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Can NRIs Invest in Mutual Funds?

Can NRIs Invest in Mutual Funds?

Mutual funds are popular for veteran and novice investors due to their relative security, diversification, professional management, and convenience. They are a low-risk way to gain sufficient returns compared to other investment options.

Investors can also start with relatively low investment amounts, as little as Rs. 500. For these reasons, they are also sought after by NRIs. This article will discuss how NRIs can invest in mutual funds in India.

Who Qualifies as an NRI?

Non-resident Indians (NRIs) are Indian citizens who live in India for less than 182 days in one financial year. Income earned by NRIs outside the country is not liable for taxation, but revenue generated from investments inside India can be taxed. 

How Can NRIs Invest in Mutual Funds in India?

NRIs can invest in Indian mutual funds (MFs) if they comply with the Foreign Exchange Management Act (FEMA). According to FEMA laws, NRIs cannot put their funds into regular savings accounts.  Many AMCs offer investment options for NRIs in hybrid, equity, and hybrid mutual funds. 

It is important to note that many AMCs and fund houses in India do not allow NRIs from Canada and the US to invest in Indian mutual funds. This is due to the compliance requirements under the Foreign Account Tax Compliance Act (FACTA). 

There are multiple ways to invest, such as online or through power of attorney (PoA). However, many AMCs do not allow investments in foreign currencies. For this reason, they must open one of the following accounts:

– Non-resident External (NRE) account: An NRE account helps NRIs invest their overseas earnings in Indian mutual funds. 

– Non-resident Ordinary (NRO): NRO accounts are opened in Indian banks under the NRI’s name. The bank manages any Indian earnings made by the NRI. 

After opening an NRO or NRE account, NRIs can invest in Indian mutual funds using the following methods:

1. Direct or Self Investment 

NRIs can invest directly in mutual funds in India using regular banking channels through their NRE or NRO accounts. To do so, they must submit the required KYC documents, such as an Aadhaar card, PAN card, bank statements, passport, and proof of foreign residence. 

2. Investing through Power of Attorney 

Mutual funds investments for NRIs can also be made via Power of Attorney (PoA). A credited AMC allows PoAs to invest on behalf of NRIs after completing a KYC process, and the investor and PoA must sign KYC papers to invest in Indian mutual funds. 

What is the KYC Process for NRIs Investing in India Mutual Funds? 

To complete the KYC process, NRIs need to provide the following documents:

– Passport 

– Photo 

– Address proof 

– PAN card 

– A cancelled cheque from the NRE or NRO account 

– A certified foreign address proof (such as the latest utility bills, residential permit, driver’s license, and more)

– Indian address proof (such as bank statements, Aadhaar card, or driver’s license)

– Passport 

Some banks may also require verification in person, which can be accomplished by visiting the Indian Embassy in their country. 

How Can NRIs Redeem Their Mutual Fund Investments?

The redemption procedure for mutual fund investments varies depending on the fund house. In most cases, fund houses and AMCs will credit the investment and gains to the NRE or NRO accounts of the NRIs, deducting any taxes. In some cases, they may also write a cheque. 

In Conclusion 

Mutual funds are an attractive investment opportunity for NRIs, providing long-term returns while posing less risk. They can also help investors grow their wealth and meet their financial goals. Some mutual funds can also be used to generate income.  
If you want to begin your investment journey, consider Tata Capital Wealth. Our experts offer expert guidance to help you reach your financial goals. To connect with us, visit the Tata Capital Wealth website today!

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