I have invested in mutual funds via the SIP route through my resident bank account. My tax status has now changed from resident to non-resident by virtue of my employment overseas.
I am in the process of updating my existing KYC data based on my new tax status
In this connection, I would like to know the following:
1) What happens to the current mutual fund holdings
2) Do I have to redeem all my current mutual fund holdings
3) If redeemed, what will be effect on STCG and LTCG and tax treatment
4) Whether all future SIP scheduled from the resident account needs to be stopped
Awaiting your valuable advise.
It appears you are in my team too !!
A non-resident must invest in MF only through NRE or NRO account.
In you case and mine, we need to take the following actions as I have understood from the informtaion I have gathered:
- Open a NRO account if not already having a NRE/NRO account
- Update KYC information for tax status from Resident to Non-resident and also update the bank details with the new NRO account
- Once the above steps are completed, we need to submit letter to individual AMC informing out tax status change and requesting to map our existing folios to the new tax status and bank account
- Most of the AMCs are not willing to update existing holdings to changed status; I am facing issues here…you may also face the same
- I trust the information I have provided will be useful to you and many others in similar situation. Please do share your update in case you get any new information regarding existing holdings
Point number 1 & 2 are correct.
Regarding the point no. 3, if you are investing through any online platform / distributor, they can help you do the leg-work for you.
Also, NRIs must submit a certified copy of the passport and overseas address to AMCs.
Thanks for clarifying point no. 3. From this I infer that I can hold my current investments “AS IS” and then continue existing SIPs by investing through my new NRE or NRO account after my tax status is updated in KYC database. Please correct me if my understanding is incorrect.
I contacted the online platform through which I am investing and they advised I should redeem all my investments fir them to take action. This will give rise to tax incidence apart from causing financial loss due to STCG and exit loads. Hence, I will approach individual AMC for the needful
Thanks and best regards
I believe that i) Getting your KYC updated , ii) Linking the Folios / SIPs to new NRE/NRO account & iii) Submitting required documents to Fund houses / AMCs are the main requirements when your Tax status has been changed.
I dont think an investor has to redeem all the units and re-invest.
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