How Can NRIs Invest In Indian Mutual Funds?

The bright future of the Indian economy is attracting a lot of investors, NRIs being one of them. Till now, NRIs were generally interested in real estate. But the recent development in the mutual fund industry has caught the attention of NRIs. If you are one of those who wants to invest in the Indian mutual fund industry, you might be having some doubts. Here, we have compiled a write up on how NRIs can invest in Indian mutual funds.

Non-Resident Indians (NRIs) and Persons of Indian Origin are eligible for investing in mutual fund schemes of India. They don’t need to have special permissions for an investment. However, there is a defined procedure and certain aspects that should be adhered to while making mutual fund investments.

Invest in Offshore Mutual Funds

As an NRI, you have the provision of investing in offshore mutual funds that focus on Indian companies. You can also consider ETFs if you don’t prefer mutual funds. These funds invest your money in a diversified manner. Thus, you can harness lucrative gains. Some of the Indian mutual fund houses have offshore operations and some of the mutual fund companies in your country have Indian subsidiaries. These aspects facilitate valuable inputs and easy investments.

When you invest in offshore funds or ETFs, you can do so in your own currency. You don’t need to exchange your currency. This will save your money otherwise spent on foreign exchange. Moreover, you will save a considerable amount that you would have spent on entry load or other expenses.

Investing in Indian Mutual Funds

NRIs can invest their money in Indian direct mutual funds by simply opening up valid bank accounts in India. The bank account will be used for the transactions with the mutual fund house. Since foreign currency transactions are not allowed, opening a bank account is compulsory. The following options are available for NRIs:

  • Non-Resident Ordinary (NRO) account
  • Foreign Currency Non-Resident (FCNR) Account
  • Non-Resident External (NRE) Account

An NRI can make investments on the repatriable and non-repatriable basis. For the former one, NRE or FCNR bank account is mandatory and for the latter one, NRE/FCNR/NRO bank account is applicable. However, during the time of redemption, the non-repatriable amount will be credited to the NRO account and the repatriable amount will be credited to the NRE or FCNR account. The right of repatriation is applicable till the investor is an eligible NRI.

Power of Attorney (PoA)

If the NRI wants to make an investment via a third party, it is possible through Power of Attorney (PoA) mode. An NRI can designate someone else on his/her behalf to carry out the transactions in the mutual fund. While submitting documents, the signatures of both the parties are necessary. The PoA should register himself/herself with the mutual fund house and submit the original or duly notarized copy of the PoA.

KYC Procedure

As mandated by SEBI, KYC procedure is applicable for all investors, including NRIs. You have tosubmit documents pertaining to KYC verification such as identity proof, address proof, photograph, bank account proof, PAN card, a copy of passport, and so on. There is a provision of in-person verification by visiting the Indian embassy in the concerned country.

Talking about taxations, NRIs have to pay taxes as applicable to the investments. For example, 10 percent long-term capital gains (LTCG) tax is applicable if gains are more than Rs 1 lakh in a year. Further, to avoid double taxation, India has signed double taxation avoidance treaty (DTAA) with most of the countries.

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