Please let me know how to change the investment status of my son who is now an NRI

First of all thanks for the service you are providing for the public. My query is: My son is on PR at Canada from April, 2013. He was making SIP in equity MFs from 2010 to August 2015. He also has a saving bank a/c besides PPF a/c from 2008. He has a house of his own which is rented out for Rs. 13,000 PM. The rent is being deposited in his PPF a/c regularly. I had given money to him while going to Canada with the assurance that whenever his SIPs will mature after 5 years I will get the MF proceeds of approx 3L. He had given me the cheques. He had no other investment except above. Has he any tax liability? What is NRO/ NRE a/c. How it is converted from saving to NRO and what are its implications. If his saving a/c is converted to NRO can I get the amount through the cheque he had given to me or he has to close his a/c. Please enlightened so that tax, if any, be paid to Government. Further, I have a grandson who was born at Canada thus is a citizen of Canada, can I open a SIP in his name or deposit some lump sum amount against his name as a gift to him. Kindly guide on the issue?

Sep 28, 2016 by Vinay Vashisht, Chandigarh  |   Mutual Fund

Thanks for the kind words. Following is our answer to your queries -

1. Your son should change the Bank account status from savings to NRO account.

2. After this change is done, you should also change his mutual fund KYC and FATCA details so that he can continue to invest in mutual funds in India despite being a NRI/ permanent resident of Canada. However, there are some restriction for NRIs based out of Canada. Not all AMCs accept investment from Canada based NRIs. Please check this link to know which AMCs are currently taking investments from Canada based NRIs https://www.advisorkhoj.com/post-your-queries...

3. Your son can redeem mutual funds even before changing the status in bank and pay you through his existing bank account. Else he can pay you even through NRO/NRE account as well.

4. Please note that NRO account is Non resident ordinary account which works more or less in the same manner as that of Savings bank account. Your son can deposit the rent cheques or other cheques in this account. He can also invest in mutual funds from this account.

NRE accounts are Non resident external accounts from where he can transfer amount to India or get overseas remittances. The proceeds of these accounts are repatriable to the country he is residing now. However, please note that he can not deposit any Indian cheque in this account excepting special cases/ direct credits. But he can invest in mutual funds from this account and receive dividends and redemptions through direct credit.

5. Investment in the name of minor can only be done by parents or court appointed legal guardian. If you are a legal guardian to your grandson, then of course you can invest on his behalf.

6. Your son can continue with his PPF account as he has opened it before becoming a NRI. PPF accounts can not be opened once one become a NRI.

7. Please also note that in case of NRIs TDS is done for short term capital gains on mutual fund investments.

8. You son should file IT returns in India on the basis of his total income here including the monthly rent amount of Rs. 13,000 received.

Hope the above helps! Thanks for writing to us.

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