How can NRI Invest in Mutual Funds in India?

The Indian stock market is a great opportunity for NRIs to grow their wealth back in India. Although NRIs can invest in stocks directly if they have the expertise, investing through mutual funds for NRIs is a smart and cost-effective solution for all types of investors. Yes, NRIs can invest in mutual funds in India on a repatriation and non-repatriation basis. However, NRI investment in mutual funds is subject to certain special rules with respect to tax and inward remittance.

Here you will find how NRIs can invest in mutual fund in India from there country of residence in simple steps.

can NRI invest in mutual funds in India?
Can NRI invest in mutual funds in India?

Also Read: Things NRIs should keep in mind when investing in Mutual Funds

Can NRI Invest in Mutual Funds in India?

While many NRIs are putting money in the Indian market, some people still ask can NRIs invest in Indian mutual funds? Yes. Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs) and Overseas Citizens of India (OCIs) can invest in mutual funds in India if they adhere to rules mentioned under the Foreign Exchange Management Act (FEMA). NRIs can invest through SIP and switch as per their convenience.

However, some mutual fund houses don’t accept mutual fund applications from NRIs based in the US and Canada due to the tedious paperwork required under the Foreign Account Tax Compliance Act (FATCA). AMCs like L&T, Nippon India Mutual Fund, PPFAS Mutual Fund, UTI Mutual Fund, etc. accept investment from NRIs based out of the USA/ Canada with certain terms and conditions.

NRIs can download SBNRI App to choose from 3000+ mutual fund schemes in India or to ask any questions related to mutual fund investment.

SBNRI is an authorised Mutual Fund Distributor platform & registered with Association of Mutual Funds in India (AMFI). ARN No. 246671

What are the Benefits of NRI Investment in Mutual Funds in India?     

Mutual funds are one of the prominent financial instruments for NRI investment in India. NRI investors can get the most of the benefits that resident Indians enjoy. For example, they can invest through a Systematic Investment Plan (SIP), choose between dividend and growth options, and repatriate the redemption proceeds out of India.

Let’s look at some of the benefits NRIs can get by investing in mutual funds in India.

Several schemes

NRI mutual fund schemes are designed to cater to the diverse and varied needs of NRIs. Basically, there are three categories for NRI investment in mutual funds in India – equity funds, Debt funds, and hybrid funds. Equity funds are the mutual funds that primarily invest in stocks, also known as equity securities. Debt funds are the mutual funds that invest in bonds or other debt securities, such as government bonds, commercial papers, treasury bills, etc. Hybrid funds, also known as balanced funds, invest in both equity and debt instruments.  

Easy to buy and manage funds online from anywhere

NRIs can buy and manage mutual funds online from anywhere in the world. NRIs can buy and redeem mutual funds online using their NRI accounts. In addition, investors can switch units of different mutual fund schemes and opt for systematic transfer or withdrawals online. You don’t need to submit cheques and DD, or be physically present in India. You can track your funds online and receive consolidated account statements regularly on mails. 

Portfolio diversification

Generally, NRIs disproportionately invest in fixed-return assets like bank FDs, gold and real estate. So, NRI investment in mutual funds, ETFs, direct equity, etc. is a smart choice in terms of portfolio diversification and income generation. Mutual funds invest its fund into various financial instruments including equity shares and fixed income instruments. Investors can enjoy the benefits of diversification by investing in mutual funds in India. 

Also Read: 5 Common Mistakes NRIs Make When Investing in India

Scope for more profits from rupee appreciation 

If the value of INR appreciates against the currency of the country of your residence, it will generate more profits for you. For example, if a US-based NRI invests 1000 USD in a mutual fund in India at an exchange rate of Rs. 75 to 1 USD, the NRI will receive good returns if the INR appreciates against the USD. 

Steps for NRI Investment in Mutual Funds

Non-Resident Indians and OCI card holders need to open any of the following accounts with an Indian bank.

  • NRE account
  • NRO account
  • FCNR account

NRE account: An NRE account is well suited for NRIs who want to save and manage their foreign earnings in India. Funds in an NRE account are fully repatriable out of India.

NRO account: NRIs can open an NRO account, or convert their resident account to NRO account, to manage their Indian and foreign income. However, money in an NRO account can’t be repatriated easily. 

FCNR account: FCNR account is Foreign Currency Non-Repatriable deposit account where NRIs can deposit their overseas earnings in one of the six acceptable currencies like USD, GBP, Euro, CAD, AUD, and JPY.

Once you have set up any of above accounts, there are two methods to invest in mutual funds in India.

1. Conventional method

2. SBNRI App

Conventional method

Here are the steps to open an NRI mutual fund account:

Get your KYC done

To invest in mutual funds in India, an NRI must complete the KYC process. Here are the steps you need to complete for NRI investment in mutual funds in India:

  • KYC form: You need to submit the fully filled KYC form to the SEBI registered intermediate. You can submit the KYC form and documents by courier/ post. 
  • Documents: Documents to be submitted for mutual fund investment are as under:
    • Overseas address proof
    • Indian/ domestic address proof
    • A copy of your passport
    • Recent photographs
    • Copy of PAN card
    • Bank statement

Merchant Navy staff must submit a mariner’s declaration or certified copy of the CDC (Continuous Discharge Certificate).

  • Attestation: Get your KYC documents attested from any of the following authorities: authorized officials of overseas branches of scheduled commercial banks registered with the RBI, judge/ court magistrate, Public Notary, or the Indian Embassy/Consulates in the country of your residence. 
  • In-Person Verification (IPV): In-person verification is a mandatory step for investment in mutual funds for NRI. You can connect to the official representative of the mutual fund house to complete the process via video conferencing. 

Use SBNRI App to Invest in Mutual Funds Online

NRIs and OCIs can download the SBNRI app to invest in mutual funds from the country of their residence. Here are a few simple steps:

  • Complete your KYC as an NRI: Type in your personal details and attach supporting documents, like:
    • PAN Number
    • Overseas address proof: Any of – Water/ electricity bill, postpaid mobile/ internet bill, rent agreement, driving license, etc.
    • Passport – front and back
    • Passport size photograph
    • Signature

If all details are correct, your KYC will be approved within 7 to 8 business days.

  • Onboarding: After KYC, you need to share the following details to complete onboarding process and start investing:
    • City and country of birth
    • NRE/ NRO bank account statement/ canceled cheque for the latest 3 months
    • Nominee details

Mutual funds for NRIs from the US and Canada

As already mentioned, only a few AMCs that offer mutual funds for NRIs from the US and Canada due to the FATCA. So if you are an NRI from these countries, then look into the additional document requirement also.

Mutual fund houses that accept NRI investment in India from NRIs based in the US and Canada are as under:

  • Aditya Birla Sun Life Mutual Fund
  • L&T Mutual Fund
  • SBI Mutual Fund
  • UTI Mutual Fund
  • ICICI Prudential Mutual Fund
  • DHFL Pramerica Mutual Fund
  • Sundaram Mutual Fund
  • PPFAS Mutual Fund

Mutual Funds for NRIs from Other Countries

Investing in mutual funds in India from other countries is easier as compared to the US and Canada. NRIs from other countries can invest in any mutual funds in India. Following are some of the best performing mutual schemes for NRIs:

Funds3 Mo6 Mo1 Yr3 Yr5 Yr2021
PGIM India Midcap Opportunities Fund21.415.68.941.719.663.8
SBI Small Cap Fund20.917.517.433.21947.6
Nippon India Small Cap Fund21.316.314.937.218.974.3
Kotak Small Cap Fund16.410736.818.270.9
L&T Emerging Business Fund18.912.914.230.614.177.4
DSP BlackRock Small Cap Fund16.89.712.3331458.9
ICICI Prudential Small Cap Fund15.81612.932.115.761
SBI Magnum Mid Cap Fund21.919.417.331.914.652.2
IDBI Small Cap Fund21.71619.531.613.964.7
SBI Contra Fund 17.717.417.131.315.249.9
Best performing mutual funds for NRIs

Note: Returns up to 1 year and more than 1 year are on an absolute basis & CAGR basis respectively as on 15 September 2022.

Investment procedure

You can use any of the following to invest in mutual funds for NRIs: 

  • Self or direct investment: Manage your investment portfolio yourself. You can use your NRI account to start investing in mutual funds in India. Collect copies of the mutual fund KYC forms from the portal of a mutual fund company. Alternatively, you can visit the Indian Embassy in the country of your residence to complete in-person verification.  
  • Power of Attorney (POA): NRIs are allowed to mandate another person to invest on their behalf. For this, you have to submit a Power of Attorney (POA) letter to facilitate transactions made by the person you have mandated. This option is ideal only if you trust someone. 

How to Redeem?

Redemption procedure varies from AMC to AMC. Mutual fund investment can be redeemed by following the redemption procedure mentioned by the respective fund house. The mutual fund house will credit the corpus (investment + gains) you are supposed to get after fund redemption to your account post deduction of applicable taxes. The proceeds will be credited to the respective NRE or NRO bank account of the investor. You can receive a cheque for the same. 

Taxation on mutual fund investment by NRI

Capital gain tax

Gains from mutual funds investment are subject to income tax for NRI investors.

FundsShort-term capital gain (STCG) taxLong-term capital gain (STCG) tax
Equity Fund15%10% without indexation benefits
Debt-oriented fundsAs per tax slab20% with indexation benefits
NRI Mutual Fund Taxation

TDS

Mutual fund investments made by NRIs are subject to TDS deduction in India. TDS will be deducted from your LTCG at 20% for debt and other non-equity funds. 

Relief From Double Taxation

India has entered into the DTAA (Double Taxation Avoidance Agreement) with more than 90 countries. As per the agreement, an NRI has to pay tax in only one country. This means if you have already paid taxes on your mutual fund gains in India, you don’t need to pay tax for the same in the country of your residence.

NRI Investment in Mutual Funds | Expert Advice | Portfolio Services & Recommendations

Can NRI invest in mutual funds is one of the commonly asked questions by NRIs. Before investing in the Indian market, NRIs must consult market experts to make informed decisions. At SBNRI, we always strive to simplify NRI investment in India and hence have partnered with AMCs and banks. You can get detailed mutual fund advisory from experts at SBNRI. You can download SBNRI App from the Google Play Store or App Store to ask any questions related to mutual fund investment, NRI account opening online and tax filing in India. To ask any questions related to Mutual Funds, click on the button below. Also visit our blog and YouTube channel for more details. 

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FAQs

Can NRI invest in mutual funds in India?

Yes. NRIs can invest in mutual funds in India using their NRE/NRO/FCNR account and after completing their KYC as a non-resident.

How can NRI buy mutual funds in India?

NRI investors need to complete their KYC process and open an NRE/ NRO/ FCNR account to invest in mutual funds in India. 

Do NRIs need to pay tax on mutual funds?

Yes. NRIs need to pay tax on short-term and long-term capital gains. They also need to pay TDS.  

Can NRI invest in SIP in India?

Yes. They can invest in SIPs through their NRE or NRO savings accounts. An NRI can use the sums parked in these accounts to invest in SIP in India. 

Which is the best mutual fund for NRIs?

NRIs can invest in various mutual fund schemes extended by different mutual fund houses. The best mutual fund for NRIs depends on their goals, risk appetite and investment horizon.

Is TDS applicable on NRI investment in mutual funds?

The capital gains from the sale of mutual fund units by NRIs are subject to TDS in India. 

Can NRIs buy mutual funds online?

Yes. There are platforms like SBNRI app that allow NRIs to invest in mutual funds online by the country of their residence.    

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