum and I must say I liked the other forum better, but that may just be because I was used to it.

I am finally getting around to opening an NRI/NRE account and like ICICI NRI services. However, I want to start investing in India and want the ability to invest in MFs and stocks through my NRI account. Are there are any banks that are better/more convenient in this respect compared to the others? Like for example, if you openned an HDFC account you could invest in MFs, but ICICI doesn't provide these services (this is just an example)?

I have read recently that NRIs can no longer do India trades, so I am confused as to what I can do.
Please educate. Thanks.

EquityMan

Equityman,

Regarding which bank is better - ICICI or HDFC , etc, I will defer to others.

A few notes follow, though:

1. You should get yourself a PAN ( it is a good idea to do that). How to get a PAN is detailed in a thread on PANs ( Getting PAN Number in India ).

2. If you are a US resident, then investing in Mutual Funds operating from within India is not desirable as you will become subject to US PFIC taxes which is an onerous burden.

3. If you have plans to R2I near term and plans for these mutual funds to be long term investments and have no USC or GC when you sell these funds, then if you invest in these funds with a "Growth" option for dividends (no "dividend" option), you would escape the PFIC issues.

Desi,

1. You should get yourself a PAN ( it is a good idea to do that). How to get a PAN is detailed in a thread on PANs ( Getting PAN Number in India ).

If that is the Indian TAX ID, I already have it and my family has been filing Indian taxes for me (though most of the time I don't owe any Indian taxes).

2. If you are a US resident, then investing in Mutual Funds operating from within India is not desirable as you will become subject to US PFIC taxes which is an onerous burden.

I am a US resident, but I dont have citizenship or GC yet (I might get GC in the next 6 to 12 months). How do you get around this problem? Just register with Indian address and trade as if you are based in India?

3. If you have plans to R2I near term and plans for these mutual funds to be long term investments and have no USC or GC when you sell these funds, then if you invest in these funds with a "Growth" option for dividends
(no "dividend" option), you would escape the PFIC issues.[/quote]

--> I plan to R2I in 6 years and I most likely will have GC then and *might* even be a citizen.

Thanks for your reply.

EquityMan

Equity man,

[QUOTE]How do you get around this problem? Just register with Indian address and trade as if you are based in India?


Note that PFIC problem comes in when there is a taxation event related to foreign based passive investment company. A taxation event is receipt of dividend or a sale of the MF. Registering with an Indian address and providing the Indian address as mailing address by itelf is not against the law. However, if you misrepresent yourself as a resident when you are an NRI, is providing false information perhaps with an intent to mislead. I would advise to not do that.

Regardless of the address, if you do not ante up PFIC taxes on sale by not reporting those to IRS is tantamount to tax evasion and I would strongly caution not to do that.

If your goal is to invest in India, you can do that from US without running afoul of PFIC and that can be done by investing in US based funds that invest in India. It is important to note that Total International Fund and Emerging Markets Fund both offer exposure to India. Lastly, if someone such as your parent who is not a US resident were to invest in India, they would not have any PFIC issues. You can of course gift money to your parent for such an investment (for it to be a gift, it has to be unconditional, the parent has to determine where to invest - you can of course advise).

Thanks Desi. My intent is to not do anything that's agains the law in India or here in the US. I think I will implement both of your suggestions:
1) Invest in international/India-focused US funds.
2) Have my family invest my money in India, in Indian MFs.

For number 2), do you have any suggestions for funds/brokerages? I am totally ingnorant about the Indian investment scene. Thanks.

EquityMan

Desi;3867Equity man,



Note that PFIC problem comes in when there is a taxation event related to foreign based passive investment company. A taxation event is receipt of dividend or a sale of the MF. Registering with an Indian address and providing the Indian address as mailing address by itelf is not against the law. However, if you misrepresent yourself as a resident when you are an NRI, is providing false information perhaps with an intent to mislead. I would advise to not do that.

Regardless of the address, if you do not ante up PFIC taxes on sale by not reporting those to IRS is tantamount to tax evasion and I would strongly caution not to do that.

If your goal is to invest in India, you can do that from US without running afoul of PFIC and that can be done by investing in US based funds that invest in India. It is important to note that Total International Fund and Emerging Markets Fund both offer exposure to India. Lastly, if someone such as your parent who is not a US resident were to invest in India, they would not have any PFIC issues. You can of course gift money to your parent for such an investment (for it to be a gift, it has to be unconditional, the parent has to determine where to invest - you can of course advise).[/quote]

Thanks.

EquityMan

[QUOTE]2) Have my family invest my money in India, in Indian MFs.

For number 2), do you have any suggestions for funds/brokerages? I am totally ingnorant about the Indian investment scene. Thanks.


For equities, I would suggest two funds. One is a Nifty fund (this can be from HDFC or PRU ICICI, Sundaram, etc) and the second a broad based focussed more on Midcaps type of fund. You will be able to look up fund at www.moneycontrol.com . First point of selection is mentioned above (One Nifty Index and the second one should be broad based with an emphasis on mid cap). The next points of selection should be low front load, low expense ratio, low turnover and a high asset base of the fund.

You do not need a broker. You can download forms and apply directly with MF company or walk into one of the large banks like ICICI or HDFC and they have a brokerage desk where they will be more than glad to sell you MFs. They will of course try to push a lot of other things.

Lastly, on this forum are a few members from India who actually are in this business and will gladly assist you with purchasing MFs. You may contact them if you wish. I have personally dealt with Rajesh Dhruva and have been pleased.

Thanks. Can I deal with these banks/brokerages from the US (though the account will be in the name of an India based family member)? Thanks.

Rajesh Dhruva,
If you are reading this, could you send me your contact info? Thanks.

Equity Man

If you go to following link and read post #18, you will find links to Rajesh's websites.

MT: Finance, Planning, Brokerage, Real Estate Service Providers in India for NRI

CAUTION: Rajesh's website have music, so if accessing from office, may want to have Mute on.

When you go to his website, you will find his email address at the bottom. He can be contated by phone also.

Desi;3820Equityman,

Regarding which bank is better - ICICI or HDFC , etc, I will defer to others.

A few notes follow, though:

1. You should get yourself a PAN ( it is a good idea to do that). How to get a PAN is detailed in a thread on PANs ( Getting PAN Number in India ).

2. If you are a US resident, then investing in Mutual Funds operating from within India is not desirable as you will become subject to US PFIC taxes which is an onerous burden.

3. If you have plans to R2I near term and plans for these mutual funds to be long term investments and have no USC or GC when you sell these funds, then if you invest in these funds with a "Growth" option for dividends (no "dividend" option), you would escape the PFIC issues.

i will suggest you to visit OIFC (Overseas Indian Facilitation Centre) which is an initiative by ministry of India to facilitate NRI peoples who want to invest in India.
you can ask any of you investment related question form the experts in this field and you do not have to wait for long time for your questions to be answered as they have 24*7 live help services on their website.
hope this will fruitful for you.