Are you a Non-Resident Indian(NRI), and Overseas Citizen of India(OCI) interested in investing in Indian mutual funds but unsure where to start? Learn about Aggressive Hybrid Funds, which balance growth potential with risk management. These funds prioritize long-term growth by offering a diversified portfolio that delivers stable returns over the long term. You will see the appeal of potentially higher returns compared to traditional fixed-income investments, especially given the tax benefits for long-term investors. Find everything you need to know about Aggressive Hybrid Funds for NRI, meaning, benefits, taxation, and how to invest in this blog.
What is Aggressive Hybrid Funds for NRI?
Aggressive hybrid funds, also known as balanced funds are a type of mutual fund that primarily invests in a mix of stocks (equities) and bonds (debt securities). They aim to grow wealth and provide regular income over the long term. According to regulations and rules from the Securities & Exchange Board of India (SEBI), these funds typically allocate 65%-80% of their assets to stocks and the rest to bonds.
They are popular among retail investors searching for a balanced approach between potential growth and stability. As of September 2020, aggressive hybrid funds, along with balanced hybrid funds, represent a significant portion of hybrid funds, with a combined Assets Under Management (AUM) of Rs. 1.1 lakh crores.
Also read: What are Balanced Funds, Benefits and How to Invest?
How does Aggressive Hybrid Funds for NRI work?
Aggressive hybrid funds aim to grow investor’s money by mainly investing in stocks (65%-80%) for growth and bonds (20%-35%) for stability. They strive to balance risk and return by regularly adjusting these investments. By doing this, they aim to provide better returns compared to other types of hybrid funds over the long term.
Since they invest more in stocks, they might be riskier but also have the potential for higher returns. The fund managers track the market conditions and adjust the mix of stocks and bonds accordingly. Overall, they aim to offer a good balance of growth potential and stability for investors.
Also read: How understanding the Rule of 8-4-3 can turn your Rs 30,000 monthly into Rs 1.5 cr?
Benefits of Aggressive Hybrid Funds for NRIs
There are various advantages of investing in an Aggressive Hybrid Fund for NRIs:
- Potential Higher Returns: Aggressive hybrid funds can potentially give better returns over time compared to regular fixed-income investments. They achieve this by strategically allocating more of their money to stocks. This approach offers the chance for higher growth. By focusing on stocks, they aim to outperform typical fixed-income options, providing investors with the potential for greater long-term gains.
- Diversification: Aggressive hybrid funds invest across asset classes, reducing the overall risk of the portfolio. NRIs benefit from exposure to both equities and debt, mitigating the impact of market volatility.
- Risk Management: Aggressive hybrid funds mix stocks and bonds to reduce the impact of market ups and downs, making them more stable during unstable times. This makes them suitable for investors seeking a moderate level of risk with potentially higher returns than traditional fixed-income investments.
- Professional Management: These funds are managed by professional fund managers who use investment strategies to increase returns and manage risk effectively.
Also read: What is the 15x15x15 Rule In Mutual Funds for NRIs?
Taxation on Aggressive Hybrid Funds for NRI
Should the equity exposure surpass 65%, the fund scheme is subject to taxation similar to equity funds. Hence the Aggressive Hybrid Funds are taxed like equity funds since these funds typically allocate 65%-80% of their assets to stocks and the rest to bonds. Here’s how the taxation on aggressive hybrid funds for NRI is levied:
- If you sell your investments within a year, the profits are considered Short-term Term Capital Gains (STCG) and taxed at 15%.
- If you hold for more than a year, they’re Long Term Capital Gains (LTCG). Up to ₹1 lakh of these LTCG gains are tax-free, and beyond that, they’re taxed at 10%.
- Dividend income is added to your total income and taxed based on your income tax slab. If the dividend exceeds ₹5000, Tax Deducted at Source (TDS) applies.
Also read: NRI Mutual Fund Taxation in India 2024 Explained
Who Should Invest in Aggressive Hybrid Funds?
Aggressive hybrid funds cater to a specific set of investors who seek a balanced approach to wealth accumulation while managing risk. Here are some types of investors who might find investing in aggressive hybrid funds suitable:
- Moderate Risk Appetite: Investors who have a moderate risk appetite and are willing to accept fluctuations in returns for the potential of higher growth can benefit from aggressive hybrid funds. These funds offer a blend of equity and debt, providing stability while aiming for capital appreciation.
- Long-Term Investors: Those with a long-term investment horizon can leverage the growth potential of aggressive hybrid funds. Since these funds typically invest in a mix of equities and debt, they are well-suited for investors looking to build wealth over time without exposing themselves to excessive market volatility.
- Seeking Diversification: Investors who recognize the importance of diversification in their portfolio can find aggressive hybrid funds appealing. By spreading investments across asset classes, these funds help mitigate risks associated with any single investment, thereby enhancing overall portfolio stability.
- Balanced Approach: Individuals looking for a balanced investment approach that offers growth potential along with downside protection may find aggressive hybrid funds suitable. The equity component provides opportunities for capital appreciation, while the debt portion acts as a cushion during market downturns.
- Tax-Efficient Returns: Investors seeking tax-efficient returns can benefit from aggressive hybrid funds, particularly NRIs who enjoy favorable tax treatment on capital gains. With proper planning, investors can optimize tax implications and enhance overall returns on their investments.
Also read: 𝗕𝗲𝘀𝘁 𝗠𝘂𝘁𝘂𝗮𝗹 𝗙𝘂𝗻𝗱𝘀 for NRI in India 2024
How to Invest in Aggressive Hybrid Funds as NRI/OCI?
NRIs can legally invest in aggressive hybrid mutual funds in Indian markets. This includes NRIs, Persons of Indian Origin (PIOs), and Overseas Citizens of India (OCIs). There are a few legal mandates like getting their Mutual Fund KYC done along with adhering to the rules of FEMA, SEBI, and RBI. Once your KYC is done, you can invest in domestic and international mutual fund schemes offered by Asset Management Companies (AMCs).
Getting your Mutual Fund KYC is mandatory to open an account to invest in mutual funds in India irrespective of the investment amount. The Securities and Exchange Board of India (SEBI) has specified a set of regulations under the Prevention of Money Laundering Act (PMLA), 2002 which mandates that mutual fund houses and intermediaries perform their due diligence on investors before they are compliant to make investments.
For more info on NRIs, PIOs, and OCIs, you can refer here.
Also read: Step-by-Step Guide for NRIs to Pick a Winning Mutual Fund
Wrapping Up
Aggressive hybrid funds offer NRIs a balanced investment option that combines growth potential with risk management. By investing in a diversified portfolio of equities and debt instruments, NRIs can aim for stable returns over the long term while minimizing downside risk. Understanding the taxation implications and following the prescribed investment process enables NRIs to make informed investment decisions in aggressive hybrid funds, aligning with their financial goals and risk appetite.
Invest in NRI Mutual Funds with SBNRI
NRIs can now download the SBNRI App and choose to invest in different NRI mutual fund schemes in India with ease. You can also get detailed mutual fund advice from experts at SBNRI. Also, visit our blog and YouTube channel for more details.
SBNRI is an authorized Mutual Fund Distributor platform & registered with the Association of Mutual Funds in India (AMFI). ARN No. 246671. NRIs willing to invest in mutual funds in India can download the SBNRI App to choose from 2,000+ mutual fund schemes or can connect with the SBNRI wealth team to better understand Mutual Fund investments.
FAQS
Do NRI have to pay tax on mutual funds?
- For non-resident Indians (NRIs), mutual funds are taxed based on capital gains rules. NRIs also face Tax Deducted at Source (TDS) on mutual fund redemptions, deducted at the highest applicable rate.But, if the TDS amount exceeds their actual tax liability, NRIs can claim a refund.
What is hybrid aggressive funds for NRI?
- Aggressive hybrid mutual funds primarily invest 65%-80% of their money in stocks and the rest (20%-35%) in bonds and similar assets.
Which income is not taxable for NRI?
- Interest earned by an NRI on fixed deposits and savings accounts in India is taxable. However, interest earned on NRE and FCNR accounts is tax-free. But if an NRI receives interest on their NRO account, it’s fully taxable.
Is an aggressive hybrid fund a debt fund?
- Aggressive Hybrid Funds invest mainly in stocks (65-80%) with the rest in bonds. They seek growth by emphasizing stocks while adding stability through bonds.
Who should invest in aggressive hybrid funds?
- Aggressive hybrid funds cater to a specific set of investors who seek a balanced approach to wealth accumulation while managing risk. You can find more about it in the above blog.
What is the tax treatment of aggressive hybrid funds?
- Aggressive Hybrid Funds are taxed like equity funds since these funds typically allocate 65%-80% of their assets to stocks and the rest to bonds. If investments are sold within one year of holding by NRIs, then the returns will be treated as STCG and will be taxed at 15% plus cess. However, if the funds are sold after one year of holding, it accounts as LTCG and the returns up to Rs 1 lakh will be tax-free. Any returns above Rs 1 lakh will be treated to a taxation of 10% plus cess without any indexation benefit.
Is it good to invest in an aggressive hybrid fund?
- Aggressive hybrid funds aim to grow investor’s money by mainly investing in stocks (65%-80%) for growth and bonds (20%-35%) for stability. They strive to balance risk and return by regularly adjusting these investments. By doing this, they aim to provide better returns compared to other types of hybrid funds over the long term.
