Financial Health Check

I am American citizen living in the United States and considering investing a modest amount in the Indian stock market. Is this advisable or...

I am American citizen living in the United States and considering investing a modest amount in the Indian stock market. Is this advisable or possible? I am not well-versed in buying/selling but I really do not like the returns I am getting these days on my retirement investments here, and wondering about alternatives or supplements to my 401k.

Name undisclosed

Non-citizens of India can invest in Indian stock market only through a prior approval from RBI. However, if you are a person of Indian origin, then you are eligible to invest in the market through proper banking channels. The Indian market, like any other equity market, is volatile and while the positive returns can exceed your returns on 401K plan, the losses can also be substantial. Hence the need for extreme care in selecting the right broker/banker for the purpose who in turn should also be cautioned about the selection of only safe and sound equity.

Thank you very much for the clarification sent on Nov 14, 2004 regarding US-64 units long-term capital loss. Is this amendment to Section 10 (33) not applicable in respect of other mutual funds, like Income Funds Schemes of SBI Magnum (MF), HDFC (MF) and Templeton (MF) bought in April 2003 and redeemed/sold at a loss in July 2004. Can we do theindexation in respect of these mutual fund losses and carry forward this loss and show it on our tax return for A.Y. 2005-06?

Rahul Singh

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Yes, section 10(33) does not apply to capital gains/capital loss on units of mutual funds other than units of UTI. For the indexation, in the event of a loss, the question of indexation of the cost will not arise as Section 48 refers to only income chargeable under the head ‘capital gains’ which means only the positive income and not the loss. The new sections 10(38) and section 111A deal with capital gain only on equity-oriented funds and do not deal with capital gain or loss on funds which are not equity-oriented funds. EOF is a fund with more than 50 per cent invested in equity shares. Thus, loss on sale of units of other schemes allows the carry forward provision.

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