A complicated situation hence complicated question.
I am trying to help a senior citizen lady. She has Indian PAN card ...aadhar card and other required documents.
She is permanent resident of USA (green card holder) but she does not like to stay in USA..so she goes back to India and come back because by law it is required that green card holders can not stay outside India for more than 6 months...or they cant get citizenship. After being citizen they don't have to come back to USA to maintain citizenship.
So, this lady wants to invest some of her savings in India but she does not want to have NRI account or invest as an NRI because after she becomes citizen (this dec. 2018) she does not want to come back to USA...so she will reside in India permanently after dec. 2018.
In this case if she invests as resident in Indian mutual funds (even though technically she is considered US person at present) what are they consequences ...
if fund house finds out, what can they do ? they will freeze her investment? .she could loose her investment ? .is it a criminal offense? she could go in to jail ?
Can a USA tax person invest in Mutual funds as if he/she is a resident of India
Can a USA tax person invest in Mutual funds as if he/she is a resident of India
A senior citizen lady should not be fiddling with mutual funds. Stocks are too volatile for people on fixed income. Now if she is getting helped to use as a conduit by near and dear ones thats another matter. Also, why is she fixated on getting on US citizenship when she has no desire to live in US. I know social security insurance (the plan in which one has never put a dime but is free is withdraw other taxpayers money) could be one very compelling reason but just wondering if there is anything else i am missing
Can a USA tax person invest in Mutual funds as if he/she is a resident of India
plansup;673695A senior citizen lady should not be fiddling with mutual funds. Stocks are too volatile for people on fixed income. Now if she is getting helped to use as a conduit by near and dear ones thats another matter. Also, why is she fixated on getting on US citizenship when she has no desire to live in US. I know social security insurance (the plan in which one has never put a dime but is free is withdraw other taxpayers money) could be one very compelling reason but just wondering if there is anything else i am missing
Did you read what I said ...really?
I said she does not want to reside in USA after she becomes citizen...
do u know if someone does not reside in USA they can not have social security or any other benefits ...
so no that is not her intention ...but she just wants to have citizenship ..u never know about future...she might decide to live in USA after few years.
And in your arrogant assumption you did not answer my question..
Can a USA tax person invest in Mutual funds as if he/she is a resident of India
I think it will be a civil offense than a criminal one. And I dont know what a fund house will do if they find out.
curiousv;673690
In this case if she invests as resident in Indian mutual funds (even though technically she is considered US person at present) what are they consequences ...
if fund house finds out, what can they do ? they will freeze her investment? .she could loose her investment ? .is it a criminal offense? she could go in to jail ?
Can a USA tax person invest in Mutual funds as if he/she is a resident of India
0) A person either qualifies as an NRI or doesn't based on number of days spent.
1) NRI's are very well eligible to invest in Indian Fund Houses, but you will have to check the exact rule if the lady qualifies as an NRI if she resides in India for x months.
2) Although NRI's from all countries are welcome with red carpet by indian fund houses to invest, most american NRI's are turned away due to fear of FATCA. Major fund houses like Franklin Templeton, ICICI will turn you away when they learn client is US tax resident.
3) However, there are new MF platforms in India such as MF Utility that provided discount aggregrate MFs from all fund houses. Getting an account in such services as an american NRI is possible from what I have recently witnessed.
4) There is one more complication: IRS imposes severe tax penalties if US tax residents hold foreign MF's > 50,000$ (google PFIC + IRS). Even if you invest say 10,000$ today and it grows to 50,000$ in 20 years (due to high growth of india's economy), then you will have to retroactively file PFIC taxes/yr tracing back to all the past years. Interestingly, you won't have to deal with this rule, if you invested the same money in individual foreign stocks.
You can avoid most of these pain-points if you simply invested the same money in american mutual funds and simply liquidate and transfer to India when needed.
So the short answer to your question is: Yes, you can do it perfectly legally (as an NRI) if you really wanted to. People have done it. But be ready to deal with the new set of complications.
1) NRI's are very well eligible to invest in Indian Fund Houses, but you will have to check the exact rule if the lady qualifies as an NRI if she resides in India for x months.
2) Although NRI's from all countries are welcome with red carpet by indian fund houses to invest, most american NRI's are turned away due to fear of FATCA. Major fund houses like Franklin Templeton, ICICI will turn you away when they learn client is US tax resident.
3) However, there are new MF platforms in India such as MF Utility that provided discount aggregrate MFs from all fund houses. Getting an account in such services as an american NRI is possible from what I have recently witnessed.
4) There is one more complication: IRS imposes severe tax penalties if US tax residents hold foreign MF's > 50,000$ (google PFIC + IRS). Even if you invest say 10,000$ today and it grows to 50,000$ in 20 years (due to high growth of india's economy), then you will have to retroactively file PFIC taxes/yr tracing back to all the past years. Interestingly, you won't have to deal with this rule, if you invested the same money in individual foreign stocks.
You can avoid most of these pain-points if you simply invested the same money in american mutual funds and simply liquidate and transfer to India when needed.
So the short answer to your question is: Yes, you can do it perfectly legally (as an NRI) if you really wanted to. People have done it. But be ready to deal with the new set of complications.
Can a USA tax person invest in Mutual funds as if he/she is a resident of India
curiousv;673696Did you read what I said ...really?
I said she does not want to reside in USA after she becomes citizen...
do u know if someone does not reside in USA they can not have social security or any other benefits ...
so no that is not her intention ...but she just wants to have citizenship ..u never know about future...she might decide to live in USA after few years.
And in your arrogant assumption you did not answer my question..
Social security benefits are provided to US citizens even if they live outside USA in eligible countries. They can collect social security payments.
SSI which is supplemental security income for citizens who have no social security credits is the benefit that is not provided outside of USA. But social security benefits are available to US citizens residing in India. If she has applicable social security credits , she can get benefit in India as a US citizen.
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RAJESH H DHRUVA
- Posts: 528
- Joined: Sat Jan 20, 2007 10:16 am
Can a USA tax person invest in Mutual funds as if he/she is a resident of India
Dear curiouv
1. As the lady is permanently residing in India, visiting US only for renewal of visa she is a Person Resident In India ( PRII ) under Foreign Exchange Management Act 1999.
2. And as her stay in India exceeds 181 days in a financial year is also Resident under the Income Tax Law.
3. As such she should invest in India as a PRII and should have domestic bank accounts .
4. There can be issues of US citizenship in KYC which will also require intimation of SSN but if the Fund Officers and Bankers are knowledgeable this can be easily resolved as she is a US citizen PRII .
5. Ofcourse as per US laws she will required to report Indian income in Fed tax returns , file returns under FBAR and FATCA as applicable and comply with PFIC rules subject to Tax paid in India being deductible from US fed taxes.
Best wishes
RAJESH H DHRUVA
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