The majority of the NRIs move abroad in the hopes of securing a better future for their families back home. Harbouring the dream of assuring the financial well-being of their loved ones, making investments in India proves to be a smart option for them. From a plethora of investment options ranging from equities and mutual funds to fixed deposits and debt funds, the mutual investments landscape in India holds immense promise, accelerating the country’s financial growth.
As one of the emerging economies in the world, the Government of India has allowed NRIs to invest in Mutual Funds in conjunction with SEBIs rules of the Foreign Exchange Management Act(FEMA) ensuring that the investment process is transparent. However, it is important to note that certain asset management companies don’t accept mutual fund applications from NRIs in Canada and the US.
Decoding the Mutual Fund Investment Process in India for NRIs
To invest in the Indian Mutual Funds market, NRIs need to open an NRO or NRE bank account with an Indian bank. Since AMCs are not allowed to accept investments in foreign currencies, the NRI investments are made in Indian Rupee, easing the entire investment and return process.
To enter into the Indian Mutual Fund market, NRIs can proceed with two different alternatives. In the direct procedure, NRIs can initiate the process on their own by submitting their application with the required KYC details indicating that the investment is on a repatriable or non-repatriable basis. In case the bank requires in-person verification, they need to comply by visiting the Indian embassy in their resident country.
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Apart from this, NRIs can choose the alternative of Power of Attorney (PoA), which allows holders to invest on behalf of NRIs and also make investment decisions. However, the signatures of both the NRI investor and PoA holder must be present on the KYC documents for investing in mutual funds in India.
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Beyond the Barrier: Mutual Fund Regulations for NRI
- KYC Compliance: Every NRI desiring to invest in Mutual Funds in India must clear the KYC process. The process involves submitting several documents- an attested copy of passport, PAN card, recent photo, bank statement and address proof. It is mandatory to provide the current residential proof, whether it's temporary or permanent.
- FEMA Declaration: When making foreign transactions, it's compulsory to abide by the country’s regulations. As a requisite, NRIs must provide a declaration in conjunction with the guidelines of the FEMA, to certify that the investment funds comply with all Indian regulations.
- Foreign Inward Remittance Certificate: As an NRI if you make the payment for a mutual fund via cheque or demand draft, then you must attach an FIRC, to confirm the source of funds. In the absence of a certificate, a letter from the bank is acceptable.
- Redemption Steps: Upon maturity of a mutual fund or voluntary exit, the AMC will credit the corpus directly to the NRE/NRO bank account after deducting applicable taxes if any. However, if the NRI opts for a non-repatriable investment, then the proceeds can only be credited to an NRO account.
- Tax Implications: NRI investors are worried that they will have to pay double tax when they invest in India. Well, that is certainly not true if India has signed the Double Taxation Avoidance Treaty (DTAA) with the country of your residence.
- Foreign Account Tax Compliance Act (FATCA): The act made effective from January 2016 makes it mandatory for all Indian and NRI investors both - existing and new investors to file a FATCA self-declaration for Fixed Deposits, MFs and more. The specific inclusion that applies to the US person for US Tax purposes is valid even on grounds when the individual has moved to India and is presently holding an Indian residency status.
Bottomline
For NRIs, the opportunity to invest in the Mutual Funds Market in India holds immense potential, being both lucrative and feasible. By staying informed and well-versed with the investment regulations, NRIs can seamlessly navigate through the Mutual Fund landscape of India without any hurdles and secure their financial future in their home country.
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(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
FAQs
The best mutual fund for NRI in India are as follows:
- SBI Equity Fund.
- ICICI Pru Credit Risk Fund.
- Parag Parikh Long-Term Equity Fund.
- UTI Nifty Index Fund.
KYC or Know Your Customer is a one-time process that NRIs as well as resident Indians need to complete to be able to transact in mutual funds in India. Read this article to understand how you can register your KYC on iNRI.
What are the rules for mutual funds in NRI? ›
NRIs must have a NRO or NRE bank account to invest in Indian mutual funds, as AMCs cannot accept foreign currency investments. All investments by NRIs are made in Indian Rupees. Non-resident Indians (NRIs) often seek investment opportunities in India to secure financial stability for themselves and their families.
Can NRI from the US invest in mutual funds? ›
Yes, NRIs based out of US and Canada can invest in Indian mutual funds. However, AMCs do not have a uniform policy to deal with US and Canadian clients. Currently, close to 14 fund houses receive investment from investors based out of these two countries and another five AMCs receive investment only from US.
What happens to mutual funds when you become NRI? ›
Non-Resident Indians (NRIs) can engage in Indian Mutual Funds under the regulations outlined by the Foreign Exchange Management Act (FEMA). They are required to establish either an NRE (Non-resident External) or NRO (Non-resident Ordinary) account and adhere to KYC regulations.
Which is the best app for NRI to invest in India? ›
"Inri's user-friendly platform, diverse fund options, and exceptional support make it the top choice for NRIs. Their seamless SIP options can be easily setup and it makes regular investing effortless."
Is KYC mandatory for NRI? ›
If you open a new NRI account with the same bank where you held a resident savings account or you convert your resident savings account to an NRO account you will require a fresh KYC.
What documents are required for NRI investment in mutual funds? ›
Before starting the investment, you should submit KYC documents, these include:
- Passport copies.
- Pan Card copies.
- Address proof.
- Latest Photo.
- Certified bank statement.
Open an NRO/NRE account: You can invest in a mutual fund in India through an NRO (Non-Resident Ordinary) or NRE (Non-Resident External) account with an Indian bank. An NRO account helps you manage your income earned in India, whereas an NRE account helps you convert your foreign currency earnings to Indian currency.
What are the restrictions on NRI investment in India? ›
Non-resident Indians can buy any immovable property in India other than agricultural land or a plantation. However, NRIs should pay out of the funds earned in India through normal banking channels or a non-resident account maintained in compliance with FEMA. The payments made in any other mode are not permitted.
Additionally, an NRO account cannot be used to hold foreign exchange. Since they are used to deposit the earnings inside India, these accounts can only hold INR. These accounts are subject to tax liabilities. The principal earned as well as the interest, are subject to tax deductions at a flat rate of 30%.
Who cannot invest in mutual funds in India? ›
One cannot invest in a Mutual Fund if one is not compliant with Know Your Customer (KYC). Therefore, investors must comply with KYC guidelines to invest in Mutual Funds. You need your PAN card and valid address proof to become KYC compliant.
How NRIs India mutual funds are taxed in us? ›
If NRI taxpayers own mutual fund units or shares of Indian companies and receive dividend income from these investments, the income is typically taxable at 20% (plus any applicable surcharge and cess) without being eligible for any Act-provided deductions for things like life insurance, public provident fund, NPS, etc.
Can NRI from US invest in SBI mutual funds? ›
Yes. An NRI investor can have a joint holding with a Resident Indian or a Non-Resident Indian in a scheme of SBI Mutual Fund.
Can US NRI invest in SIP? ›
Non-Residents of India (NRI), Persons of Indian Origin (PIO), and Overseas Citizens of India (OCI) are eligible for investing in Indian mutual fund SIP schemes just like the Indian residents. On top of this, no special permission is required from RBI or any other banking body to invest in the mutual fund SIP schemes.
Where do NRIs invest money? ›
NRIs can invest in Mutual Funds, National Pension Scheme, Bonds and NCDs, Fixed Deposits, Public Provident Fund, Equity, Real estate, and more.
Can NRI invest in HDFC mutual fund? ›
An NRI can invest in both equity and debt mutual funds. Taxation however, depends on the type of fund and its holding period. Taxation for equity mutual funds: For equity mutual funds, a holding period of less than one year is short term. A tax of 15 per cent on short-term capital gains is applicable.
Can I do mutual fund with a NRE account? ›
Open an NRO/NRE account: You can invest in a mutual fund in India through an NRO (Non-Resident Ordinary) or NRE (Non-Resident External) account with an Indian bank. An NRO account helps you manage your income earned in India, whereas an NRE account helps you convert your foreign currency earnings to Indian currency.
Can OCI holders invest in mutual funds? ›
Both NRI and OCI can invest in mutual funds. For the benefit of some of our other readers, allow us to first explain the two terms. 2. Is in India for 60 days or more during the previous year and 365 days or more during the four years immediately preceding the previous year.
