A Guide for NRIs to invest in Mutual Funds in India

Posted by nishantdhar on December 20th, 2019

Indian migration to the west of the world is a common phenomenon. Many of these Indians are nurturing the dream of returning to their motherland because they have dependents here. In such situations, the only right thing to do is to search for investment options in India. You'll also find a lot of NRIs investing in India's real estate. NRIs have also begun investing in mutual funds for the past few years, however, as the returns are higher compared to real estate.

Could NRIs invest in Indian mutual funds?

You've probably got the answer to this question already. Indeed, NRIs can invest in Indian mutual funds. Nevertheless, the regulations under the Foreign Exchange Management Act (FEMA) must be adhered to. You won't need any RBI approvals to invest in mutual funds. On both repatriable and non-repatriable basis, you can invest.

You will need an FCNR or NRE account with one of India's banks to invest on a repatriable basis. You have to remit the investment money either from your NRE or FCNR account or through banking channels.

On a non-repatriable basis, you can also invest. The investment money will come from your NRE/FCNR or NRO account.

Should an NRI invest in Indian mutual funds?

Yes, like any other investor, by investing in mutual funds, NRIs can reap many benefits.

Easy to invest and manage

Investing in mutual funds has become more convenient as all processes are now online. Your investment fund can be managed and monitored online. Gone are the days when you've had to send cheques, fill out physical forms, and provide demand drafts for stock and debenture investment. Now, to invest in mutual funds, you don't need to be in the same country. You will receive emails for your statements. You will buy and sell online mutual funds.

Rupee Appreciation-Based Income

If a hike is taking place in the currency of your resident country, you will earn higher profits from your investments.

How can an NRI invest in Indian Mutual Funds?

The process is similar to what you would have done in India if you were here. The regulatory requirements such as submitting your KYC request, opening an NRE, NRO, or FCNR account (a Demat account if you are an Indian citizen) with a bank in the country will have to be met. There are two ways you can invest in mutual funds:

Direct/self

You can choose to use normal banking channels to perform the transaction. You will need to complete an application to specify whether you are investing on a repatriable or non-repatriable basis. It will be appropriate to submit updated KYC information. You will need approved copies of your PAN card, resident identification, and recent photograph, passport, and bank statements. You may need in-person verification and you can do so by visiting your country's Indian embassy.

Power of Attorney (PoA)

Power of Attorney is a simple and common way of investing. This means that you legally grant somebody the rights to invest on your behalf. Most mutual fund companies are allowed to invest on behalf of an NRI by PoA owners. That person can make all your mutual funds decisions. As part of KYC, both parties' signatures are needed.

Mutual Fund Regulations for NRIs

In addition to the KYC provisions, there are a few other things you need to know about:

Remittance Certificate: if payment is made through a draft or cheque, you need to apply a FIRC or Foreign Inward Remittance Certificate. Typically a bank letter is appropriate as well.

Redemption: Upon tax deductions, the corpus will be sent to your account.

Tax Deduction: You will only have to pay tax once if India has signed the Double Tax Avoidance Treaty with your resident country.